Buying a house from the builder in Italy

Buying a house directly from the construction company in Italy has its pros and cons. Today we take a closer look at how to buy an Italian house straight from the builder, with the help of notary Giampaolo Marcoz from the Italian National Council of Notaries.

Buying a house from the construction company has a very special charm to it: to see the house be born from the foundations up, decide on the appearance and other features with the architects, and above all have the privilege of owning a new building that is on the cutting edge of energy efficiency.

At the same time, there are some important drawbacks to keep in mind when buying from the builders so that your beautiful dream doesn’t suddenly turn into a dreadful nightmare. Giampaolo Marcoz explains more.

Buying a house from the builder in 2019

"The purchase of a property from the builder is a process that doesn’t always take place before a notary,” explains Marcoz. “The least complicated case is the purchase of an existing housing unit: in that case the buyer has already viewed the finished property, has evaluated the costs of any additional work and features they want, has decided to purchase, then goes to the notary and makes the purchase.”

But what happens if the property of your dreams is still only in the planning phase? “When the building has yet to be built," replies Marcoz, "what happens is that the builder who bought the land tries to sell the house even before it is built, because his interest, of course, is to sell all the units to be built, and he needs the funds to finance the construction. The procedure for this, therefore, is that a preliminary contract is made between the buyer and the builder, which sets down in writing the final price and payment times (for example, that various payments can be made according to the state of progress of the building works)."

However, this pre-purchase agreement is not always successful. "Sometimes the builder can go into crisis or bankruptcy, possibly because they have mortgaged the property to purchase the land and finance the work. This can become a problem for the buyer because if it reaches the point where the house has to be auctioned off, the proceeds go to the creditor, while the person who signed the preliminary contract of sale loses their money and the house too. The only way to prevent this is if the deed has been signed by a public notary.”

Buying a house from the builder: how to protect yourself

When buying a property from the builder, it is essential that the buyer has certain safeguards and guarantees. But how?

"The need for the buyer to protect themselves,” says Marcoz, “is the basis of the Legislative Decree 122/2005, known as the Consolidated Text of the goods to be built, which is still the standard reference on the subject.”

Basically, the notary Marcoz explains to us two essential elements of the Council of Notaries’ guide on the subject: “There are two distinctive elements of the Consolidated Text”:

1. “The protection of the buyer in terms of the sums paid in the various stages of construction, from the foundation to the turnkey. This protection obliges the manufacturer to give a guarantee issued by a bank or an insurance company for an amount equal to all the money paid by the buyer. In this way, the buyer would recover their money in the event of bankruptcy of the building company, although they wouldn’t have a home.”
2. “The so-called ‘postuma decennale’, that is, the rule establishes that at the time the deed is signed, the manufacturer issues a guarantee against any damages that may emerge in the next ten years due to defects in construction that would then require repairing by the buyer.”

How can you obtain these protections? "By doing the prepurchase agreement in front of a notary, which necessarily entails the activation of the protections provided for in Legislative Decree 122/2005,” Marcoz answers. “The problem is that these guarantees have high costs for the builder, because they are asked to limit the amount of money they receive. That's why preliminary contracts are often not made by the notary, but by private deed. In this way, however, the buyer is left uncovered and exposed to the risk of losing their money and the house. The advice is to always have recourse to a notary, but especially in the case of purchase from a manufacturer, so you don’t find yourself without protection.”

Buying a house from a builder: costs, expenses and taxes

The purchase of a house from a construction company involves certain costs that are represented in part by expenses, in part by taxes. Specifically, you will have to pay the costs of the notarial deed, which are different from the costs of making a private purchase and sale agreement between private individuals. The VAT replaces the registration tax, which you must when you buy house second hand from a private vendor.

How much VAT do you have to pay when you buy house from the builder?

"The purchase of a new property from the builder is subject to VAT, and not a registration tax, which instead concerns transactions between individuals,” explains Marcoz. ”It is unfortunately a tax disadvantage for the buyer compared with private transactions: VAT for purchase from the builder is 10% while the registration tax in a private transaction would be 9%. The VAT for purchase from the builder would be 4% for a primary residence compared with a 2% registration tax for a private transaction. In addition, VAT when buying from the builder is paid on the real closing price, while for a transaction between private individuals the registration tax is paid on the cadastral value, which is generally lower than the sale price.”

Facilities for buying a house from the builder

Apart from the tax deduction available for a first home, which is also available for the purchase of a house from private individuals, there are no special reductions in 2019 for the purchase of a home from the construction company. Until last year, it was possible to deduct 50% of the VAT, spread over a period of ten years, on the purchase of a first or second house in energy class A or B. However, this opportunity has not been extended to 2019.”

Buying a house from the builder: the advantages

In the absence of these benefits, what is the advantage of buying house directly from the manufacturer? "Undoubtedly that of buying a new product,” replies the notary, “which will have, for example, a better level of energy efficiency and will be better managed from the point of view of services and will require less maintenance in the long run.”

Purchasing a house from the builder through a real estate agency

What’s the difference between buying a house from a builder and doing it via a real estate agency? "The buying process is the same, but the agency can be a valuable support for the customer, to guide them through all the procedures and explain the situation. Obviously in this case it is necessary to pay the relevant commission to the estate agent."