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ADVICE ON SELLING A APARTMENT IN DISTRICT V11,BUDAPEST

I bought a new apartment in Budapest ten years ago, have rented it out and am now thinking of selling it (as I am now retired). There is no mortgage or burdens on the flat.

I employed a well known Property Management company to mange the tenants etc ,all worked well and they have told me that they would manage the selling process. This all seems fine but I would be grateful if there is any advice in the forum on pitfalls, hidden costs etc.

At the moment, the Management company has offered to sell it for a fee of 4% plus VAT, is this reasonable?

I understand that the BUYER pays the legal fees but ,as all documentation is in Hungarian, there is advice that I obtain an English speaking lawyer to make sure all is correct and proper.

There is also reference to the cost of the bank transfer (incurred by the BUYER) - not sure what this actually is?

Also, whilst I bought the flat with Euros, would I be able to insist that a BUYER pays me in Euros? 

Are there any difficulties transferring the eventual sales proceeds from my Hungarian bank account to the UK,or are there restrictions on currency movements?

Would really appreciate any guidance from anyone who has gone through the process recently?

Roseanne

barbara9876 :

At the moment, the Management company has offered to sell it for a fee of 4% plus VAT, is this reasonable?

Honestly, without more details, hard to say. But you will typically earn more by selling yourself directly.

barbara9876 :

I understand that the BUYER pays the legal fees

No, not a required fact. This is simply one convention. You can in fact negotiate any terms you wish with the buyer, and the buyer can try to negotiate any term with you that buyer wishes.

For simplicity, I have normally paid the property transfer costs, and legal fees of "MY" attorney, but I have never paid any legal fees of the seller.

barbara9876 :

all documentation is in Hungarian, there is advice that I obtain an English speaking lawyer to make sure all is correct and proper.

Nothing here is legal in English. You have to either get an English speaking attourney or a translator. Private message me if you wish a competent translator who has dealt with property sales.

barbara9876 :

There is also reference to the cost of the bank transfer (incurred by the BUYER) - not sure what this actually is?

The translator I would recommend can answer this. They will tell you what fees they wish to answer this question, professionally.

barbara9876 :

Also, whilst I bought the flat with Euros, would I be able to insist that a BUYER pays me in Euros?

If those are the contract terms you setup for sale, i.e. Payment in Euro, then the buyer should settle on this issue by contract in Euro.

But.... There may be resistance to paying in Euro. You have to have a strong advocate for your rights. Your attorney may do this for you... or if I know Hungary.... maybe not. Again. If not, private message me for help.

barbara9876 :

Are there any difficulties transferring the eventual sales proceeds from my Hungarian bank account to the UK,or are there restrictions on currency movements?

Seriously, why would you think there would be any?

The UK is still, for now, in the EU, so there are no restrictions on currency movements. Free transfer of money and capital..... That is one of the main points, and rights, of being an EU member state. This is 2017, not 1950.

You may loose a bit on currency conversion however (especially now since the GBP is now lower to the EUR or HUF).

Of course, if you wait two years, once the UK is out of the EU, then currency transfers may be an issue. But that is fully a UK problem then, since the UK elected to leave the EU.

I echo what klsallee says:

It's up to you and the buyer to decide who pays what.  The 4% plus VAT is a bit on the high side but not exceptional.  3.5% is more like it.  The lawyer will also try to take a percentage which will push your costs up. 

You might want to consider advertising it yourself - depends if you can be bothered.   There are web sites which can take ads in English for a minimal fee but you'd obviously do better with an ad in Hungarian. You can even sell it to another investor.  I sold my own house in Austria simply by advertising on various web sites. I found the agents to be utterly useless there.  Then again we bought our HU house through a local agent before it was even advertised as our agent had her ear to the ground and knew the owners (the family was selling as their relative, the occupant had died previously).  We paid nothing to the agent - the sellers paid.

Regarding the sale, it has to be denominated in HUF but you can get the money in EUR as it's only for the legal paperwork.   There are no restrictions on sending your cash elsewhere but should be in something useful like EUR, USD or AUD etc.   You can use a transfer agent rather than a bank and therefore reduce your costs further.   

Be aware the seller should have cash ready as the sale can be done immediately - there's no messing about with searches.  The buyers usually can get a letter from their bank/mortgage provider showing their finance availability but even better is a cash buyer.  If it's a cash sale, it's simply done there and then in the lawyers office - bank transfers, no way in cash.  Takes a few weeks for the land registry entry. 

Note: if the buyer is not an EEA national, they need permission from the government.  For flats or houses, it's never usually a problem but it would almost certainly be an issue if it was farmland.

Thanks for replies.
Any advice on the estimated legal fees for the seller?   I know that the main legal fees are incurred by the buyer, but the seller is usually advised to have an English speaking lawyer to make sure that the Hungarian documents are fine and correct.

Many thanks for all advice.

barbara9876 :

Thanks for replies.
Any advice on the estimated legal fees for the seller?   I know that the main legal fees are incurred by the buyer, but the seller is usually advised to have an English speaking lawyer to make sure that the Hungarian documents are fine and correct.

Many thanks for all advice.

Yup, lawyer best and the cost is about 3% + VAT.

I am now going ahead and selling my apartment,having received a good offer

Do I need to actually go to Budapest or can I give power of attorney to my solicitor to conclude the sale?

Also,I have owned the apartment for 9 years,and am advised that there is no capital gains tax to pay,as I have owned the flat for more than 5 years.

Is this correct?

Many thanks again for all assistance.

barbara9876 :

....Also,I have owned the apartment for 9 years,and am advised that there is no capital gains tax to pay,as I have owned the flat for more than 5 years.

Is this correct?

Many thanks again for all assistance.

Yes, I believe that's correct but your lawyer should advise you anyway.

I have now actually sold the apartment and wonder if there are any steps that I should take to deregister for personal tax from the NAV, building tax ,etc

I do have a lawyer and an accountant and will be checking that all is completed, but any advice on steps to be taken after a sale would be useful in order to make sure everything is properly done.

Many thanks for all advice.

I thought that the 5 year timeframe was extended to 15 years, but hey, that's what you have the attorney and accountant for!
Congrats on the sale! Hope it sold for a pretty penny, farthing, or Euro!

Vicces1 :

I thought that the 5 year timeframe was extended to 15 years

In Hungary, I believe nothing I just hear. Too many rumors here. I only believe what can be referenced from an officially notarized and registered source.

And even if the time limit was extended, there may be grandfather clauses for those that purchased before any law change was enacted. Which is why it is essential to get access to and read the current law (which even then seems to always change).

Absolutely understand your concerns klsallee.  And again, although I'm linking the source of my understanding, I agree and stress that a trustworthy attorney is essential!

Capital Gains Tax is payable on the sale of a Hungarian property. The current rate of CGT in Hungary is 16% and is payable on the profit in disposal i.e. the difference between the sale price and original purchase price plus any related expenses. If a property is owned for more than five years, a CGT reduction of 10% per year applies. If a property is owned for more than 15 years no CGT is payable on the sale of the property.

https://www.ptireturns.com/hungary/property-tax-return

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Vicces1 :

Absolutely understand your concerns klsallee.  And again, although I'm linking the source of my understanding, I agree and stress that a trustworthy attorney is essential!

Capital Gains Tax is payable on the sale of a Hungarian property. The current rate of CGT in Hungary is 16% and is payable on the profit in disposal i.e. the difference between the sale price and original purchase price plus any related expenses. If a property is owned for more than five years, a CGT reduction of 10% per year applies. If a property is owned for more than 15 years no CGT is payable on the sale of the property.

https://www.ptireturns.com/hungary/property-tax-return

I dont believe this is correct, I have bought several apartments (most recently in June 2017) and I was advised the CGT payable was 0 after 5-years. This was the advice given to the sellers by my lawyer who does all the contracts.

The laws have no doubt changed. I was also under the impression that it was 5 years for some time, but it was my understanding that it was changed once again to the current 15 years. I am not a lawyer or real estate agent so if this is wrong, please link a reliable source describing the current situation!

Its what my lawyer told the seller when I bought an apartment in July. I will double check with them.

Dyan12 :

Its what my lawyer told the seller when I bought an apartment in July. I will double check with them.

I don't disagree -- I am not as experienced as you in the purchasing and selling of Hungarian properties.  I have just seen the citations via a Google search, with the older entries confirming the 5-year timeline and the newest entry I could find explaining the new 15 year timeline (that's the one I cited).

As I have purchased a property here, I would love to hear that there's no property tax after 5 years, so please do keep us updated with what you find!

Quite frankly, my wife has a business answering these types of issues for expats, but I have not asked her..... I think she is a little bit tired of my freebie question/answers. And what one's lawyers "says" is not important unless they can provide the actual law number they refer to (and then you still have to check the "surrounding" laws to see where you actually fit in). Even a lawyer, especially a property lawyer, may be more interested in selling properties than giving the actual facts that are relevant to the buyer. And Hungarians have a tendency to "think for you", so you can not always trust their replies (because their thinking may be erroneous for your particular circumstances). And those facts can vary depending on the sellers' economic and residence status. From my own terse review recently of this issue, there seems to be quite a bit of divergence of when capital gains is required and when it is not. So it seems the devil is in the details.

For example, this site says the same as Vicces1's reference site, while  this site also confirms what Vicces1 said, unless one is using the income of the property sale to buy another house. Or if one is not a Hungarian resident. So there appears to be the old "it depends" issues here.

As an interesting side note, all the photos as Vicces1 referenced site are from the "Mill Pond" in Tapolca, a town near where I live.

klsallee :

..... And what one's lawyers "says" is not important unless they can provide the actual law number they refer to (and then you still have to check the "surrounding" laws to see where you actually fit in). ....So it seems the devil is in the details. ...

And even then, as we longer term residents unfortunately know, whatever the law actually says, there will be some sort of clause which means no officials are guilty or have to do anything within a set period or a judge could randomly decide on a different interpretation for that particular case (e.g. Roman law system). 

Here there' s no concept of "justice delayed is justice denied".

I cite my own property boundary dispute - 4 years old now despite the official 30 day "decision" period in the law.  This property law has a clause which allows them to effectively put off making a decision indefinitely.

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