Buying a house is indeed very exciting story. The most exciting is no doubt
the process of bidding, when you communicate the amounts which you will
never see in your hands. But let's not jump too far.
Even before starting to think about whether you want to move, read the article
From search to purchase
in my wiki to get more familiar with how it happens. Don't be too
scared: at the end of story the feeling of lying in your own sofa in
your own garden or balcony if worth going through all difficulties and
scaring decisions. And of course, property is generally better and more
reliable investment then bank savings as:
- Provided that you have taken a mortgage for 4-5% and normal inflation is 2-3% then you have been credited for just 2% which is very cheap.
- Property trend to rise in price faster then inflation.
- Government provides you with tax
return.
On the other hand buying a house always results some extra costs (about 10% of the property value), which you can't afford often in your life.
First of all try to compose the list of features that
describe the house of your dreams. For sure the 1
st version of this list would be
incomplete and ugly. Now search different sites offering houses for sale
and visit few of them. Revisit your description list and try to specify
them better and in more details with fresh examples in mind. Ask real
estate agent stupid questions, which you may run into. This will help
you to come up with better description of your house (my description is
here)
which you can even send to agents: some of them (I met only two out of ten) are happy to see this description to offer the best from their
database. In general search over all agents and all other sources costs
money but perhaps it will result the house of your dream − it's up to you to decide whether it's worth the money.
Create a check list of typical questions. I personally was interested in following:
- Is
there running guarantee for the kitchen appliances (oven/fridge)?
Usually the appliances have 3 years guarantee, but if owner has ordered
all from one producer (e.g. Siemens), he may get the special guarantee
for 5 years.
- How many working surfaces the kitchen has? Is there enough place for cookware? Is kitchen surface a stone?
- Is deep freezer located in kitchen? Modern deep freezer is usually 4-stars (see Temperature zones and ratings). Sometimes it is placed in cloak in the garden, which is not handy.
- Does oven have a self-cleaning function? Zanussi / Electrolux should have models with this function (but maybe for models after 2006/2007).
- Check the laminate (scratches / traces from furniture). Thickness of laminate on ground floor should be 8mm.
- Floor
heating is considered to be more effective then radiators, but it
should not be used if floor is not tiled (less effective).
- What
is the energy label of the house? If the agent assures you it is A,
don't trust him by word: this level of energy efficiency is difficult to
achieve. Usually for 10-years old (or younger) houses it is B or C. For
houses older than 10 years the presence of energy label certificate is
obligatory for property transfer deed (see energielabel.nl → Is een energielabel verplicht?).
- If house is older than 10 years or younger than 3, everybody would suggest to make a structural report. Otherwise check that GIW guarantee
is running (it lasts the first 10 years for walls / basement / roof,
first 3 years for windows and 1 year for painting) and this insurance
will be transferred to new owner.
- Check the side costs (heating,
electricity, WOZ and other taxes). Sometimes they are provided by
agency in a formular that house seller fills in, if not − ask to provide you. Note that at the
notaries you will have to pay back the current house owner part of the taxes for
the rest of the year, which he has paid at the beginning of the whole year.
- Is
house facing the busy road? Highways will disturb you also at night but
due to good isolation you will not hear them with closed windows. Road
next to your window might wake you up at six in the morning and cause more
troubles. Think about the ecology and safety of your family. The
trade-off is always the time you need to get to your office by car, as
you'll spend more time to get to highway.
- How far is the social block (sociale woning) located? Each agent
will give you different information, but you may be lucky to meet the
agent that leaves in this area and he knows, what area results most
complains and problems. Objectively it is difficult to judge, as private
houses can be rented and rental block may be very quiet and all blocks
are mixed.
It is wise to search in parallel the mortgage advisor. Contacting the mortgage services
of the bank (that serves your debit account) will not harm, but my
feeling is that your bank is not willing to offer you other rates than "standard" defined by bank policy. On the other hand mortgage advisers have direct connections with several mortgage providers and
they know how to trade. Each tenth of the percentage of the rate in my case is €20 less per month payment. Not much, but %0.3 is already good money. More over
mortgage advisor will be more willing to answer all your questions, as
his salary at the end of the day will depend on whether you are his
client (in contrast to bank clerk). The advisor will take care of all financial questions (mortgage type, the period to fix the percentage, best way to invest your savings, advise the notary, plan future expenses, provide the house insurance and personal life insurance). I would personally recommend Jan Augustinus from
Aandacht Hypotheken. I have chosen the annuity mortgage with the following conditions:
- Be able to sell a house at any moment and return the debt to the bank with no penalties.
- Be able to pay back 10% of house cost each year.
- Period: 25 years
- Percentage fixed for: 10 years
Under these conditions I was offered 4.65% per year. By the way, if you want t go beyond 106% of market value for mortgage, then you can do it by
doing the renovation in your house. When choosing the mortgage type you may consider these options:
- If you are sure, you will cell the house and move from the country one day, then interest-only mortgage may look attractive. You will pay around €800 interest monthly (tax return included), which is less then renting the house.
- Even though the conditions allow you to return certain amount of house
cost per year, it is not advisable. The reason is that bank gives you
money on very low percentage. If you have spare money, don't bring them
to bank: invest them into another property or shares. For example you can take a mortgage for whole house price but payback the mortgage only partially. When mortgage period end, you bring the accumulated assets to bank. However you loose money on higher interest payments.
Concerning the life insurance: by law you are obliged to insure a
certain amount of the mortgage. This money will be paid back to your
partner to somehow survive in worst scenario. The amount of mortgage to be insured in my case was €37.900 (
mortgage − purchasePrice × 80%), which results €93 per year. In this respect the
advisor will ask you about your pension plan, as in case of death wife
is entitled to get 70% of your accumulated pension, and children – 14%,
which will help them significantly. By the way, when you reach the
pension age, your wife is entitled to 50%
*) of your pension that you've
build throughout the period of your marriage, even if you are divorced
by the time your are retired.
Special attention should be given to
NHG. It costs 0.7% of the mortgage, but it's worth these money, as banks provide you with better mortgage rates and you save many thousands and the end of the day. If the house price is above the insured by NHG limit, try to make a deal with buyer and pay the difference with cash so that the purchase price on paper allows you to acquire it.
Finally you have searched and visited all potential houses and you
have defined the top one and you are ready to make an offer. It is
generally accepted rule that you have one valid offer at a certain
point of time. That means you'd better avoid making offers for several
houses (and agencies) in parallel. Agencies will pay back to you and
guarantee that once your offer is considered by house owners, other new
clients will have to wait until you finish your negotiation round with
seller before they are served. In positive case (you and seller came to
agreement) you can buy the house. Otherwise you withdraw your offer and
exercise next house in your list. It may happen that you will return to
1st house in your list again, but at that moment the agency might have
already had another client. In case if several clients are willing to
make an offer agents open an auction and allow clients to bid. The
procedure how to make offer is usually described on the last page of the
brochure, but common is to write an email or fax. Your offer made by email is binding, however you can quit even after you put a signature on purchase contract (you have
three days reconsideration period).
Congratulations,
you have committed to buy the house! The contract which is offered by NVM-certified agency is standard (the description of all articles is available
in English) and does not require a lot of attention. As far as I know it was introduced in 2003 to protect both seller and buyer. It can be further extended by additional articles on your request. I personally asked to formalize additionally two things (I think they are applicable in many cases):
- Buyer can cancel the contract if structural investigation
reports problems, that need to be fixed/repaired in short term
(within one year) and exceed €1000 in total.
- Include the list of items that seller agreed to leave in the house (in case you have immovable and movable properties combined in one price).
Few interesting details which I've learned from description of contract articles:
- The Soil Protection Act may force the owner of the ground to put
it in order. That is why the attention is drawn to any oil tanker in the
ground which purchaser should be aware of. This tanker have been used in old houses to provide the heating system with fuel. After the central heating has been introduced they are not used. However the purchaser is responsible to check everything before buying:
The expression “was aware of” is wider than “knew about”. Even defects the purchaser did not know about but would have discovered if he had made sufficient effort are ones he could have “been aware of”. So the purchaser can’t just simply assume that everything is in order. It is expected that the purchaser will investigate or arrange an investigation as to whether the property meets his requirements. The phrase “what you don’t know won’t harm you” does not apply here. Where there’s any doubt, the purchaser must ask questions and/or carry out some investigation.
- Another interesting article is 6. For me it was new to learn that one can lease a kitchen or boiler. However the purchaser should either take over these obligations of get the house free of any. The same concerns renting.
Now you need to do few minor things: choose the company to make a structural report and
to complete a deal. The notary should be in 15km distance from the property, otherwise you'll have to pay transportation costs for other parties. Prices for the the notary range from €950 till €1350 for two deeds package. Some of the notaries require the translator from Dutch to English to be present (which is required by article 42 of the Notaries Act) that adds around €300 to the price. The structural report (optional) and market price valuation report costs are around €300 each. Be present during the structural investigation, ask questions: this will help you in maintaining the house and also you will learn about how to check if something went horribly wrong. Ask the house owners about the following:
Another question which you might be interested in is the inheritance of the property. Unfortunately, in The Netherlands you cannot gift the property to your children without paying taxes. What are the alternatives? OK, first of all, you can cell the house to your child. This goes the normal way, so you need to pay 2% of transfer tax and about €750 for notary for property deed. When selling the house you can't put the price too low: it can't go below WOZ price. Another alternative would be to gift a house: in this case you need to refer
. The amount of money you can gift your kid without paying any taxes is €19.114+€50.300 and if the house price is €250.000, then you need to pay 20% from €180.586. Situation changes if you have two kids: then you pay 10% from €111.172, which will approach the price you pay when you cell the house. Another schema allows you to gift a kid €5030 every year (should be made via notary) until he/she is 18 years old (which is €90.540 by full age). If you are sure your kid will not become a mafia member and will not kick you off you own house, you can try this way. In later case you can split the house cost between two kids with no big extra costs, but you need to trust your babies ultimately as in worst case you will find yourself on the street.
I would be happy if somebody provides me a link to prove this information.
