Tips on buying and selling real estate
What to keep track of when setting off to purchase or sell immovable property?
Owners of real estate often think that the intermediation of a real estate consultant is unnecessary when selling their real estate, although it would occasionally be good to ask for advice in the case of certain questions. Here are the most important points that should be taken into consideration when setting off to purchase or sell real estate.
1. OWNERSHIP OF IMMOVABLE PROPERTY
The ownership of immovable property can and should always be checked using the land register, in which the general data, size, owners, restrictions and mortgages encumbering immovable properties have been entered. Immovable property can only be transferred, i.e. sold by the owner of the immovable property entered in the land register.
A family’s joint property is in the joint ownership of the spouses, regardless of the fact that until recently only one spouse was entered in the land register as the owner, typically the man. When setting of to purchase or sell real estate this information is very important, since property in joint ownership can only be sold with the consent of both parties. In the event that one of the parties is deceased, it does not automatically mean that the other party is the owner of the entire immovable property. In the event of the death of one joint ownership party their property shall pass through succession to their intestate successors, if no other arrangements have been made in their will. As of 1 January 2009, a system for the renunciation of succession is valid in Estonia. To learn about what one should know regarding succession, visit the homepage of the Chamber of Notaries.
As is the case in joint ownership, where the consent of both parties is required to conclude a sale, the consent of all co-owners is also required in the case of common ownership.
Read more in our blog: Sirle Koorts ‘What kind of an oddity is common ownership and how can it be ended?’
2. VALUE OF LAND AND POSSIBILITIES FOR USE
Information concerning the value of land, the natural status of land and the use of land, can be found in the Land Cadastre, which is maintained by the Land Board. A quick search of the Land Cadastre can be performed here: http://xgis.maaamet.ee/ky/
A restrictions map can be found HERE.
Examination of the restrictions map is necessary in order to keep up with any legally established restriction or set of restrictions on the use of property.
Full control over immovable property may be restricted with legal restrictions or restricted by real rights which are established for the benefit of other persons. Restrictions on immovable property ownership are legal restrictions on ownership, which are not separate real rights and which are therefore not required to be entered in the land register in order for restrictions to be created.
Restrictions established by a court decision or transaction shall be valid if they have been entered in the land register by the land registry division. Restrictions established by law may be amended or terminated only on the basis of a judgement or a notarised transaction, as a result of which the restriction becomes a restricted real right. The easiest way to perform inquiries in the Land Cadastre is by using the cadastral register number.
3. LEGALITY OF A CONSTRUCTION
The next register from which data must be checked is the register of construction works at the address www.ehr.ee
The main objective of the register is to keep track of construction works currently under construction and in use. As of 1 April 2016, data from the register of construction works has legal effect in a manner similar to that of the land register. Pursuant to the Act to Implement the Building Code and the Planning Act, which entered into force on 1 July 2015, data in the register of construction works must be organised by 1 January 2020, and all heretofore unregistered buildings must be entered in the register, identification of which will begin based on orthophotographs. As such, it is currently possible to purchase buildings that have been entered in the register of construction works as well as those buildings that have not been entered, although it should be taken into consideration that by 2020 all buildings in use must be entered in the register and this requirement rests with the legal owners of buildings.
In the case of construction works that were built after 22 June 1995 and prior to 1 July 2015, but which have not been entered in the register of construction work, and which are currently being used, the local government may issue a construction permit and occupancy permit on the basis of a construction project or audit. In exceptional cases construction works will be entered in the register on the basis of a notice, regarding which a document containing a legal basis for construction was issued prior to 1 January 2003.
Existing construction works, which were built prior to 22 June 1995, may continue to be used in accordance with their intended use, although the owner is required to determine whether the construction work has been registered in the register of construction works and, if there is no register entry, to enter the construction work in the register of construction works.
Read more in our blog: Piret Rondo’s article ‘Doghouse, shed and barn, or once more about the new Building Code’.
4. PERFORMANCE OF CONSTRUCTION WORKS – BUILDING PERMITS AND AUTHORISATIONS FOR USE
The regulation of construction work falls within the competence of local governments. In order to begin construction works, a construction permit must be applied for. After the completion of the construction work and prior to occupancy a check of the conformity of the constructed utility systems is performed and an occupancy permit is issued for construction works built according to requirements.
Any renovation or reconstruction works that are associated with the changing, supplementing or repairing of the building's main constructions, require a building permit and whatever arises therefrom.
A house or apartment can still be purchased or sold without building permits and authorisations for use, although the obligation to bring documentation into conformity with the requirements established by law rests with the legal owner. Documentation that is in order, especially the permit for use of construction works, serve as a guarantee that the heating, water, electricity and other systems have been installed as required, are therefore fit for use and safe, which is a significant argument in favour of making the purchase in the case of two objects of equivalent value. Incomplete documentation reduces an object’s sales price, since along with the object the buyer acquires a problem requiring resolution in an unspecified amount. Banks also refuse to accept such property as a loan guarantee.
Read more in our blog: Ingvar Allekand’s article ‘Unlawful construction work’ ‘How does this affect your immovable property transactions?’“
5. NEW BUILDING CODE
The regulatory provisions regulating construction and planning, which entered into force on 01 July 2015, can be found at the following links:
Building Code www.riigiteataja.ee/akt/105032015001
Planning Act www.riigiteataja.ee/akt/126022015003
Act to Implement the Building Code and the Planning Act www.riigiteataja.ee/akt/EhSRS
It is important that you find an adjustable operation that meets your needs and wishes in Annex 1 to the Building Code and that you act on the basis thereof:
https://www.riigiteataja.ee/aktilisa/1050/3201/5001/Lisa_1.pdf
Read more in our blog: Ingvar Allekand’s three part article ‘The New Building Code - luck or accident.’ Part 1 and Part 3 ‘Purchasing a partially completed construction work’
6. PURCHASING A PARTIALLY COMPLETED PRIVATE HOUSE
When purchasing a partially completed private house, a great deal of attention should be paid to construction technology and documentation related questions.
Building documentation – whether and to what extent construction documentation is available for buildings or ancillary buildings located on a registered immovable. The existence of building design documentation and working drawings, along with building permits for electricity, water, sewerage, ventilation, and heating systems, etc., as well as a record of construction works, power line and water quality control acts, etc., should be confirmed.
If the construction documentation is deficient, it must be assembled by the new owner, with the cost of doing so definitely impacting the price of the property. The lack of documentation may also entail a future requirement to demolish the construction work.
Read more in our blog: Kaupo Mõttus’s ‘What to keep in mind when purchasing a partially completed private house.’
7. HIDDEN FAULTS
If following the acquisition of the immovable property the buyer discovers a significant defect in their new home, one that they were not informed of beforehand, but which the seller had to have been aware of and was required to notify the buyer of, then it is a hidden defect – meaning a defect that the buyer should have been informed of, but was not.
It is honest and expedient to notify the buyer of all known defects and to also fix these in the contract of purchase and sale, in order to avoid any sources for disputes later on.
Hidden defects may be grouped as defects relating to legal, technical or environmental questions. They are all connected in one way or another.
Legal defects include, in addition to incomplete documentation, utilities arears to an apartment ownership or some other related service provider, a loan taken by the apartment association, which increases general costs, heritage conservation restrictions, etc.
Technical defects include, for example, construction faults, utility system faults, etc.
Environmental defects may include spring flooding, loud noise or air pollution in the proximity of some types of production buildings, nightly noise in the vicinity of a night club or a habitual disturber of the peace in an adjoining apartment.
The liquidation of legal and technical types of defects always includes a certain cost in terms of energy and money. Environmental defects are frequently impossible to eliminate.
Read more in our blog: Kristo Kivisalu’s article ‘An unpleasant surprise, i.e., hidden defect, after purchasing immovable property’, and Elis Madi’s article ‘Winter months reveal hidden defects.’
8. LIABILITY OF THE SELLER
The seller is liable for the defects in sold immovable property in accordance with the Law of Obligations Act, above all when
- the defect has not arisen from the buyer;
- the defect was present at the moment that possession was transferred;
- the buyer was unaware of the defect at the time of concluding the contract nor should they have been aware;
- the Purchaser has notified the Seller of the defects within a reasonable period after they became or should have become aware of the defects;
- an agreement limiting the liability of the seller has not been concluded or the seller cannot rely on such an agreement;
- the defect arose due to the intent or gross negligence of the seller;
- the seller was aware or should have been aware of the defect, but did not disclose it to the buyer.
Pursuant to law, the seller of immovable property is required to notify the buyer of all possible known defects, which is also reflected in the selling price. It is important to know that the seller is liable for the discovery of hidden defects for a period of two years after the conclusion of the sales transaction. Therefore, in the case of a defect hidden during the sales process, the buyer may demand from the seller the elimination of a significant defect or compensation for the elimination of the defect. In the most severe case, a buyer that is disappointed in the quality of the object may institute proceedings for reversing the transaction, i.e. demanding the opportunity to withdraw from the purchase and to receive a refund of the sales price from the seller.
9. PREPARING IMMOVABLE PROPERTY FOR SALE
A home is an individual’s highly personal and unique private area, where random and strange people do not usually set foot. When setting out to sell one's current home, it must be viewed in an entirely different way, with the glance of a stranger, since the home has now become a piece of immovable property for sale. What is the difference between a home and immovable property for sale? In a home the most important thing is that the life within would be comfortable and pleasant for its residents, whatever that may be for different people. Immovable property for sale must be acceptable and interesting to as many people looking to make a purchase as possible. Consequently, starting with the taking of pictures, the most interesting and best possible exposition of the immovable property becomes a priority, along with making one’s personal life as inconspicuous as possible. In other words, everything begins with a major cleaning. When taking sales photographs it pays to remove all highly personal as well as practical items from sight – empty packaging, plastic bags placed between cabinets, laundry drying on a radiator or elsewhere, personal makeup and hygiene products, etc. Particular attention should be paid to the displaying of the bedroom, since it is extremely unpleasant for some people to enter a strange private area. To avoid such problems, it is best to cover the bedlinens with a beautiful and clean bed cover and to remove all personal items from view, and to close all drawers and cabinet doors. It is known that people have a limited attention span – therefore, we keep the focus on the best qualities of our immovable property.
Read more in our blog: Lenne Kontor’s article ‘Interior decorating tips for sellers of immovable property.’
10. PREPARING FOR A LONG SALES PERIOD
The sale of a lovely country home in Hajaküla may last for several years. In many cases the sellers are no longer living on site. In that case, it is important to prepare the house to stand unoccupied for an extended period of time and to protect it from all possible weather conditions, to the maximum extent possible.
Read more in our blog: Terje Oden’s article ‘How to preserve the value of a country home?’
11. PREPARING A NOTICE OF SALE
A notice of sale for immovable property must be informative; it must provide the interested party with sufficient information that it piques their interest enough for them to head out to visit the object. All of the information provided must be accurate, since excessive embellishment or the presenting of false information may bring with it problems involving the Consumer Protection Board, as well as buyers demanding post-transaction compensation. The text should be of an optimal length. An advertisement with only a brief amount of text will not motivate the buyer to call, and an advertisement with too much text will be burdensome on the buyer and they will grow bored.
Everything begins with high quality and comprehensive pictures. The over processing of pictures may create the wrong impression of the object, which may in turn create a negative reaction once there. It is recommended that around 10 pictures be added.
A plan characterising the spatial planning is also highly informative. This is something that can be drawn easily with the aid of free programs found on the Internet.
Pursuant to subsection 67 (1) of the Building Code, the immovable property advertisement must include the particulars of the energy certificate. The existence of the energy certificate can be controlled from the register of construction works.
Read more in our blog: Kersti Luige’s article ‘What does a good advertisement for the sale of immovable property include? ’
12. TAKING SALES PHOTOGRAPHS
Even though the purchasing of immovable property is a financial transaction with far-reaching implications, it is primarily emotion that is conveyed when putting together an advertisement for the sale of immovable property. The initial impression, i.e. emotion, is what is generated within the buyer when they view sales photos. If the photos have piqued their interest, the person will read the advertisement. If the advertisement has been properly formalised and includes sufficient information, the desire to initiate contact will arise. By taking the sales photos we are trying to create that feeling of recognising an ideal home within the viewer. However, the photos may not distort reality or convey false information. A good practice prior to taking the sales photos is to carry out a thorough cleaning, during which all personal items, laundry and cleaning supplies, clothing, shoes, worn carpets, pet items, sickly looking houseplants and other items typically found within a house and which are not intended for sale, are removed from in front of the lens. Fresh cut flowers in a vase or a beautiful houseplant are appropriate when it comes to helping to create atmosphere, although their use should not be overdone. When taking sales photos, it is wise to remain professional and keep the focus on what you are trying to sell.
Read more in our blog: Viljo Pettinen’s article ‘Part I: 10 tips for photographing immovable property’ and ‘Part II: 10 tips for photographing immovable property.’
13. SETTING THE SALES PRICE
Finding a selling price is often limited to a price comparison between the immovable property objects included in the offer, which actually provides only an overview of the sellers’ expectations regarding price. It is frequently the case when selling one’s home that, without even realising it, the valuable emotions associated with one’s home are incorporated into the selling price. In such cases the sellers' price expectations may turn out to be 15-20% higher than actual transaction prices. In most cases, an unrealistic price expectation results in a long and drawn out sales period, which in certain instances may bring with it greater damage.
When setting out to sell your home, it is reasonable to contact a real estate company employing professional assessors. They have access to information on performed transactions and they are therefore able to prepare a thorough price analysis for the immovable property. Real estate brokers, who have access to transaction information and who work together with assessors, are also able to prepare a similar selling price analysis.
The difference in the price analyses prepared by the broker and the assessor lies in the fact that the assessment by the professional assessor is broader and more in depth, and is suitable for assigning the market value of the loan guarantee, financial reports, making a decision on investment and other important financial decisions, in addition to determining the sales price. The price analysis prepared by the broker takes into consideration all of the necessary aspects in determining the sales price and is suitable for finding the correct sales price.
Read more in our blog: Oscar Edela article 'Seller's price expectation vs the actual market price’
14. BANK LOAN
It is common and often the only available choice that a bank loan is used to purchase immovable property. Initial information about banks providing loans to private persons:
Swedpank: www.swedbank.ee/private/credit/loans/home
SEB: www.seb.ee/laen-ja-liising/kodulaen/kodulaen
Nordea: www.nordea.ee/Teenused+erakliendile/Laen+liising+kindlustus/Eluasemelaenud/51607.html
Krediidipank: www.krediidipank.ee/eraklient/laen-ja-liising/eluasemelaen/index.html
LHV pank: www.lhv.ee/finantseerimine/laenud/eralaen/
Read more in our blog: Kadri Lest’s article 'Will a bank give you a loan to purchase immovable property?'
15. EMOTIONS THREATENING THE TRANSACTION
Regardless of the fact that purchasing and selling a home are both very emotional decisions, it should be remembered that the process is, above all, a business transaction. Regardless of the type of transaction being performed, an individual attempts to attain the most favourable terms and conditions. The same is true in the case of immovable property transactions. The seller tries to get the highest possible sales price, and the buyer the lowest. Consequently, both parties are trying to move the price in a direction that is beneficial for them. This is frequently done due to ignorance or sometimes even intentionally by searching for errors and defects on an object, haggling down the price down and haggling up the price by adding price tags to emotional values. In terms of price negotiations, undervaluing a person’s self-worth and things that are important to them is not a good tactic. This is insulting and may, in a worst case scenario, lead to withdrawal from the transaction specifically due to emotional reasons. Both parties are then losers. Therefore, the defects and inadequacies present in the object being purchased should all be identified, with the seller being made aware thereof and, based on the situation, a counteroffer being made. With the goal of performing a smooth transaction, it is reasonable to do so in a compelling manner that is respectful to all parties. In the case of older and more emotional parties, it is helpful if someone is able to mediate the negotiations. An impartial person who is focused on concluding the transaction sets their emotions aside, lowers tensions, and deals with facts and arguments, which improves the chances of finding a compromise solution.
16. NOTARY MEMO
If the seller and the buyer have reached a mutual agreement on the sales price as well as other relevant questions, it is time to select a notary who will formalise the transaction, and make an appointment to visit the notary. All parties will then begin exchanging information with the notary. If the sales transaction is being mediated by a broker, they will prepare a notary memo for this purpose, which contains all relevant information. If there is no broker providing assistance, the notary’s office itself will collect information regarding the transaction participants, the object of the transaction and the transaction being performed. The notary will then verify the correctness of the submitted information using all existing registers and will prepare a contract of purchase and sale. The only thing that the notary is unable to verify personally is the description of the condition of the object. Yet this is very important, since the actual condition of the object is fixed in the contract of purchase and sale. The more precisely the condition of the object is fixed, the more soundly the seller can sleep over the next two years.
The buyer and the seller would both benefit from reviewing the draft agreement prepared by the notary and making any necessary changes or clarifications to it. The draft agreement can be reviewed in the notary’s office, prior to concluding the contract or a request can be made to have a copy e-mailed to you.
17. DELIVERY OF THE OBJECT
The delivery-receipt of the immovable property object is a very important part of the contract of purchase and sale, possession of which results in a change in ownership. This means that as of the moment of delivery of the keys all liability for the situation prevailing on the object falls on the buyer. All meter readings should be fixed and submitted to service providing companies. In the case of an apartment, the readings should also be submitted to the apartment association. The new owner must then, at the first available opportunity, conclude new contracts. It must also be checked whether all windows, doors, and gates close correctly and to take receipt of all of the keys in use on the object. The compliance of the condition of rooms belonging to the immovable property must also be checked, along with the fixing of important conditions such as the organisation of parking, etc.
All of the information must be noted in two identical copies, marked with the date, and signed by the buyer and the seller.
Good practice is to deliver and receive the asset immediately prior to visiting the notary to formalise the contract of purchase and sale. This ensures the buyer of full knowledge of what they own. Since the transaction is ensured either with money deposited in the notary's deposit account or a bank loan, the seller has no reason to worry that they have transferred possession prior to the conclusion of the notarised contract. On the contrary, this provides them with the necessary feeling of security that the buyer is aware of all circumstances related to the object and will later be unable to rely on their ignorance and submit possible compensation requests. As a beautiful and symbolic gesture, the keys are handed over by the seller to the buyer following the signing of the contract of purchase and sale.
18. WHEN AND FROM WHOM SHOULD YOU SEEK ADVICE
Advice can be sought at any point during the process of purchasing or selling immovable property, if you have any doubts regarding your knowledge or the ability to make the right decision. In addition to real estate broker service, Domus Kinnisvara also offers a consultation service, during which you can ask for advice and help with those questions that have proven to be problematic for you.
During the course of the consultation you can ask for advice on any questions you may have, from the checking of documentation to the preparation of a sales advertisement or a notary memo. If you wish, the consultation will also cover activities such as the inspection of the object and recommendations on what to do to prepare for sale or the taking of sales photos. You can also request the assistance of an immovable property consultant to inspect the object being purchased or to check documentation.
If you are interested in a consultation, please contact our immovable property consultants via telephone or e-mail, explain your wish and submit the relevant data. The consultant will then review the materials, search for answers to your questions, prepare a written reply and agree on a meeting time where they will explain the information to you.