Which one is better: buy a house or buy an apartment?

Rent-free housing, independence from the favour of a landlord and a secure investment: these are the main reasons why Germans like to invest in their own four walls. Before you can enjoy the freedom of your own living space, however, it is important to decide whether you want to buy an apartment or your own house.

Buying a house or buying an apartment? This question cannot be answered on general terms, but individually. Of course, there are certain advantages for both options, but there are also hidden pitfalls to pay attention to. First of all, it is important to become aware of your own needs and wishes. Questions can help.

Important questions about whether to buy a house or an apartment?

• How much space do I need?
• Am I more of a country man or a city person?
• Is a private garden important to me or is a terrace or a small balcony sufficient for sunbathing on hot days?
• What financial budget is available to me for purchasing real estate?

The prospective buyer thus faces all sorts of questions that influence the decision whether the choice is to own a house or an apartment.

An Important question: a country man or a city person?

The fine houses in the countryside is often located far away from city, possibly in a place where is lack of convenient transportation. If your workplace is located in the city centre, you must be prepared for daily commuting between home and work.

Condominiums, on the other hand, are often located in city centre with convenient transportation and attractive leisure and shopping opportunities.

How much am I able to or should I invest in real estate?

In most cases, the maintenance and acquisition costs of a house are higher than for a condominium. The building plot, for example, must be paid completely by yourself. The same applies to insurance, maintenance and repairs, which cannot be avoided over the years. For example, a heating system usually needs to be renewed sooner or later. The homeowner will of course have to bear these costs himself. In the case of condominiums, on the other hand, the corresponding costs will be taken by all homeowners of a house. The house community thus divides the costs incurred among themselves. The "house money", which is paid monthly by all homeowners, is usually used to pay property tax, insurance and renovation work.

Do bear in mind the factor of time when comparing between houses and apartments.

If you want to buy a house, you should be aware of your solely responsible for maintenance. In this case, it is not only a question of money, but also of time that must be invested in repairs, unless you can or do not want to hand over all the work to expensive craftsmen.

Many people dream of owning their own house with a large garden, but despite all the euphoria, they forget that even the maintenance of the outdoor area can be very time-consuming and labour-intensive. As long as the condominium is located on the ground floor, it usually only has a smaller garden plot, which entails correspondingly little work. In the best case, the house manager and the caretaker are responsible of the repair work in the case of condominiums.

As apartment owner, however, it is your duty to attend the owners' meetings. In these meetings, various topics and regulations concerning, for example, house rules or upcoming costs for repairs are discussed. Negotiating skills and willingness to compromise are important aspects of these meetings, because, in accordance with the Housing Ownership Act, for example, major structural changes must be decided unanimously by all owners.

House or apartment? To what extend is freedom important to me?

As an apartment owner, one is always subject to the majority decisions of the owners' meeting. As the owner of a single-family house, one enjoys a high degree of freedom of design. Within the technical and legal regulations, the scope, the external appearance and the cut of one's own four walls can be determined by oneself. In addition, the sole use of the house and garden space, especially for families with children, is a powerful argument for buying their own house. The lower noise pollution is an additional advantage, through which single-family houses can win points over condominiums. Conversely, noisy parties can easily take place in your own house without any neighbours feeling disturbed by it.

Property management

Anyone who has developed or undeveloped land (including forests or agricultural and forest land) is often overwhelmed by the multitude of obligations that accompany with it. Various property managers, who take care of all the tasks, offer you help.

Term declaration

Real estate means "non-movable" things. Colloquially one understands under it usually houses, but strictly speaking it means the land, which can be both developed and undeveloped. Real estate is also home ownership or leasehold.

The so-called "structures" on the property (buildings, houses, storage rooms, sheds, etc.) are firmly connected to the property and therefore cannot be considered individually (§§93, 94 BGB). The colloquial property management can thus refer both to houses ("superstructures") as well as land.

In addition, the legal word "real estate" is used for the land. This means either a property (as a property) or a commercial space. The commercial area (built or undeveloped) is registered by the city administration according to a land use plan or the development plan as such and must be used accordingly.

These commercial areas are offered for sale by the property management of the municipalities and must be used by the buyer for commercial or industrial purposes. Real estate and land are therefore basically the same. However, the legal term is mainly used in the field of public law and therefore also refers to the administration of these properties.

Roughly speaking, one can generalize: what is called real estate management in the private environment is called real estate management in the municipal environment.

Excursus: management of municipal real estate

In the municipal environment, the term real estate management is not used, instead you will always find here the term property or the property management. Here is a short description of what is in the field of property management:

Property management:

The word property used under administrative law is customary in public-law real estate, usually when someone wants to acquire a building plot. The properties belonging to the city or the country are also looked after by them.

Buying and selling of real estate

The land belonging to the municipality can be rented, bought or even exchanged. The communes, which own the properties in question, are responsible for them. Settlement takes place via the department (property management) of the city (in the town hall). Basically, the same conditions are necessary for this as for a private sale. However, due to internal administrative regulations, usually longer processes are necessary for the settlement.

Management of private buildings and land

Back in the private sphere, the essential areas that play a role in real estate management should now be mentioned.

Property management (facility management, property management)

Private or commercial real estate management comes in several variants. Brokers, for example, will own many objects, but they will need to be kept in good condition until they are sold. Someone has to take care of these objects. Commercial management of buildings is often referred to as property management and technical maintenance as facility management.

Rental housing administration, property management

Anyone who leases houses or apartments also has to do with empty and inhabited objects. He has to take care of the interests of the landlords as well as the maintenance or renovation of the empty buildings. Again, the technical assistance of a property manager is often used.

But tenants are mainly familiar with the term "property management". The caretaker is not a janitor, but a qualified specialist who helps the tenants.

Excursus: purchase and sale of real estate

When buying and selling real estate (land), an agreement (release) of both parties before the notary as well as a registration in the land register are required according to §§ 873 and 925 BGB. The notarization is mandatory. This results from the fact that it is a commitment transaction (see § 311b BGB).

Attention: in advance, the financing commitments of the banks are always necessary. A report about the object is helpful because of possible deficiencies (price reduction). Then a notary is to be charged with drafting the contract, which will be signed by both parties at the time of authentication. The land charge order form of the bank should ideally be available before the deadline so that the land charge can be registered immediately after the certification.

Procedure at notary

The notary will then send a copy to the parties. The tax office makes the land transfer tax assessment. If the notary has all the documents, the purchase price can be paid. Irrespective of this, the tax office notifies the notary that the land transfer tax has been received and sends him a clearance certificate. This requires the notary to register the property in the land register. If the purchase price has been paid and the notary has been informed of the receipt of payment, he can cancel the land charge in the land register. Buyer and seller can make a key collection. After the transfer of ownership and indemnity in the land register the sales contract is settled.

Project management

Project management in the construction industry includes the clarification of the task, the structure, the interdisciplinary coordination and the control of a construction project from planning to execution to completion under legal, economic, technical and environmental conditions. In order to accomplish these tasks, the project manager needs expertise in different areas of work, enabling him to work effectively with other engineers, business people and lawyers.

Project management means:

• Definition of goals, processes and phases (project organization, project description)
• Structuring, organization (project structure plans)
• Process control (planning and approval procedure)
• Construction of contracts (procurement strategies, contracts)
• Scheduling, time control and capacity planning (network planning, updating, countermeasures))
• Cost determination / compliance / budget planning (compliance and tracking of the budget, cash requirement planning)
• economic optimization (economic calculations, product quality, quality costs))
• Organization and control of the services (quality control, result control)
• Information and Documentation (Meeting Strategies, Database)
• Order and contract processing (contracts, supplements, billing, financial controlling, payment security / payment control)

A project is a project characterized essentially by the uniqueness of the conditions as a whole. Definition of Project management

• Project management is the set of management for the execution of a project on tasks, organization, techniques, means.
• Project management is the direct, interdisciplinary coordination of planning, control and decision-making processes on various tasks.

There are about 35,000 real estate agents in Germany. Not all of them work independently, but are often times in employment relationships. The industry association IVD (Federal Association of Real Estate for Consultants, Brokers, Administrators and Experts) comprises about 6,000 member companies. The real estate brokerage business in Germany is heavily influenced by the financial services industry, since the property brokerage business is related to real estate financing.

Accordingly, many brokerage companies are associated with banks and savings banks. As a whole, the saving-bank group is the largest real estate broker in Germany. However, most savings banks operate the agency business on their own. In addition to brokers affiliated with financial institutions, there are also many independent brokers.

Broker commission

It causes commission fee to hire a broker, because there is a causal connection between the brokerage activity and the conclusion of the contract. This condition must be proved by the brokers in the event of a dispute with a written proof of real estate. The amount of the brokerage commission can in principle be freely negotiated within certain legal limits and depends on the market situation, the price of the real estate as well as on the market usual conditions. It is usually

• in the case of private real estate sales in Germany regularly between 5.95 and 7.14% of the purchase price (including VAT),
• for private real estate leases, up to two net monthly cold rent (plus VAT) (limited by the Housing Act) and
• in commercial real estate transactions according to the individual arrangements between broker and client.

The market-standard percentages of brokerage commissions on real estate sales vary from state to state. These are not legally binding commissions, but they serve as a guide for brokers and customers.

Depending on the regional practices for the private real estate brokerage business, the commission will be charged

• shared between buyer and seller (often in equal parts),
• carried solely by the seller or

The commission of the seller is referred to in the industry as internal commission, the buyer's as external commission. A complete internal commission, also known under the keyword ordering principle, has the advantages that

• the property can be offered to the buyer without additional brokerage commission (i.e. factually included in the purchase price, if the market situation permits),
• the buyer thus has lower additional acquisition costs in the context of real estate financing and
• this is an economically efficient cost allocation, since the person who decides on the appointment of a broker and its selection also pays for it, so that there is real competition for quality and price.

A complete internal commission has the apparent disadvantage that the acquisition costs, such as the real estate transfer tax and the notarization costs are higher, because they are usually calculated on the basis of the value of the certificate or the value of the consideration, and these values may increase due to the included brokerage. However, this view fails to do so because, in a functioning market, real estate that is marketed without brokers competes with those where a broker acts, so that if a seller decides not to hire a broker the value of the commission can be applied to the purchase price and thus be able to collect it itself.

In rare cases, an additional payment agreement is made between the seller and the broker. In addition to a commission, if a certain purchase price is exceeded, the additional proceeds are divided between the broker and the seller according to a certain pre-agreed pattern.

Brokerage commission in the notarised purchase agreement

If real estate agents protect their rights to brokerages in the purchase contract, one speaks of the so-called broker clause. The broker clause states that the mediation of the property by the broker has come about. If the broker clause is used in a wording that subjects the purchaser to immediate foreclosure of his assets in the event of non-payment of brokerage fees, the Chamber of Representatives considers that this is inappropriate and contrary to "good morals".

If, contrary to the recommendation of the Notary Chamber, real estate buyers accept such a clause, they should note that the mention of the broker and his commission in the notarised contract of sale will only result in an increase of the notarial registration fee if the seller agrees to pay the commission to the broker but the obligation was then assumed by the buyer. If only the buyer has to pay a brokerage fee, this does not increase the value of the property that is subject to the withholding tax if the buyer has commissioned the broker. For this purpose, the simple sentence in the brokerage clause of the purchase contract suffices: "The buyer has commissioned the broker." If this sentence is missing, then the brokerage commission may increase the real estate transfer tax.