Buy a house in Hungary. How does it work?
When you have found your dream home at Hungarian Home and have decided to buy, of course you would like to record the agreement. The Hungarian Law determines precisely the procedure for buying properties in Hungary.
The purchase contract / real estate contract has to be drawn up by a Hungarian registered lawyer (in the Hungarian language). Buyer and seller make a joint appointment at a lawyer. We work with a select group of Hungarian lawyers. The choice between them is usually made based on the language of the buyer. Allthough it is required to record real estate agreements in the Hungarian language, you must be able to be informed in (mostly by the lawyer) or ask questions in your native language. At this moment we have English and German speaking native Hungarian lawyers available.
The lawyer will ask buyer and seller about the agreements made with regard to the sale of the property and will record the agreements in a purchase contract. Seller, buyer and lawyer sign the contracts that are drawn up in triplicate.
One of the agreements will consist of a customary deposit (foglaló), usually between 10%-20% of the total purchasing price and the date when the deposit is to be received.
Depending on the agreements between buyer and seller sometime a down payment (in general: anything in access of the deposit, not being a deposit) can be drawn up.
The Hungarian Law is very specific on the deposit (foglaló). A deposit ensures that the buyer’s offer has been made in good faith and with the intention of ultimately closing the deal. A deposit is, in essence, something given to guaranty the buyer’s intention to close the transaction. As such, if the transaction fails to close by reason of the buyer’s default, the entire deposit is forfeited to the seller. There is no need for the seller to show that he suffered any damages whatsoever.
However, if the seller, for whatever (un)known reason, wishes to abandon the sale, the seller must pay the buyer double the amount of the deposit paid. If the seller fails to do so, you have the right to present your proof (contract) to a lawyer and, according to the Hungarian legal system, he eventually can register a debt (the balance of the double-deposit and any refund) on the property. This is a method to assure secure payments of deposits.
At the moment your deposit is received the lawyer checks if any debt or claims exist with regard to the propery. When the balance of the agreed upon purchase prices has been received according to the mutual agreements, the ownership will pass to the new owner. The buyer will receive the keys of the house, meter readings of electricity, natural gas and water. Our staff will take care of the registration of the transfer of ownership of the meters at the supplier(s) of these utility services.
About a month later the Hungarian Land Register Office will send the buyer an official notification that the property has been registered to the new owner. About 3-6 months later the Hungarian Tax Authorities will inform the new owner about the Transfer tax (4%) to be paid.
In Hungary it is not uncummon that (part of) the purchase price is paid in cash. Banks in Hungary may charge 0,3%-1% transaction cost and/or unfavourable exchange rates. We can inform you of contact information (addresses) of exchange offices that charge 0,05% when exchanging amounts over EUR 10,000 (2018-09-21 approx. GBP 8,922).
The procedure for buying some properties, such as farms / wine houses (tanya) in rural areas (agricultural) take longer. In these cases, after signing a purchase agreement and payment of the deposit, the purchase agreement has to be made public in the Municipality (city hall, town council) for the duration of 2 months. With regard to these kinds of properties the Hungarian Law gives local people the first right to purchase for the same amount.
After these two months, the purchase agreement will be assessed by a number of committees (e.g. regional, provincial, Land Registration Office). This process may take up to 4 months. The following committees are considered to be a formality. It is done to prevent large scale sale of agricultural land to foreign buyers / investors. This time frame will require patience and some insecurity may sometimes be felt. However, this will vanish when after the approx. 6 months the end goal is received at the lawyers office: the official purchase agreement, accompanied by the official paper from The Land Registration Office stating the buyer as the new owner.
At that moment the remainders of the purchase price is to be paid. Are all papers correct and payments done, the transfer takes place. It is often possible, however, to already start using the ‘tanya’. The purchase agreement states that if the whole purchase price is paid, the buyer may already get the rights to use the property. The buyer may want to opt for this if waiting 6 months is not an option. But keep in mind, although this very rarely happens (once since 2015), full payment and user rights for agricultural registered properties do not prevail over the above-mentioned procedure.