Thinking of buying a home in Germany? Buyers beware!

by Joerg Moddelmog
Kaiserslautern Legal Services

Americans are allowed to buy real estate in Germany. If you are considering buying a house or land on which to build a house, there are a few important legal tips you should know.

The purchase agreement must be signed before a German Notar, a publicly-appointed lawyer who can issue deeds and documents for direct enforcement. Don’t sign a contract in German unless you have been presented with a written translation in English. Some Notars in the KMC specialize in generating bilingual purchase agreements.

The real estate purchase tax (3.5 percent) and any broker commission will be based on the value of the property bought. As a result, undeveloped property will trigger less tax.


VAT (19 percent) tax relief forms cannot be used for materials for the construction of a house.

It is a good idea to have the value of the house appraised. Effective January 2009, the new energy usage estimate which must be done by an architect or the German TÜV will also be helpful in determining whether the house meets environmental standards.

Germans mainly buy or build their house in order to have their own property and to be able to pass it on to the next generation, not to make a profit when they sell it.

Americans tend to assume that they will be able to sell real estate for more than they paid for it. While that may be true in most places in the States, the same does not necessarily apply in Germany. Here, houses generally will not substantially increase in value. When the demand for housing goes up, the government opens up new lots for development, which keeps prices from escalating. As technology evolves, older houses become outdated and less desirable. New environmental regulations may require a prospective buyer to invest in mandatory improvements, which can further depress purchase prices on older homes.

If you build a house, the builder provides a five-year warranty. But, if the builder goes into bankruptcy, the buyer may have real difficulty recovering on any warranty claims, unless the builder has insurance. Those having a home built should closely monitor the quality of the construction as the house goes up. 

Due to the recession in Germany, there is a surplus of houses for sale. It is a buyer’s market. Yet, if you are looking for a bargain, beware. Many homes sold as a result of foreclosure need substantial repairs. Often the owner ran out of money and tried to finish construction “on the cheap.” An uncompleted house that has been exposed to rain or winter weather is a poor investment – you’d be better advised to tear it down and start over. 

When it comes to financing, down payments make a big difference in the interest rate. Credit scores are of lesser importance than they are in the states. Refinancing is standard practice. Most German mortgages are designed to be paid off within 15 years. Paying off a mortgage before the due date will most likely result in significant penalties.

When civilians use living quarter allowances to buy a home, it is referred to as personally owned quarters allowance. The purchase price will be divided by 10 and 1/10th of it paid a year, up to the maximum amount of your LQA for your grade and number of dependents. The POQ payments will stop after 10 years. If your home is not completely paid off by then, you may have to refinance or move out and rent out the home to help pay off your mortgage.

A final cautionary note: while it is fairly easy for an American to buy real estate in Germany, it is not always so easy for an American to sell real estate to a German buyer. This is particularly true in communities affected by the military drawdown like Darmstadt, but it can also happen in “end state” communities like Kaiserslautern. If a German buyer knows the American seller must return to the United States, it makes it less likely the seller will receive fair market value for the property (assuming a buyer can even be found.)

So think twice before plunging into the purchase of real estate, and consult with a German attorney before investing. Contact either Matthias Voelker, the German Attorney-Advisor at the 435th ABW/JA Law Center on Ramstein at 489-2552, or the German Attorney-Advisor at the Kaiserslautern Legal Services Center on Kleber Kaserne at 483-8848.