Property Investment Italy

The Buying Procedure

A friend of ours bought this villa. Click for details.

Italy is an excellent country for property investment. The country has a fairly simple property buying process, but it differs a lot from the USA and UK systems.

I have gone through the real estate buying process myself, and it is actually rather easy—once you understand it.

You may also involve your lawyer if you would like extra peace of mind, although I have never done so, seeking professional advice, including that of legal counsel, is strongly advised to mitigate risks and ensure a successful real estate acquisition.

You will need an Italian tax number known as a codice fiscale, which your lawyer or agent can arrange. You will also need your passport.

The process is in five steps:

1) Make the offer

Once you find a property you like, you then make an offer, which is signed by both you and the seller. This then gives you and the seller a certain amount of time to sign the Compromesso (preliminary contract). Once you sign the Compromesso, you normally pay around 10% of the purchase price, which is held in trust by the estate agent.

Warning: If you back out after the compromesso is signed, you lose this deposit money.

Important Tip: This is also the stage you can have your surveyor (geometra in Italian) check out the property to make sure all is as stated. This is a very good idea, and something I recommend you do; it is worth every cent in order to avoid horrible surprises later on. Make sure that the offer is conditional on the surveyor's report confirming the seller's statements regarding the condition of the property to be factual.

2) The Preliminary contract (Compromesso)

The preliminary contract (Compromesso) commits both parties to the sale. The contract confirms that both parties agree to buy and sell the property and agree on the terms and conditions of the sale. It is often a good idea to let your lawyer look through the contract, as you need to pay a 1/3 deposit, which you will lose if you back out after signing the contract. If the owner backs out, he will have to pay you double your deposit.

3) Il Rogito Notarile (L'atto di compravendita)

The Rogito is the formal signing of the final contract before an Italian notary, marking the legal completion of the sale. This is a critical, legally binding event.

Before the Signing:

• Final Checks: Conduct a final inspection of the property to ensure it is vacant (unless otherwise agreed) and in the condition promised.
• Essential Documents: Ensure you have your Codice Fiscale (Italian tax code) and, if applicable, the final mortgage approval from your bank.
• Funds Ready: The final payment is typically made via a banker’s draft (assegno circolare) from an Italian bank, not a personal cheque. Have this ready, along with funds for the notary's fees and taxes.

During the Signing:
The notary reads the entire deed aloud to both parties. Their primary role is to verify the legality of the transaction and ensure the terms match the preliminary contract (Compromesso).

• Translation is Key: If your Italian is not fluent, it is highly recommended to hire a professional translator. This ensures you fully understand every clause before you sign.
• Power of Attorney: If you cannot attend, you can grant a procura (power of attorney) to a trusted representative. Note that this document must also be signed before a notary, either in Italy or at an Italian consulate in your home country.

After the Signing:
Once both parties sign, the property is legally yours. The notary will then handle the registration of the deed with the authorities.

4) Registration and Taxes

Immediately after the Rogito, the notary is legally required to register the transfer with the Italian Land Registry (Agenzia delle Entrate and Catasto). This is when taxes become due.

Understanding the Taxes:
The taxes you pay depend heavily on the property's status and your intentions. The notary will calculate the exact amounts, but understanding the basics is crucial for your budget.

• Primary Residence (Prima Casa): To qualify for significant tax reductions (e.g., a fixed €200 registration tax instead of a percentage), you must meet strict conditions, including committing to register your residency at the new property within 18 months. This typically requires being an EU citizen or having a valid visa permitting residency.
• Investment/Secondary Home (Seconda Casa): For non-primary residences, taxes are higher. The main Registration Tax (Imposta di Registro) is typically 9% of the property's cadastral value (not the purchase price, but usually close to it).
• New Builds from a Developer: Instead of registration tax, VAT (IVA) applies, usually at 10% or 4% (for certain "green" buildings) on the full purchase price, plus fixed mortgage and cadastral taxes.
• Other Taxes: You will also pay the Cadastral Tax (Imposta Catastale) and Mortgage Tax (Imposta Ipotecaria), which are fixed, minor amounts.

Key Takeaway: Discuss your tax status with your consultant (geometra or commercialista) and notary well in advance to avoid unexpected costs.

5) Possession and Utilities Transfer

After the signed deed is deposited with the authorities, you officially take possession of the property.

The Most Critical Step: Avoiding Previous Debts
Before the Rogito, you must protect yourself from the previous owner's unpaid bills. Request official certificates of no debt (certificati di morosità) for:

• Water and sewage bills.
• Condominium fees (if applicable).
• Gas and electricity bills.
  Unpaid utility bills, especially the municipal waste tax (TARI), can become a lien on the property, making you, the new owner, responsible.

Transferring Utilities into Your Name:
Contact the utility providers to transfer contracts immediately. You will need a copy of the deed (Rogito) and your Codice Fiscale. The main providers are often:

• Electricity: Enel, A2A, or other regional providers.
• Gas: Italgas, Eni, or others.
• Water: The local municipal company (comune).
• Waste Tax (TARI): This must be registered in your name at the local town hall (comune).

Consider hiring an agenzia di pratiche (administrative agency) to handle this process for you, ensuring a seamless transition.

Considering Financing from Abroad?

Firstly, before I get onto financing, it is often better to organize the home insurance in your own country if it is a vacation home.

Okay, onto financing. For non-residents buying a holiday home, securing financing can be one of the biggest challenges. While arranging a mortgage in your home country is an option worth investigating, it's important to understand the realities.

The Potential Benefits:

• Familiarity: You would be dealing with a financial system and contract in your own language.
• Currency Management: If your income is in a currency other than the Euro, a home-country loan can eliminate the exchange rate risk on your mortgage repayments.

The Significant Hurdles:

• Limited Availability: Most mainstream banks in countries like the UK, US, or Canada are reluctant to issue mortgages for Italian properties due to legal complexities. Your options may be limited to specialized international lenders or private banks, often with stricter terms.
• Ongoing Currency Risk: Remember, you still need euros for the property deposit, taxes, notary fees, and maintenance, so you are not completely insulated from currency fluctuations.

The Italian Mortgage Reality:
It is notoriously difficult for a non-resident to secure a mortgage from an Italian bank without a documented history of a stable, high-income job within Italy (a "posto fisso"). Italian banks heavily favor residents with permanent employment contracts.

Practical Advice:

1. Explore Specialist Lenders: If you need financing, your most viable path is often through a mortgage broker who specializes in Italian property for foreigners. They have access to lenders familiar with non-resident situations.
2. Cash is King: The vast majority of non-resident holiday home purchases in Italy are cash transactions. Being a cash buyer significantly strengthens your negotiating position.

In summary, while getting a mortgage from your home country has theoretical benefits, it is rarely straightforward. For most buyers, the choice is between using a specialized broker for an Italian mortgage or planning for a cash purchase.

For more information and a selection of properties, visit our property investment Italy main page.