Selling an apartment in private ownership

1. Acquisition title – the document based on which you acquired ownership of the property – this is most commonly a purchase or donation agreement and an inheritance decision.
2. Excerpt from the ownership deed.
3. Owner’s declaration – a document on the basis of which your apartment unit is legally defined within the apartment building.
4. Energy Performance Certificate of the building (PENB).
5. Record sheet with a breakdown of advance payments for services.
6. Settlement of services and energy for the previous year.
7. Confirmation of the unit’s debt-free status towards the HOA (Homeowners Association).
8. Information on the HOA’s financial management, any planned investments, future repair plans, and possibly investments already made, which the owners repay in the form of extraordinary payments to the repair fund, etc..
9. Floor plan of the apartment with room dimensions.

Transfer of a cooperative apartment

If you own a cooperative apartment, you are not the owner of the apartment itself but rather the so-called membership rights and obligations with the right to lease in the housing cooperative.

1. Acquisition title – typically the transfer of membership rights and obligations.
2. Ownership deed of the apartment building.
3. Lease agreement, based on which you are entitled to use the apartment.
4. Record sheet.
5. Cooperative statutes.
6. Settlement of services and energy for the last year.
7. Confirmation from the cooperative of debt-free status.
8. Declaration from the cooperative that no proceedings are being conducted against the member that could lead to their exclusion.
9. Confirmation from the cooperative regarding any unpaid annuity, or confirmation of the annuity’s payment.
10. Floor plan with marked dimensions.
11. Proposal for an agreement on the transfer of membership rights and obligations in the cooperative. Many cooperatives have their own preferred agreement forms.
12. Information on the cooperative’s financial management, accounting closure.
13. Overview of planned repairs.
14. Information on fees for the transfer of membership share.
15. Information on the possible transfer of the cooperative share into private ownership. In such a case, the cooperative should prepare an Owner’s Declaration.

If you do not have some of these documents, do not despair. We will arrange everything necessary for the sale for you.

The post What documents do you need when selling an apartment? appeared first on REMAX Alfa.

Introduction to the Czech Mortgage Market

The Czech mortgage market has seen steady growth in recent years, with more and more people looking to purchase their own homes. However, the process and requirements for obtaining a mortgage in the Czech Republic can be different from what you may be used to in other countries. It is important to understand these differences and be prepared to meet the necessary requirements in order to increase your chances of being approved for a mortgage.

Understanding the Czech Mortgage Process

The first step in obtaining a mortgage in the Czech Republic is to find a lender and submit a loan application. It is best to seek the help of a mortgage broker or advisor when finding a lender. This will typically require you to provide various documents, such as proof of income and employment, as well as information about the property you wish to purchase. The lender will then review your application and, if approved, will provide you with a loan offer. From there, you will need to sign the loan agreement and provide any additional documentation required by the lender.

Meeting Czech Mortgage Requirements

To be approved for a mortgage in the Czech Republic, you will typically need to meet certain requirements, such as having a stable income and a good credit history. It is also important to have all the required documents, such as proof of income, employment, and property purchase contract draft, ready to submit with your application. Additionally, many lenders will require a down payment of at least 10 to 20% of the property’s value.

Comparing Czech Mortgage Rates and Terms

When looking for a mortgage in the Czech Republic, it is important to compare the rates and terms offered by different lenders. Some of the key factors to consider include the interest rate, the length of the loan, and any additional fees or charges. Another important factor is the RPSN (Real Annual Percentage Rate of Charge), which is the total cost of the loan including all fees and charges expressed as an annual percentage. It’s also important to consider the flexibility of the loan terms, such as whether or not you can make early repayments or change the loan amount. By comparing different offers, you can find the best deal for your specific needs and budget.

Tips for Successfully Navigating the Czech Mortgage Market

• Research: Seek the assistance of professional mortgage broker to help you research different lenders and the products they offer to find the best deal for you.
• Get pre-approved: Getting pre-approved for a mortgage can help you understand how much you can borrow and what your repayments will be.
• Know your credit score: Having a good credit score can help you get a better rate on your mortgage.
• Be prepared: Having all the necessary documents ready when you apply for a mortgage can help speed up the process.
• Get a lawyer: A lawyer can help you understand the legal aspects of buying a property and ensure that the contract is in your best interests.

Conclusion

Purchasing a property in the Czech Republic can be a challenging process, but by understanding the mortgage market, meeting the requirements, comparing rates and terms, and following these tips, you can increase your chances of success. Be sure to do your research, be prepared and seek advice from professionals to make the process as smooth as possible. With the right information and guidance, you can find a home that meets your needs and budget in the Czech Republic.

Author: Ing. Jakub Rotrekl, Ph.D, mortgage specialist

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It all started with the law

In December 2016, a new Consumer Credit Act comes into effect. The law states that the bank is entitled to request from the client, with the exception of certain situations, a penalty corresponding to the costs incurred in the event of early repayment.

What does this mean? There is a consensus in the market that the costs incurred can include the lost interest income until the end of the fixed period.

When calculating the penalty for early repayment of a mortgage, banks simply examine at what rate they originally lent to the client and at what rate they could lend the money again at the time of early repayment. If they could lend the money at a lower interest rate than the client was paying, there is a loss in the form of the difference, and the client will have to pay it. If they could lend the money at a higher interest rate, the client will only be charged an administrative fee of a few hundred crowns, because there is no lost interest.

It is clear that a clients can face a high penalty if they want to repay their mortgage earlier than planned, especially during a time when interest rates on new mortgages are lower than the interest rate on their mortgage. For example, if a client had a mortgage with a 3% rate and wanted to repay it earlier than planned when new mortgages were being provided at a 2% rate.

The Czech central bank is entering the game

In March 2019, the Czech National Bank issued a statement which states, I quote (for those who do not want to read it, simply the lost interest will not pass):

The cost incurred in connection with the early repayment of a consumer loan for housing is not also the reduction of interest income for the lender after the early repayment of the consumer loan for housing, or the interest costs of the lender from its debts. In the first case, this is not a cost, but a lost profit. In the second case, this is not a cost incurred in connection with the early repayment of a consumer loan for housing, but again (a wasted) cost of providing the consumer loan. Therefore, the reduction in interest margin profit or any possible (wasted) refinancing costs, regardless of their designation (such as “opportunity costs”, “costs of obtaining financial resources”, “loss in interest income”), cannot be classified as reasonably incurred costs of the lender incurred in connection with the early repayment of the loan because the legally required connection with the early repayment is missing, and therefore cannot be the subject of compensation that the lender can demand from the consumer according to § 117(2) of the Consumer Credit Act.

And the situation that still exists today is born

According to the interpretation of recommendation of the Czech National Bank, in connection with an early repayment, banks have no other legitimate claims than the reimbursement of administrative costs, which range from 500 CZK to 1500 CZK.

Not all banks fully respected this recommendation of the Czech National Bank and throughout 2019, a sometimes quieter, sometimes quite loud “battle over sanctions” took place. There are many articles on this topic over the years. After many disputes in court, with the financial arbitrator and many tens of millions CZK in fines paid by banks later, it can be stated that all the banks have “calmed down”.

I have my own ranking of banks based on their willingness to respect the interpretation of the Czech National Bank. It is quite clear cut, but I will keep it to myself, because although it is based on my rich experience, it does not necessarily say anything about the future, and also, I do not want to name specific institutions.

What follows from this?

What follows from this is that the bank does not have a tool to hold its client. Here, I would like to emphasize that I do not evaluate the correctness of such a situation or the commercial sense of it, I am only describing reality as it is.

Why is it important to know this?

If you were to take advantage of the current market conditions and purchase a property at a relatively low price compared to a year or two ago, you can do so largely thanks to the high interest rates on mortgages.

So, you have a choice: you can either choose to buy now at a high interest rate, but with the assurance that the purchase price will remain favorable and that you can potentially lower the interest rate later, or you can wait for interest rates to decrease but this could result in a more competitive market and limit your chances of finding a good deal. The dormant demand for property is high, and as interest rates remain high and rents continue to rise, there is a potential for the market to become more active once mortgages become more accessible again.

Can it change?

Yes, it can and it probably will change. There have been talks for a long time about amending the law which will probably change this situation and allow banks to impose sanctions higher than administrative costs. If I go by the current development, I dare to estimate (and it is only an estimate) that this will not happen before the second half of 2024. However, even if it were to happen earlier, I assume that by then there will be at least temporarily lower interest rates on mortgages, and thus the opportunity to lower the rate on existing mortgages.

Author: Ing. Jakub Rotrekl, Ph.D, mortgage specialist

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In the event that you leave the sale of the deceased’s property to a real estate agency, you will not have to worry about viewings and handling unpleasant questions with interested buyers. But if you want to arrange everything yourself, be prepared for the following questions. “Why are you selling the apartment / house?” This turns the conversation to death and may be followed by questions such as “Who died?”, “Did the death happen on the property?”, “Was it a natural death, suicide or violent death?” Interested parties may care about your situation of feelings, as they only want to buy a property and so only care about its history. Don’t blame them. For some, the idea of ​​sleeping in a room where a person recently died or even committed suicide is unacceptable and can break any potential deal.

Is the seller obliged to inform potential buyers about a death in the property?

Simply put, the worse the cause of death which happened in an apartment or house, the worse and at a lower price it will sell. This leads some sellers to try to hide information about a death from buyers. Sometimes they even hide them from real estate agents, someone they are entrusting with the sale. However, news of a death can easily be found out.

Although, by law, the seller has no obligation to inform a buyer of a death that occured in the property, I always recommend the seller to communicate this information to all serious interested parties. It is basic human decency. After all, sooner or later they will find out from the neighbours. And if they don’t hear it from you, you’ll lose their trust, which can lead to a lost sale.

It is certainly not necessary for you to tell the buyer an elaborate story about the cause of death, just state the fact that the death occurred. Likewise, do not include information about the death directly in the advertisement or to everyone who comes for a viewing. Only tell those who show a serious interest in buying. The dignity of how you behave in such a sensitive situation will affect the atmosphere and the course of the entire sale.

Tragic death in real estate

A much more serious situation is when a suicide, fatal accident, or even a murder has occured on the property. The property thus gains a certain stigma

People are instinctively curious about death, especially if it happens in a particularly tragic manner. The media has long understood that the colourful description of tragic news can attention, readability, and viewership and thus secure higher advertising revenue. However, you are not a journalist. If you tell a colourful story about a suicide, wth specific details including the exact spot in a property where it happened, people will be interested, but will not buy. Let the details of any tragedy remain unknown.

How to proceed if the death occurred directly on the property

I have personally sold properties where someone had killed themselves. My colleagues also have experience with selling a property where a murder took place.

Selling such a property is complicated, as it will definitely have a negative effect on the price, but it is not impossible. Those interested in buying can usually accept that an old grandmother died of natural causes in an apartment, but many people refuse to buy a property where, for example, people burn died in a fire, committed suicide or were murdered. Others are willing to buy such a property only if the price is lowered. These usually include buyers who are emotionally colder or investors who will rent the property out, for example with short-term leases to foreigners or people with bad finances as they do not have the money to be choosey.

However, time heals every tragedy, so even a tragic death on a property will be forgotten after some years, and over time the price of such a property will begin to return to a normal level. Just think, in the Czech Republic are properties where shootouts with the Gestapo took place, or deported Jews lived, or other war horrors took place, sometimes marked by commemorative plaques on the side of the building or on the pavement outside. Yet today, no one cares too much about what happened so long ago.

In conclusion

Arranging the sale of a property following a death can be psychologically very demanding. The place itself carries with it a number of memories, both sad and joyful. Therefore, do not be afraid to ask for help from loved ones, or contact one of our real estate agents for advice. An experienced, sympathetic property broker will treat you with kindness and consideration of your situation, and will do their best to help you. We have real estate agents like this.

We wish you good luck in selling your property and much strength in the coming days.

Are you considering a sale? Start by finding out its market price. You can get a free estimate from us.

By obtaining an estimate of the market price of a property, you will have an overview of how much your apartment, house or land is worth. This is invaluable knowledge as it enables the children of elderly parents to protect them.

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Article prepared by: Bc. Petr Podlešák, manager at REMAX Alfa

What people say about our services

We asked our clients if they were willing to comment on the work of our brokers in front of the camera. Here are their authentic statements. For more references from clients, see references.

The post How to sell a property after someone dies appeared first on REMAX Alfa.

And unfortunately there are more bad ones than good. Choosing a decent real estate agent who will provide you with top service when selling a property isn’t as easy as it should be. Some agents promise you a gold mine just to get the job, but then their actions fall way short of their promises. For this reason, I have prepared a guide on how to choose a good quality real estate agent.

If you follow my advice, you can find yourself a good real estate agent. With a good agent, you often sell for more money than selling yourself, and without all the worry.

Where to find a good real estate agent?

(a) Personal references

References are among the most reliable ways of finding a decent real estate agent. Simply ask friends, colleagues, and neighbours for their experiences with real estate agents to see if they can recommend someone to you. However, be careful that the advice you receive is not given purely because the real estate agent they recommend is their friend or part of their family. In the same way, be careful that they are not recommending someone just so that they get a reward or cut of the sale’s commission.

(b) Search the Internet

Good real estate agents who are conscientious about their work, promote themselves openly online. For example, they have their own websites, blogs, Facebook business pages, and video channels on Youtube. They also often widely advertise themselves and the properties they sell, so you will come across their leaflets, billboards, and banners all over town. Real estate agents who are less visible often do not pay full attention to the property they are selling or are among the least successful around. In recent years, real estate trading has moved to the Internet, so an agent’s website can give you a good idea of their skills in online selling.

Draw up a list of a few real estate agents who look competent or have been recommended to you and contact them.

What people are saying about our service

We asked our clients if they were willing to comment on the work of our brokers in front of the camera. Here are their authentic statements. For more references from clients, see references.

Personal understanding and a good first impression

You will work with your real estate agent for several months, so having somone who understands you and is on your wavelength is very important. Also gauge the first impression they make on you, as this will likely be the impression they make on people interested in buying your property. The way they act can make a sale easier or more complicated. So ask yourself, do they have a pleasant voice, how do they express themselves, and how promptly do they respond to your questions?

Personal understanding is a good basis for choosing a property broker, but the matter should not end there. A real estate agent may be on your wavelength, but that doesn’t mean that they can sell your property well. Instead, try to see what other skills they have.

Communication skills

You should get a good first impression of your real estate agent in the way that they communicate. Your real estate agent should be pleasant to speak to, helpful, proactive on the phone (i.e. you should not have to chase them down when you need something), at the same time they should not be pushy or impress their will upon you.

A property broker’s communication skills are important for a successful sale, so if you have any reservations about the way they communicate, don’t work with them.

Reliability and credibility

When you first start working together, your real estate agent will try to show themselves in their best light, but you will soon see definite signs of the real person in their reliability and trustworthiness. Did they arrive on time for your meeting? Did they send you the information they promised? Did they call on the date they promised you? Have you ever caught them lying or twisting the truth?

These are all warning signs. If it happens to you flee; from them while there is still time.

Clothes maketh the man

It is still true that clothes make a man. Selling real estate is not like selling hot dogs on the beach. A real estate agent is responsible for assets worth millions and so should dressed accordingly, to reflect decency and trustworthiness. How they dress affects credibility, which affects the smooth running of your sale.

Ask your potential real estate agents questions

At your first face-to-face meeting with your real estate agent candidates ask plenty of questions and monitor their reactions. Experienced, professional real estate agents will have full, sensible answers. Inexperienced, sub-standard ones will not know how to answer, and may be vague and evasive. The worst candidiates will simply ‘um’ and ‘er’.

Examples of questions to ask:

• What will you do to sell my property?
• Where and how will you promote my property?
• Why should I choose you?
• Describe to me how our cooperation together will function?
• How do you guarantee that the whole transaction will go smoothly and that I will receive the money?
• How long have you been working in the real estate industry?
• Is selling property your primary job?
• How many properties have you already sold?
• Will you work with other real estate agents to sell my property? Cooperation between agents can significantly facilitate sales.
• Can you give me some references from your previous clients?

With appropriately asked questions, you can find out a lot about how qualified your estate agent is. You can also use conflicting questions to find out if they are telling the truth. If you bombard the real estate agent with questions and they become entangled, confused, and begin to answer inconsistently, you may know that they are making their answers up. An estate agent who lies is the worst possible type, as trust between client and property broker is essential. If you find out that your real estate agent candidate is lying, do not work with them under any circumstances, even if they gets you drunk with sweet promises.

Google your real estate agent candidtate

The era of secret property brokers is over. Enter any real estate agent’s name into Google and see what information appears. If there are very few or zero ‘matches’, then they are probably a novice or inactive broker who doesn’t let the world know much about them. That’s not a good sign.

The worst result is if there are a lot of negative reviews. While one or two bad incidents can happen between individuals (personality clashes, misunderstandings etc.), a long list of disappointed customers should sound alarm bells. Another bad sign is if a property broker is hiding behind a real estate agency. If this is the case then you will not find their photos or videos anywhere. Conversely, good, capable real estate agents are proactive and not afraid to put themselves and their faces in the marketplace, literally. Long-term proactivity is a great sign that they are serious about their work and enjoy it.

Today, clients can rate real estate agents and agencies on the Internet, for example via Google or Facebook. Independent reviews from clients are an excellent guide for choosing a property broker and real estate agency.

How a real estate agent advertises property

Take a look at how your real estate agent candidate is advertising other clients’ properties. Does he have high-quality photos or a video presentation? Is the text of the adverts engaging and does it contain any grammatical or spelling mistakes. If you see advertisements like this; run.

Check up on your real estate agent

Don’t just rely on what your real estate agent says they will do. Check to see if they really keep their promises. For example, ask your partner to call an advert from a different phone line and see how your real estate agent candidate reacts to a prospective buyer. How friendly, positive, willing, and proactive are they? If they don’t answer the call (it can happen, real estate agents are often in meetings, conducting viewings, or negotiations), wait to see if and how quickly they return the missed call. If they do not call back or only call back on the next working day, avoid them like the plague. Would you be happy if they failed to return a call to someone who was interested in buying your property?

A huge advantage can be had when selling a property if real estate agenst cooperate with others in the industry. Property brokers who work with other brokers sell properties faster and at higher prices. Avoid real estate agents who refuse to cooperate (not wanting to share a commission or fee).

Which real estate agency does your property broker work for?

The office where your real estate agent works will tell you a lot about the overall quality of the real estate services they provide. High-quality offices offer their real estate agents better opportunities to promote your property. They provide proper facilities to help them do their jobs well and offer decent real estate training. However, do not choose a real estate agent purely on whether they work in a large or small office. Some larger agencies have poor estate agents, as do some smaller ones.

However, be aware that larger, stronger offices have more opportunities and clout to promote your property. This will bring your property to the eyes of a larger number of potential buyers, which in return increases your chances of a quicker sale for a higher price.

A real estate agent who works on their own or as part of a small team may be very likeable and capable, but they are still a pawn in the industry. They will not be able to achieve results as good as those who work in a larger team, as they do not have the same advertising and cost synergies.

I have personal experience of this, as before I joined REMAX, I used to work in a small real estate agency where there was little broker support and the promotion of properties was abysmal.

Do not only rely on what your property broker says, ask for written commitments from your estate agent

Don’t just rely on a property broker’s promises, get facts and commitments in writing. People selling property often like to hear unrealistic promises from property brokers about how much their property is worth.

However, reputable real estate agents will always tell you the truth, even if you won’t like it, about a property’s real market price and will back up their claims with facts. While many owners do not want to hear the truth about the real market price and are happy to have their unsubstantiated dreams supported by an ‘expert’, but are in fact just delaying their appointment with reality. As such, they often laden themselves with a bad estate agent.

For this reason, do not just rely on what a real estate agent tells you, but ask them to explain the reason and show the evidence for a property’s valuation. Also ask for any real estate agent’s commitments and promises to be in writing. This could be in the form of a sales plan or as an annex to the brokerage contract. This way, if the real estate agent does not fulfill their obligations, you will be able to terminate the contract instantly. To learn more about this read the article; “What should a quality sales plan contain?

Is your real estate agent experienced or just starting out in the industry?

Experienced real estate agents can share their experience and knowledge when selling your property.

Alternatively, novice property brokers can often offer you enthusiasm. Experienced estate agents will typically, but not always, be confident in their work and act in a well-established way, while a novice broker may let their inexperience or impatience spoil a deal. There is also the chance that they will not survive in the industry long enough to complete the sale of your property.

That said, decent real estate agencies provide novice property brokers with plenty of assistance, including a dedicated support manager to help them overcome these disadvantages. However, these are generalisations; the important thing is how to gauge how a particular real estate agent comes across to you.

Is your real estate agent looking after only your interests or are the a ‘dual broker’?

Find out if your real estate agent is solely representing you at the sale (a so-called ‘seller’s broker’) or are they also being paid by the buyer (a so-called ‘dual broker’). A seller’s broker makes every effort to ensure the best possible sale for the selling client.

By working for both parties, a dual broker has a conflict of interest. Dual brokers are the biggest problem in today’s real estate market. You cannot trust them 100%, because they are also working for the counterparty and as such cannot provide you with a comprehensive and unbiased real estate service.

The largest and most fundamental conflict that a dual broker faces is that the seller wants to sell for the maximum price possible, while the buyer wants to to buy for the minimum. This causes the dual broker to act only as an intermediary between the seller and the buyer, ensuring the smooth administration of the transaction. They therefore follow the path of least resistance, and that means the path of compromise.

Simply do not work with dual brokers, they will not defend your interests.

How much commission is your real estate agent charging?

The amount of commission is naturally very important for a client. No one wants to pay more for services than is necessary. For this reason, many sellers consider the amount of commission as the only criteria for choosing a property broker. But this is not a smart move.

Instead, always ask not only how much the commission is, but also what services the real estate agent provides for that cost. Additionally, ask your real estate agent to commit to providing those services in writing by including them in the brokerage agreement.

In this way, you should choose a real estate agent based on a comparison of the amount of commission charged and the number of services provided. Never simply except the lowest commission as it is likely to come with the lowest standard of services. At the same time, a real estate agent with the highest commission will not guarantee the best service. It’s just not that simple.

There are plenty of lazy real estate agents on the market who still charge an unreasonably high commission. All they are focused on is collecting their commission as soon as possible and do not care if they sell the property well or for the best price.

Conversely, a real estate agent who has too low a commission will be unable or unwilling to invest a lot of time and money into promoting your property. Such brokers often work by simply photographing the property themselves and then displaying it on several real estate websites, thus ending their marketing efforts. That is woefully insufficient in today’s market.

The result of such little effort is that the real estate agent will not reach as many potential buyers as they could. The sale will often take longer and the seller will receive a lower price than they otherwise could have.

If you want to sell your property for the best price, then it is important to present the property in the best way (i.e. top quality photos and video presentation, professional homestaging) in coordination with high quality marketing, which should include promoting the property not only on real estate websites but a social media campaign, targeted advertising around the property, working with a database of buyers, cooperation with other brokers, etc.

However, all of this costs time and money which is reflected in the amount of commission paid.

In my experience, in most cases, paying a higher commission is rewarded with a faster sale at a higher price which more than off sets the cost of paying your real estate agent more. A higher commission is money invested in proper marketing.

For this reason, it is advisable to ask your real estate agent what marketing activities will be provided for the commission you are paying.

Ultimately, it is up to you whether to employ a real estate agent who will sell your apartment for 3 million krowns with a 2% commission or employ a real estate agent who, thanks to his investment and skills in marketing, will sell your apartment for 3.2 million krowns with a 5% commission. In the first case, after deducting the commission, you will be left with 2,940,000 Czk in your hand, in the second case 3,040,000 Czk.

Which real estate agent costs more in the end? Amazingly, this is what is happening in today’s real estate market.

People can easily calculate how much a real estate agent’s services will cost them, but they usually cannot see the lost profit from hiring a broker who is unable or unwilling to carry out quality marketing and effectively defend your interests.

Good brokers usually do not need to underestimate themselves because they have no shortage of contracts.

Therefore, it is often the case that brokers who apply for your favor with too little commission and are relentless are brokers whose services can ultimately become more expensive for you.

The commission of real estate brokers most often ranges from 3 to 5% + VAT, depending on the price and volume of services provided.

What business skills does your real estate agent have?

Your property broker should be a good trader. Why? Because the buyer is constantly trying to get a discount and other benefits. Some buyers use all sorts of ways to lower the price. For example, they look for whether the seller is under time pressure, getting divorced, in financial difficulties, dealing with a death in the family, etc., all in order to get a discount.

The buyer knows that sellers who are in an unfavorable life situation and emotionally upset will be more likely to lower their sales price due to their weakened position. A real estate agent who represents you properly should be prepared for all situations and should be able to defend your interests in all circumstances. No buyer demand or pressure should derail him. If they do, they are not a broker worth his salt, but is someone who will cost you money.

Therefore, try to find out if your real estate agent is a good trader. There are several ways to do this. Firstly, you can ask them questions, like those mentioned in the beginning of this article, and then judge their reaction.

The easiest way is to put them under pressure to see how they react in such situations. For example, if you want concessions in the brokerage contract, ask for a reduction in the commission and watch their reaction. Do they agree to reduce their commission without a fight? How will they defend your interests if they are not even able to defend their own? Will they respond to your requests irritably or aggressively? This is also not a good sign. If they treat buyers in a similar way, they can easily lose them and so can you. Only a broker who is able to defend his interests diplomatically is able to defend your interests effectively. Therefore, do not be afraid to subject your real estate agent to these tests. There is a lot of your money at stake.

Beware of real estate agents who don’t charge VAT

With the exception of novice property brokers, good real estate agents, at least in large cities such as Prague or Brno, are always VAT payers. Every successful real estate agent who devotes themselves fully to their work will sooner or later have to comply with tax law. If there no one is paying VAT, it is very suspicious. There are only two reasons for this.

1. They don’t sell much and are not as successful as they claim to be. Unfortunately, many property brokers do not tell the truth about themselves, their qualifications and abilities. I do not know of a single experienced, high-quality and honest broker who is not a VAT payer.
2. Cheating. Unfortunately, some property brokers collect a commission in cash and officially report only a small part of their income. Selling a property can take months, during which time a real estate agent and their client can get to know each other fairly well. This enables dishonest brokers to know who he can ask for a cash commission payment without documentation in return for a discount.

In the first case, you have no guarantee that you are cooperating with a professional, in the second case you run the risk that a broker who cheats on the state is not morally honest and can easily deceive you as well. You can find out if the broker is a VAT payer at the Register of Economic Entities at wwwinfo.mfcr.cz.

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Article prepared by: Bc. Petr Podlešák, manager at REMAX Alfa

The post How to choose a real estate agent to sell your property appeared first on REMAX Alfa.

However, private owners, such as yourself, can also use a sealed bid auction to sell your apartment, house or land. It is suitable for anyone who wants to sell for the maximum price.

We started selling properties using sealed bid auctions in 2015. Since then, we have completed several hundred transactions at REMAX Alfa.

Here, I would like to share with you our four year’s of experience in organizing auctions, our observations on their success, their advantages and disadvantages.

What is a sealed bid auction?

A sealed bid auction is often described as a competition for the best offer.

It is called a sealed bid auction because bids for purchasing the property are submitted by prospective buyers to the seller in sealed envelopes.

Today bids do not have to be physically sealed in an envelope (although that is still possible), but instead can be submitted electronically via an online auction system or by email.

At Alfa, those interested in bidding on a property can choose which form is best for them. Most people choose to bid via our electronic auction system or by email, but some, especially the elderly, still prefer to deliver bids in a classically sealed envelope.

We then submit all offers to the seller.

The best offer wins

The best offer does not necessarily mean the offer with the highest price.

Other criteria may play a more important role for the seller.

And it sometimes happens that the seller prefers a bid that is not the highest in monetary value.

For example, if the seller is in a hurry, he may prefer a bidder who offers a faster payment method, albeit a lower price.

Or it sometimes happens that the winning bidder is one who offers the seller a longer time to move out.

The decision on whom to sell is solely up to the owner. The real estate agent is only an advisor during the auction. They may, for example, draw the seller’s attention to a bidder’s unrealistic promises or payment terms, etc.

Advantages of sealed bid auctions

1. Transparency and efficiency

The main advantage lies in the transparency and efficiency of selling this way.

2. Equal opportunity

All interested parties have the same opportunity to buy. It does not matter who views the property first, second or third.

3. Speed

If sealed bid auction is well organized, the property will sell relatively quickly and profitably at the same time. Additionally, because there is a fixed deadline for submitting bids, potential buyers have plenty of time to make a mature decision and are not pressured into making a quick offer.

4. Selling at the maximum price

The buyers decide for themselves which offer to make to the seller. They can offer a higher or lower price dependent on what the property is worth to them.

In the fast-growing real estate market that we have been experiencing in recent years, competition between buyers means that real estate sold this way often achieve the maximum value.

All proceeds from the sale belong to the seller. Our real estate agency is only entitled to a pre-determined fee.

Disadvantages of sealed bid auctions

Sales by sealed bid auctions are simple in principle, but more demanding in terms of preparation, marketing, and credibility of the auction organizer than regular sales. And this is the biggest drawback.

1. Preparation

A sealed bid auction organizer must prepare well by creating clear rules and predicting all potential problems. It’s more challenging than a traditional sale, such that a lack of preparation can end in fiasco.

2. Marketing

In order for an auction to be successful, the seller must make an intensive advertising campaign to attract as many interested parties as possible in a short time. If the auction is badly promoted, only a few people may come to view the property and ake bids, meaning that it will not sell as well as it should. In fact, it may not even sell at all. Making an intensive, high-quality advertising campaign requires sales and marketing experience. If the seller doesn’t possess these skills, then their chances of success drop dramatically.

3. Some people are discouraged by sealed bid auctions

Not all buyers welcome sealed bid auctions. That is a simple fact. Some people openly tell us that if the sale is organized in this way then they are not interested in buying the property.

While, this may seem like a big disadvantage, in reality, people who dislike sealed bid auctions are generally just not interested in making a competitive offer. Consequently, their loss does not have a significant impact on the final sales price.

4. Credibility of the auction organizer

Historically, sealed bid auctions have been labelled as a means for corruption in the sale of state and council property. It is a bad reputation that leads many not to trust them. It is therefore absolutely essential that the auction organizer has a good reputation, and is a trustworth guarantor that everything will be above board and take place according to predetermined rules.

Unfortunately, it still happens that a less honest potential buyer wants to bribe the real estate agent to find the value of rival offers. This includes those who have lost the auction, but then offer a bribe so that they can offer a higher price after the result has been announced. Such conduct is in violation of our auction rules. Unfortunately, there are other ways in which bidders can try to corrupt the auction.

In order for a sealed bid auction to succeed, those taking part must trust the organizers and have faith that it will be conducted according to the rules, otherwise they will not participate. No one wants to be involved in anything corrupt, even if it will not financially hurt themselves personally.

For this reason, we place great esteem and importance in the moral credibility of our real estate agents. In addition, any Alfa estate agent who would even attempt to accept a bribe would be instantly dismissed and face trial for damages.

If you entrust the organization of a sealed bid auction to us, you can be sure that everything will be done cleanly, honestly, and according to the rules.

E-systems oversee human failures

Unlike traditional envelopes, electronic systems can also monitor the moral failure of workers.

The system we use at REMAX does not allow the real estate agent who organizes the auction to see the offers received before the deadline. This ensures that no one can inform other bidders about rival offers received and thus influence the auction in their favour. Similarly, no employee is able to discard offers received. The evaluation of the auction often takes place in the presence of the seller, who has a perfect overview of all the offers received.

The future of sealed bid auctions

In my opinion, the sale of real estate through sealed bid auctions has a promising future.

Of course, bidding through electronic systems, which can oversee the weakness of humans, will become more and more widespread, and bidding in traditional envelopes will decline.

There are numerous countries where sealed bid auctions are a very popular way of selling real estate. For example, in Canada, the USA, Australia, and Norway. While the method is growing in popularity in Germany and other countries.

I am interested in selling my property through a sealed bid auction

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Autor článku: Bc. Petr Podlešák, manažer REMAX Alfa

What our clients say about our auctions

We asked our selling clients, for whom we organized an auction, how satisfied they were with the result of the sale. To see what they said, visit the references page.

The post Sealed bid auctions – an excellent way to sell real estate appeared first on REMAX Alfa.

• after constructing a new building;
• when a building is used by a public authority;
• when selling a residential property or office space from 1.7. 2015.

The owner of an individual housing unit is obliged to display the building’s energy intensity rating in information and advertising materials during the sale of the housing unit from 1 July 2015, and when renting the unit out from 1 January 2016.

The owner is also obliged to present the energy certificate to those interested in purchasing the unit before concluding the purchase contract and, from 1 January 2016, also to those interested in renting the unit. In the case of an apartment the owner can request a copy of the PENB from the building’s manager in writing. If they do not respond, then they can use the last 3 years’ of utility bills (electrcity, gas, and heating) as an alternative, but must prove that they have requested in writing a copy of the PENB from the building managers. If they have still not provided a copy by the time the purchase contract is being signed then they must report the situation to the Státní Energetická Inspekce (State Energy Inspectorate) or SEI. In failing to provide a certificate, all information and advertising materials concerning the sale must display an energy rating of class G (the worst rating).

A building’s energy performance is assessed on the basis of the total annual energy supplied, which is understood as the amount of energy supplied to the building, including energy produced in the building by renewable energy sources and consumed in the building. It is therefore mainly the amount of energy needed for heating, cooling, ventilation, humidity adjustment, hot water preparation, and lighting.

The amendment does not apply to the transfer of membership rights and obligations in a housing cooperative, however, from January 2016, the housing cooperative must also have the energy certificate processed.

The certificate is valid for 10 years from the date of issue, or until a major change is made to the completed building (which includes adjustments of more than 25% of the building’s external structure). The certificate can be processed only by a qualified energy specialist, as listed by the Ministry of Industry and Trade. The certificate also contains a graphic, which is commonly referred to as an energy label.

Energy performance certificates are seen as indicators of a building’s energy consumption, giving those interested in buying or renting a property the opportunity to assess operating costs, or the cost of possible reconstruction. It is therefore similar in nature to other ratings supplied, for example a vehicle’s fuel consumption rating or the electricity consumption rating of electrical appliances.

Selling a property

When do you need a building’s energy performance certificate?

Are you selling your apartment, warehouse, office, residential, or non-residential space? Then, as the owner you are obliged to process an energy performance certificate if:

• The building is intended for housing and as a residential building it is also registered in the state’s land registry (katastra);
• The building is larger than 50 m2 of what Czechs call ‘energeticky vztažné plochy’ or the energy reference area. This is basically the total floor area of all heated areas, aka not small properties;
• A property is a commercial object registered as a business property or administration building;
• A property that is in insolvency proceedings and subject to sale through a purchase agreement;
• Apartments that are being sold (here the certificate can be obtained from the building managers).

When is a building’s energy performance certificate not needed?

The energy performance requirements of a building shall not apply to:

• buildings with less than 50 m2 of what Czechs call ‘energeticky vztažné plochy’ or the energy reference area. This is basically the total floor area of all heated areas, aka small properties;
• buildings for family recreation (cottages, recreational facilities);
• on listed buildings (however, beware of listed facades and other exceptions for which a PENB applies, if the building is not a protected monument according to the state land registry);
• buildings used for religious purposes;
• properties that are not registered in the state land registry (katastra) with a prescibed number;
• if the property passes from one person to another through inheritance or as a gift;
• Transfer of rights from person to person (when transferring the apartment of a housing cooperative to the future owner)
• industrial and production plants, workshops and agricultural buildings with energy consumption up to 700 giga joules (194,444 kwh) per year.
• buildings put into operation before 1947 with the written consent of the buyer that he does not require an energy certificate and the building has not undergone changes to the exterior structure of more than 25%.

From 1 July 2015, the seller (owner) must provide an energy certificate for a property on sale to the public. In the event that the energy certificate is not processed and the property is accordingly awarded an enrgy rating G (the worst rating), the owner of the building is not protected from possible inspection by the State Energy Inspectorate and from penalities of up to 100,000 Czk.

If a real estate agent does not receive an energy certificate from the owner for use in advertising, they must label the property as energy rated G, which will naturally have a negative impact on the sale and the property’s value. In practice, any property advertised for sale without a valid PENB may receive a visit by the State Energy Inspectorate with the possibility of receiving a fine.

Renting a property

When do you need an energy performance certificate for renting a building out?

Are you looking for tenants for your apartment, warehouse, office, residential, or non-residential space? Then you are obliged to provide an energy performance certificates if:

• The building is rented as a complete building;
• The building is a commercial property that is rented out as a complete building and is not operated by the owner himself;
• The building is a warehouse and is leased to another operator.

When does a building not need a certificate of energy performance for rental?

• For industrial and manufacturing plants, workshops and agricultural buildings with energy consumption up to 700 giga joules (194,444 kwh) per year;
• Furthermore, the PENB obligation does not apply to production halls, sports facilities and technical premises which are not intended for administrative activities.

From 1 January 2016, the PENB must be part of every newly concluded lease agreement handed over to the leasee at the contract signing.

Why is an energy performance certificate required?

The certificate itself is created by an assessment of the building or apartment by an energy specialist with knowledge in the field of building structures and energy, where the whole building is assessed in every detail. You may then use this energy certificate for the next 10 years for the following transactions:

• The sale of a house
• The rental of a whole house (complete building)
• The sale of a commercial property
• The sale of a housing unit
• The lease of an office, warehouse, business premises (if the building as such is entirely intended for lease and the owner does not have a permanent residence or residence there)
• For requiring a building permit (new buildings)
• For requiring a building permit during reconstruction
• Before the completion of construction (for approval or re-approval)
• When replacing a heat source with a new one with higher efficiency or when installing a heat pump or solar panels
• For acquiring a Green Savings Grant

If you are buying a property, make sure that you get a copy of its energy performance certificate. You are legally entitled to a copy when you purchase or rent a property and may later need it if you want to reconstruct or make changes to the property.

What will you learn about the property?

First of all, you will find out the overall state of the building’s construction from the certificate. Detail that will include the condition of:

• floors and their insulation
• walls of the building’s envelope, composition and insulation
• windows and doors and their thermal insulation properties
• ceilings and their insulation
• roof structures and their method of insulation
• overall dimensions of structures, windows and doors
• information on structures that would be worthwhile insulating or replacing
• information on the quality and efficiency of hot water or heating systems
• information on how much any potential investment in insulation will be required

From this data it is possible to compile an overall picture on the condition of a property, its quality and any detected defects, such as leaks, thermal bridges, condensation and more. In addition, it is possible to learn about the heat loss from the building’s envelope and from the current heating system used. The system for heating and domestic hot water are also mentioned here including their age, type of fuel consumption and, above all, their efficiency. From this, one can assess if or when the boiler will need to be replaced or if investing in a new system will generate significant savings or improve the building’s overall rating.

At a glance of the certificate, someone can gauge a building’s quality and whether any future investment will be needed.

For each time the building is reconstructed or a reconstruction permit is requested from the local authorities, the property owner will need to provide a valid energy certificate, so make sure you get a copy from the person selling you the property when you sign the purchase contract.

What if your building your apartment is in doesn’t have a valid PENB?

If you own an apartment in a building (společenství vlastníků jednotek or SVJ) and you want to sell or rent it out you need to provide a valid PENB. But what if the building’s mangement fail to provide one?

It is, of course, best to try to explain to those responsible for managing the building that it is their duty to provide a PENB. However, if they are still unwilling to act and you want to avoid penalties from the SEI, you must ask the building’s management for a PENB in ​​writing. This formal request should include the reason the PENB is needed and allow a period of up to 14 days from receipt of the request to when a PENB must be provided. The request should outline that the building’s management team are obliged in accordance with Act 406/2000 Coll., on energy management to provide this certificate.

If, as the owner of an apartment, you do not receive an answer from the first request, send a second call with a deadline of 7 -10 days, referring to the first request and notifying the building’s management that if the PENB is not received he will be forced to forward the issue to the SEI.

If you do not receive a PENB even after the second request, send a copy of the correspondence to the SEI with a complaint and a request that the SEI obtain it from the building’s management. In such a case, you could take advantage of the fact that you did not receive a copy of the PENB and you could instead replace it with energy bills for the last 3 years, thus avoiding your need for the PENB.

97% of all apartment buildings in the Czech Republic do not fall into the worst energy class (class G). Yet, it is necessary for an apartment owner to have an energy certificate so as to avoid negative repurcussions. For non-compliance of this legal obligation, the owner of an apartment or possibly the building’s management risk a fine of up to 200,000 Czk and will then be required to pay for a certificate to be produced.

Penalties related to PENBs

Sanctions for building owners and operators

The very introduction of energy certificates has a negative side: penalties. But who can be penalised? Any selling or leasing owner of an apartment, building or house who violates the legal obligation to present an energy certificate to the buyer when it first goes on the market (this includes in advertisements). When selling or renting out a house or commercial building, the owner (as an individual or ‘fyzická osoba’) is subject to a fine of up to 100,000 Czk. Legal entities, such as businesses (or ‘právnická osoba’) are subject to fines of 200,000 Czk.

This fine is applicable from 1.7.2015 for anyone in non-compliance. This means that each property advertisement must be marked with an energy class and a calculated value based on the certificate. If this value is not advertised, the State Energy Inspectorate can immedicately initiate inspections and administrative proceedings against the owner.

The State Energy Inspectorate and the Ministry of Industry and Trade incorporated these penalties into Act 406/2000 Coll. on energy management. As soon as you begin advertising a property for rent or sale, you (or your real estate agent) must provide a valid energy performance certificate when asked. Failure to do so will make the property owner liable for a fine.

Some people argue that if the seller and the buyer agree that neither of them want or need an energy certificate then a PENB is not necessary. This is wrong. An energy certificate is needed for every sale or rental. Adding that a PENB is not wanted into a purchasing contract only provides written proof of a failure to meet this obligation and are breaking the law. As such it is easy for the authorities to prosecute not only the property owner, but in this case also the buyer or tenant.

If the buyer decides that the newly purchased property requires immediate reconstruction or other major modification, they will need to request a building permit. If he did not receive one from the seller, then he will have to provide a new one himself.

Before paying for a new PENB to be made, the new owner may try to contact the person they bought the property from to obtain the original certificate. However, based on the purchase contract, a dispute may arise over whether the certificate was provided or not. Sometimes the dispute drags on, even though the contract stipulates that the certificate was handed over when the purchase contract was signed, as the certificate’s existence can be easily verified at the Ministry of Regional Development in the ENEX database, where the certificate is registered.

How to protect yourself against this? Firstly, it is important to have an energy certificate prepared and hand it over to the buyer when signing the purchase contract. Preferably, both the buyer and the seller sign the original certificates, which they pass to each other. This should avoid any future dispute. Especially, as no one wants to cause trouble with the threat of a 100,000 Czk fine for non-fulfillment, as well as other potential non-economic penalties.

Secondly, do not think that this issue does not concern you. If you are selling a property for hundreds of thousands or millions of krowns, do not decide that saving several thousand krowns to have an energy certificate made is a good saving. If you come across a buyer who understands the issue, it could be even more expensive or you will simply end up having to get it done anyway, delaying the transaction.

Additional risks for the seller

A building’s energy performance certificate is an important document corresponding to the technical and energy assessment of the property under Decree 78/2013 of optimal conditions.

If the property owner expressly avoids fulfilling this statutory obligation pursuant to Act 406/2000 Coll., On energy management, which states that he is required to have a permit for the sale or lease of a property drawn up, he is risking the entire transaction unnecessarily.

Every buyer has the right to full information about the condition the property is in, not only in terms of “defects and the state of the property” but also in regards to its running costs.

If these legal obligations are not fulfilled, the buyer may revoke or deem the purchase contract as partially or completely invalid for up to 5 years after signing.

An insolvency administrator representing the property owner is also obliged to ensure that a valid energy performance certificate is available for the sale or foreclosure of a property.

My advice to you is to never neglect or avoid getting an energy certificate for your building made, as you may cause major legal and financial damage when selling or renting your property.

Would you like to have an Energy Performance Certificate for a Building drawn up?

Please contact me. I am energy consultant Ing. Jarmila Bílá.

The author of this article.

I am an authorized engineer in the field of buildings’ technical equipment and a certified energy specialist. I am also a member of the Association of Energy Specialists. I have been processing energy performance certificates for buildings since 2008, with a wide range of experience in energy performance assessments and legislation. I work mainly in Prague and its surrounding area. Although, it is possible to arrange the processing of a PENB certificate for real estate further outside Prague.

I process certificates both for residential engineering properties (family houses, apartment buildings) and for properties intended for commercial purposes (administrative buildings, hotels, schools, industrial buildings, etc.).

Personal inspection of any building being assessed is a matter of course (although it is possible without it, if, for example, there is sufficient construction documentation and photos – which could even lead to a quicker assessment). Either way, I can take care of all your PENB needs. I will visit the property, take care of all documents, and then, once complete, hand over your PENB certificate.

Prices for drawing up a PENB certificate (including delivery)

Delivery times are from one to two weeks (by agreement), and if necessary within three days.

For example, the cost of a PENB certificate for a family house ranges from 3,000 to approximately 5,000 Czk. For an apartment building the price is approx. 8,000 Czk. I can also process a PENB for a commercial building. The price for any PENB is highly dependent on the size and structure of the property and on whether and to what extent there is construction documentation (i.e. whether it is necessary to redo the documentation or update it in any way). Unfortunately, due to the diverse range of properties and the varying completeness of documentation, I cannot offer you a uniform pricing structure. I work independently on my own IČ trade licence, although I am not a VAT payer.

Ing. Jarmila Bílá, energy consultant and recommended supplier by REMAX Alfa

The post A building’s Energy Performance Certificate (PENB). When do you need it? appeared first on REMAX Alfa.

Under Section 4 of the Income Tax Act, you are exempt if you have owned a property or cooperative apartment for more than 5 years. For details, see the article What is income tax on the sale of a property.

Here, we will focus only on the specific provisions of the Income Tax Act concerning the taxation of income from the sale of inherited real estate.

If you sell a property that you inherited from a testator who was a direct relative or spouse, the five-year period includes the time when the property was demonstrably owned by the testator.

Who are relatives in the direct line?

Relatives in the direct line are children, grandchildren, parents, grandparents. They are members of the family, where the family tree goes down (from father to son), but also up (from son to father). Siblings, uncles, aunts, nephews, and nieces are not direct, but subsidiary.

What is the rate of income tax

Income tax is 15%. Income from a property sale is calculated as the selling price minus the estimated price as determined in the inheritance proceedings minus other costs related to the acquisition or investment in the property (eg fees, for a lawyer, real estate agent, etc.)

Example 1

Mr. Krupička inherited an apartment from his grandfather in Brno. Mr. Krupička lives in Prague, he had no use for the apartment, he did not want to rent it due to the distance. So he decided to sell it. His grandfather lived in the apartment for the last 15 years before his death. In this case, Mr. Krupička did not pay income tax, because the period for exemption also includes the 15 years when his grandfather lived there. Mr. Krupička therefore met the legal condition of 5 years and sold the apartment without having to pay income tax.

Example 2

Mrs. Loukotová and her husband bought an apartment a year ago. Unfortunately, Mr. Loukota suffered a heart attack and died. For Mrs. Loukotová, the apartment is unnecessarily large, expensive, and she also reminds her of her husband. So she decided to sell the apartment and move back to her hometown, where she has family and friends. Mr. Loukotová’s share in the apartment went to Mrs. Loukotová as part of the inheritance proceedings. The Loukots bought the apartment for 2.5 million. This price was also determined in the appraisal of the property during the inheritance proceedings. When they bought the property they paid 100,000 Czk in real estate acquisition tax. A year later, she managed to sell the apartment for 2.7 million. The taxable income is calculated as follows: 2,700,000 – 2,500,000 – 100,000 = 100,000 Czk. She will therefore pay 15% of 100,000 Czk in income tax, i.e.15,000 Czk. If Mrs. Loukotová had other expenses associated with the transaction, for example in hiring a lawyer or a real estate agency, she could reduce the tax base by these expenses. She could also reduce the tax base by the cost of any reconstruction she had done.

Example 3

Mr. Zdeněk Kulihrášek shared an apartment with his brother Jaromír Kulihrášek. When Jaromír (a batchelor without children) suddenly died Zdeněk inherited his brother’s half of the apartment as their parents were also dead. Jaromír had lived in the apartment for 25 years. However, Zdeněk is not a direct heir and therefore is not covered by the income tax exemption. Zdeněk received an offer to buy the property for 3 million. However, the estimate of the property’s value during the inheritance proceedings was 2.8 million. If Zdeněk decides to sell the apartment at this price, his taxable income would be 3 million – 2.8 million. i.e. 200,000 thousand krowns. Income tax at 15% amounts to 30,000 Czk. As Zdeněk does not need the money and, moreover, does not want to pay tax, he decides to rent the apartment for 5 years and then sell it.

How to pay income tax on the sale of real estate

You can calculate the income tax from the sale of real estate in your income tax return, which you must file with the relevant tax office by 31 March for the previous calendar year. You must also pay the income tax by this deadline.

Obligation to notify the Tax Office

If you acquire real estate worth more than five million krowns, you, as the heir, are obliged to notify the tax office of this fact.

Failure to file will result in a fine of 0.1% of the amount of undeclared income if you comply with this obligation after the deadline without being prompted to do so by the tax administrator.

You risk a fine of 10% of the amount of undeclared income if you submit the Notification only at the request of the tax administrator.

A fine of 15% is possible to those who try to avoid the tax office’s attempts to get in touch.

Are you considering selling an inherited property and don’t know if you are subject to income tax or not?

Then get in touch with us. We work with tax advisors, so we can answer any questions you may have about taxes and real estate sales.

What do clients say about our real estate agents?

We asked our clients if they were willing, on camera, to comment on the work of our brokers. Here are their genuine statements. For more references on brokers, see References.

The post When are you exempt from income tax from the sale of an inherited property in 2022? appeared first on REMAX Alfa.

The sale of real estate is subject to income tax. The amount of tax depends on whether you are selling the property as an individual or a company.

Income tax for natural persons

Income from the sale of real estate is taxed according to § 10 of the Income Tax Act. Income tax is 15% or 23% for natural persons.

If in 2022 you had income higher than CZK 1,867,728 (48 times the gross salary), you are obliged to tax income exceeding this threshold at a 23% income tax rate.

In 2021, the so-called solidarity tax was abolished and replaced by a rate of 23%. The solidarity tax did not apply to income from the sale of real estate, however, the current 23% rate already applies to income from the sale of real estate.

The basis of the tax is the income reduced by the expenses demonstrably spent to achieve it. The income is therefore the price obtained from the sale. The cost is the amount you bought the property for. The other most common expenses include, for example, legal costs, assessments, repairs, technical evaluation, costs for a real estate agency, etc.

Example

In 2016, Mr. Gordon bought an apartment for CZK 3,000,000 and started renting it out. In 2019, he needed to invest capital in his business and therefore decided to sell the apartment. In the meantime, real estate prices rose, so he managed to sell the apartment to Mr. Novotny for CZK 3,500,000. With both transactions, Mr. Novák had costs associated with legal services, custody of the purchase price with a lawyer and a commission to a real estate agency. Mr. Novák’s total demonstrably spent expenses amounted to CZK 180,000. The tax basis is the amount 3,500,000 – 180,000 – 3,000,000 = 320,000 CZK. Mr. Gordon will include this amount in his income tax base according to §10 of the Income Tax Act. Income tax then amounts to CZK 48,000.

Income tax for legal entities

For legal entities, the income tax rate is 19%. Income from the sale of real estate is included in the income of the entire company and is thus also taken into account in the company’s tax return.

Are you considering selling your property? You start by asking us to estimate its selling price.

Exemption from income tax

Natural persons are exempt from income tax in the cases specified in § 4 of the Income Tax Act.

1) You have owned the property for 5 or 10 years, respectively

The exemption period depends on when you acquired the property.

If you acquired the property after January 1, 2021, you are exempt from income tax upon sale after 10 years from its acquisition, in accordance with the amendment to Act 586/1992 Coll. on income tax, which became effective on January 1, 2021.

If you sell real estate that you acquired before January 1, 2021, you are exempt from income tax for 5 years after its acquisition, according to Act No. 386/2020 Coll. Art. 4 paragraph 1.

According to §4 of the Income Tax Act, natural persons are exempt from real estate sales tax in the following cases.

2) You have owned and resided in the property for at least 2 years

If you have lived in the apartment or family house for at least 2 years immediately before the sale, you are exempt from the tax.

3) You will use the money from the sale to purchase your own housing needs

If you sell an apartment or a family house and use the funds to purchase housing needs (housing needs are defined in § 4b of the Income Tax Act) by the end of the tax period following the tax period in which you received the money, or if you use the amount corresponding to the funds obtained to purchase your own housing needs before by obtaining them, but first in the tax period immediately preceding the tax period in which the taxpayer obtained these funds. See §4 paragraph 1 a) of the Income Tax Act.

Example:

In January 2022, you received an amount of 3 million from the sale of the apartment. This amount will be exempt from income tax if, in the period from 1.1. 2021 to 31/12/2023 you invest the amount of 3 million to solve your housing needs.

You must report the tax exemption to the Tax Office

If you want to be exempt from income tax for the reasons mentioned in paragraph 3), you must, from 2021, submit a notice of receipt of proceeds from the sale to your tax authority. If you do not report this fact, the income tax exemption cannot apply. Details can be found in the article Tightening the conditions for exemption from income tax.

Exemption from income tax on the sale of a cooperative apartment

As a natural person, you are exempt from income tax on the sale of a cooperative apartment if you sell the apartment after 5 years from the acquisition, according to § 4 paragraph 1), letter s) of the Income Tax Act.

How to pay income tax on the sale of real estate

You will state income tax from the sale of real estate in your income tax return, which you must submit to the relevant tax authority in your place by March 31 for the past calendar year. You must also pay income tax by this date.

Thinking of selling and don’t know if you qualify for the exemption? Contact us, we will advise you.

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The post Income tax on the sale of real estate in Czechia in 2023 appeared first on REMAX Alfa.

What problems can occur?

The worst tenants can give you sleepless nights and cause significant damage. For example, this might happen:

1. They stop paying you rent, but at the same time they refuse to move out of the apartment. Moving out a non-paying tenant is not as easy as it may seem at first glance. The tenant is protected by the Czech Civil Code.
2. They may damage your apartment and refuse to compensate you. Proving that your tenant caused the damage is often difficult and sometimes you have no choice but to write it off.
3. Some tenants do not know how to behave as residents, which can lead to complaints from the neighbours. Most often, these are problems associated with being too loud at night, too much clutter in communal spaces, or problems caused by pets, such as excrement or constant barking.

That’s why it’s important to learn to how prevent problems from starting, as you don’t have to face them if you choose your tenants carefully.

You can do this by following my advice.

Don’t underestimate your choices

The biggest problems with tenants start when you choose the wrong ones.

Preventing problems is much easier than solving them.

I dare say that 80-90% of issues with tenants occur because property owners have chosen the wrong people.

Therefore, conduct thorough checks on all potential rentors.

Most landlords do not do this at all. They often choose tenants only according to gut instinct, perhaps asking some passing questions about their occupation, family circumstances, and the reason they are looking to rent. The examination typically ends there.

How to check a tenant’s quality

Even the most problematic tenants try to appear in the best light before signing the lease and many owners are deceived by these first impressions. But what you should check for?

1. Look in the various state registers

The Insolvency Register

Check if the candidates are insolvent. You can find out from the insolvency register at Justice.cz. The information here is free.

The Register of Bankruptcy

You can find out whether the applicant has declared bankruptcy from the central register of the Executors’ Chamber at Ceecr.cz. One extract from the register will cost you 60 Czk.

The Solus Registry

Solus is an association of legal entities, which brings together major service providers such as telephone companies, banking and financial institutions, insurance companies, energy providers, etc. Solus.cz operates the Nejsemdluznik.cz service, through which those interested in renting can request an extract from the register. Thanks to this, you will find out if your potential tenant has any outstanding debts. The applicant must apply for the statement themselves, you as a landlord cannot do it for them. However, you can write a statement request together. For the price of 200 Czk, the applicant will receive not only an extract from the register, but also an extract from the central register of executions and the insolvency register.

2. Check their online footprint

See what digital trail the applicant is leaving behind. Enter their name in Google, Facebook, and Linkedin and you may learn something interesting.

If the applicant is a company representative, such as an executive, see if their company publishes financial statements.

Once, a company executive wanted to rent an apartment from me, and I found out that his company had not published financial statements for several years, while the old financial statements that were available showed losses of hundreds of thousands. Publishing financial statements is a legal obligation and non-compliance should be a warning to you. The applicant was disqualified by both facts. In the case of companies, also look at their websites, business pages on Facebook, etc. It will also tell you a lot about how the company works. An entrepreneur from a non-functioning company may have trouble paying the rent.

3. Trust your instincts

Many people suppress their intuition and rely only on facts. However, this means ignoring valuable signals. How do prospective tenants come across to you? Do you like them? Are they pleasant or do you get a negative vibe from their company? Listen to your inner voice, it will tell you whether to continue with the interested party or to end the meeting. Unfortunately, in our Western civilization, we do not learn to develop our intuition as much as we should. Although it is a skill that can be developed through training.

4. Ask questions and read between the lines

This is the hardest part. While the first two points can be done by anyone who can use the Internet and the third point by anyone with a slightly developed instincts, the fourth point of examination requires greater attention, observation, and even ingenuity.

The goal of asking questions is to reveal insincere actions and concealed facts. Those who tell you the truth will pass this test, but if they hide something from you or make answers up, sooner or later they will start to get tangled up in their lies.

You might think that asking questions is not difficult. This is true, asking the questions alone is not difficult, but asking questions to reveal insincere behavior or lies is not easy. It means that you must read between the lines and observe any discrepancies between oral expression and body language. Most people can’t do it.

Ask candidates why they are looking to rent, ask for references from employers or former landlords and then watch their reactions. Always ask for this information in person or at least by phone. Never through emails or forms. Written answers give bad tenants time to prepare their answers, so you cannot judge their reactions to know the truth.

During interviews, pay attention to what the candidates think of the law, following rules, interpersonal and neighbourly relations, etc. You can’t usually find this information by asking questions, but only by carefully reading between the lines.

What to do if in doubt?

It’s better to reject an applicant who, at the outset, you have doubts about than to try and solve subsequent problems once they have moved in.

The Czech Civil Code protects tenants more than landlords, so once they are in you are at a disadvantage. Evicting problematic tenants may not be at all easy.

If you have any doubts about the trustworthiness of the applicant, but still decide to rent the apartment to them, at least ask for a higher security deposit (you can request a deposit of up to three months rent) or rent the apartment for less than a year with the possibility of extending.

We tell our real estate agents not to recommend a tenant to a landlord if they wouldn’t let them move into their own apartment.

Do you want to rent out your? property

Leave the worries about choosing tenants to us.

Article prepared by: Bc. Petr Podlešák, manager at REMAX Alfa

The post How to check a tenant’s quality appeared first on REMAX Alfa.