HOW TO BUY real estate properties IN BULGARIA?

CALCULATING YOUR BUDGET
Frequently asked questions about Bulgaria

Property-related questions

When budgeting for a property purchase, estate agencies` fees also have to be allowed for, as both buyer and seller share the payment of  estate agencies's commission in Bulgaria.

Mirela`s brokerage fees are normally between three and five per cent of the property purchase price. It includes all the views, surveys and inspection of the properties.
If you intend to buy an apartment "off-plan" then the fees are usually due at the time you sign preliminary contracts rather than on completion, so you need to ensure you have the essential funds available at this early stage.

A municipal tax, which is basically the UK equivalent of stamp duty, is also compulsory. The tax is currently two per cent of the purchase price.

When buying an apartment, remember to take into account the additional cost of annual maintenance and management fee. This covers the insurance of the building, plus maintenance of the public areas such as communal gardens and swimming pool (if there is one), caretaking and security. These costs are normally based on the size of the apartment.

When buying a house, in addition to these property- related costs, there is also the cost of setting up a limited liability company through which land can be purchased. Expenses for setting up a company are generally between E 600 and E 900. However, these costs are negligibly low compared to those in Western Europe.

RESTRICTIONS ON FOREIGNERS

Currently there are still restrictions on foreigners buying land in Bulgaria, but they are due to change in the next year or two as Bulgaria works towards complying with EU directives for joining the European Union in 2007. At present a foreigner can buy a building but not land as an individual. He will need to register a Bulgarian company which is entitled to purchase and own land.  

FINDING and VIEWING A PROPERTY

There are many factors to consider when buying a real estate property and it helps a great deal if you can narrow your search.

Four recommendable Bulgarian regions should be kept in mind when it comes to investing, namely:

the Black Sea coast; the ski resorts and mountain regions of Rila, The Rodopе or Pirin Mountains; properties in or around the capital Sofia; property in the unspoiled, rural areas of Bulgaria.

Mirela's extensive database and innovative websites offer search- facilitating features for finding properties with certain characteristics in specific areas and villages. You can click on a selected property and see all details about it. What is more, you can even compare the average real estate property prices in different areas and quarters.

If a property provokes your interest and you would like to visit it, trust Mirela`s agents for all the necessary arrangements. 

BUYING A PROPERTY AND OPENING A BANK ACCOUNT

If you are contemplating investment in Bulgarian real estate properties, the first thing to organize and establish is a Bulgarian bank account.

You can do this during your stay in Bulgaria, accompanied and assisted by an agent of Mirela- etate agency. In case a joint account is required, then both parties- seller and buyer- have to be present at the time to sign all the relevant documentation.

Bank fees for servicing the account in Bulgaria are approximately E 1 per month.

Internet banking is available at some, however not all, Bulgarian banks.

Money can be safely transferred directly from a Western bank account to a Bulgarian bank or deposited for safe-keeping at Mirela's bank accounts.

SETTING UP A COMPANY AND A COMPANY BANK ACCOUNT

As well as a personal account, a company bank account should also be set up if you are buying a house, and a minimum of BGN 5,000  is required to be deposited (the equivalent of about E 2500) as the minimum capital required under Bulgarian law for the establishment of a limited liability company.

Please, note this amount is not the cost of setting up the company. It can be used immediately either for costs incurred during your visit or for any required deposits.

An independent lawyer, appointed by you,  or a lawyer employed by the real estate agency can form a limited liability company on your behalf.

The bank document certifying  the deposition of minimum capital  is presented to Court for obtaining a registration, along with other company documents which have to be prepared.

You can fully rely on your estate agent to accompany you to a local notary office (chosen by you or recommended by the agency), where the notary public has to attest your signature on the company documents. The notary charges a fee around BGN 37 (E 17).

Two copies of the company documents are produced, one in Bulgarian and one in English. The lawyer guides you through the Articles of association word by word in a detailed explanation involving all issues on company management.

FINDING A LAWYER

If you choose to employ an independent lawyer, a list of Bulgarian lawyers is available at the British Embassy.

Your other option is to have Mirela real estate agency recommend you some good and experienced professionals. A simple way to receive personal recommendations is to join one of the website forums and post a notice of your request or send us an e-mail request. Like any other country, Bulgaria has some lawyers that are better than others, so good personal recommendations are worth their weight in gold if they can be obtained.

When a property has been found and the purchase price agreed upon, the lawyer would then draw up a preliminary contract ( or you can have one from your real estate agency), setting out the initial amount of money- deposit- to be paid. The deposit  is usually about 10 per cent of the purchase price of the property. Paying the deposit "reserves" the property, ensuring  it is taken off the market.

VIEWING AND EXAMINING THE PROPERTy

Once you have made your chioce of a real estate agency and an attractive property, your  broker contacts the seller in order to arrange a view of the property and conduct an extensive research on the property, including checks of court and mortgage records. Normally the cost for viewing the property is included in the  estate agency's commission. A detailed inspection of the construction is carried out by a civil engineer and you can order a complete construction survey  if you are purchasing a very old property or if there is some doubt about the parameters of the  land the building has been erected on. This type of survey usually involves a geologist taking soil samples to analyse the condition of the land and the building's foundations.

PRELIMINARY AND FINAL CONTRACTS

There are two types of contracts in purchasing a real estate property: preliminary and final.

In the case of an "off-plan" property investment, a preliminary contract is signed,  containing and specifying conditions such as completion date of the shell, roof, and  the construction work as a whole.

The quality of the construction materials is made explicit and a payment scheme is adopted. Payment is in the form of instalments on the specific dates corresponding to the completion of the construction stages.

A delivery- acceptance record  is  signed upon completion, stating you are satisfied with the standard of construction and finishing works.

 Any defects or problems should be pointed out at this stage to enable rectification on the part of the the constructing company.

The Preliminary contract is then sent to your home country, containing the completion date (previously agreed upon) specified by the developer and the amount of the penalties he will owe in case he fails to meet the deadline.

If you make the decision to purchase a property while in Bulgaria and you still have to leave,  you can have the preliminary agreement signed by appointing a lawyer to represent you through a power af attorney.  The final contract is finally prepared and signed by both buyer and seller at the public notary's office.

You do not have be present in person provided you have authorized an attorney to represent you.

The whole purchasing process usually takes a month to be finalized.
Once a date for the final completion is agreed upon, it is possible to realize the deal sooner. Note, however, that you cannot have the date fixed back in time, so it is imperative that finances are available by the stipulated dates. It is wise to keep all time limits realistic since failure to comply with them spells considerable penalties and may even lead to loss of the property.

After the deposit has been paid the remaining amount of the purchase price needed for completion can easily be transferred to a Bulgarian bank account from your country.

You should expect to receive the title deed a couple of weeks after the final completion date.

The originals of the documents are written in Bulgarian, but an English translation is always available on request and the fee charged for it is negligible.

One thing you should be familiar with is the discrepancy between the actual price paid for the property, and the price appearing on the title deeds.

In Bulgaria "tax value" differs from "purchase price" in that tax value  is much lower than the actual transaction price for reasons of taxation. Most Bulgarian property owners insist on keeping the  tax value written in the title deed to avoid paying greater taxes on the property transfer.
If you are buying an apartment and it is still occupied by the owners, you should not expect them to move out immediately- it usually takes a month. However, this period is negotiable if the buyer has reasons to require his newly purchased property vacated earlier.

It has always proved useful to refer this matter to your estate agency and be assisted in any negotiations with the seller.

LOCAL TAXES

Once you have assumed possession of a property, there are local annual taxes to pay. They are incredibly low in comparison to Western Europe- e.g. the annual rate of tax on a house being 0.15 % of the purchase price.

The only additional tax you are required to pay is garbage tax; this varies depending on the location and the size of the property. The amount of the latter ranges from E 15E to E 25 per year.

In case you have purchased an apartment, local taxes are still due, together with annual maintenance and management fees fixed by the developer or the managing agent.

RENOVATION AND RESALE

Building costs are comparatively low in Bulgaria against the backgound of European construction.

An average Bulgarian wage is currently E 150 per month. Rates for employing builders differ widely but as a guide, building work corresponds approximately to one third of what it would cost in Western Europe.

If your intention as an investor is to demolish the old existing construction and build anew, the average prices for construction works are between E 200 and E 300/ sq.m.

Construction work cost seems to be following the the increase in property prices, prompted by the discovery of excellent- value Bulgarian properties and land on the part of international investors.

If a property is bought for investment and profit, there is a capital gain tax of 19.5 % if the property is resold before a five-year term.

Click HERE for additional information on your expenses as a buyer.

Click here if you want to buy property in Bulgaria!

We remain at your disposal for any further information you may need - e-mail mirela@mirela.bg