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Understand the Dogovor za pokupko-prodajba

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When it comes to buying real estate in Bulgaria, making sure you fully grasp the property sales contract is essential.

Indeed, not fully understanding the document you will sign can lead to financial losses, including the forfeiture of deposits, payment of penalties, unexpected costs, legal expenses, and potential poor investment decisions.

We've heard countless stories of people making costly mistakes when signing their property agreement in Bulgaria. We want to help you avoid the same experience.

We'll give here a very brief overview regarding the property sales contract in Bulgaria ; if you want a full checklist, please check our property pack for Bulgaria.

What is the Dogovor za pokupko-prodajba in Bulgaria?

In Bulgaria, the property purchase agreement is a crucial document in real estate transactions, known locally as "Договор за покупко-продажба" (Dogovor za pokupko-prodajba).

This agreement is legally binding and outlines the terms and conditions of the property sale, serving as a formal contract between the buyer and the seller.

The process typically begins with a preliminary contract, which includes details like the property description, price, and conditions of sale. This preliminary stage is where you would negotiate terms, such as the payment schedule and any necessary repairs or modifications to the property.

For international buyers or non-residents, there are additional considerations. In Bulgaria, non-residents can purchase property, but there are restrictions on land ownership.

As a non-resident, you can own buildings but might need to set up a Bulgarian company to own the land on which the buildings sit. This is a common workaround for foreign investors.

The signing of the final purchase agreement usually occurs after due diligence has been completed. This involves checking the legal status of the property, ensuring there are no outstanding debts or legal disputes, and verifying that the seller has the right to sell the property.

Regarding deposits, it's standard practice in Bulgaria to pay a deposit when signing the preliminary contract. This deposit, often around 10% of the purchase price, serves as a guarantee for both parties.

If the buyer backs out, they lose the deposit. If the seller backs out, they must return the deposit, typically with an additional penalty.

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What should be included in the property purchase agreement in Bulgaria?

In Bulgaria, the property purchase agreement for real estate transactions must adhere to specific requirements, as laid out in Bulgarian property law.

The law governing these transactions is primarily the Property Act (Закон за собствеността) and the Obligations and Contracts Act (Закон за задълженията и договорите).

The agreement should contain several mandatory clauses.

These include:

Mandatory Clause Description

Identification of the Parties

Full names and personal details of both the buyer and seller.

Description of the Property

A detailed description of the property, including its location, area, boundaries, and any relevant identifiers.

Purchase Price

The agreed-upon price for the property.

Payment Terms

How and when the payment is to be made, including any deposit details.

Transfer of Ownership

Clauses related to the transfer of ownership, including the date of transfer and conditions to be met for the transfer to occur.

Warranties and Representations

Statements by the seller regarding the legal status of the property, confirming there are no encumbrances, liens, or disputes.

Additional clauses can be added to address specific circumstances of the sale, like:

- Any agreement about the state of the property at the time of sale.

- Agreements about any future changes or developments to the property.

Conditions or contingencies are also common in these agreements.

These might include:

- The purchase might be contingent on the buyer securing financing.

- The sale could be dependent on the results of a property inspection.

- For instance, confirming that the seller is the legal owner and has the right to sell.

In Bulgaria, it is mandatory for the final property purchase agreement to be authenticated by a notary.

The notary plays a crucial role in verifying the identities of the parties involved, ensuring the legality of the document, and witnessing the signing of the agreement.

What's the signing process like?

In Bulgaria, the signing process of a property purchase agreement is quite structured and involves specific steps.

The property purchase agreement is bilateral, meaning it requires the signatures of both the buyer and the seller.

It can involve multiple parties on either side. For instance, if a property is owned by more than one person, all co-owners must sign the agreement. Similarly, if there are multiple buyers, they all need to sign.

Both parties need to provide certain documents and information for the signing process.

The seller must provide proof of ownership, such as title deeds, and any other relevant documents that prove the property’s legal status, like a lack of encumbrances.

The buyer, particularly if obtaining financing, needs to provide proof of funds or mortgage approval.

Here are the steps for signing:

Step Description

Preparation of the Agreement

The agreement is drafted, usually by a lawyer or a notary, incorporating all the terms negotiated between the buyer and the seller.

Review of the Agreement

Both parties review the agreement to ensure all terms are correct and acceptable.

Signing the Agreement

The agreement needs to be signed in the presence of a notary. The notary verifies the identities of the parties and witnesses the signing.

In certain circumstances, it is possible for the agreement to be signed remotely, for example, via a power of attorney.

In this case, one party grants legal authority to a representative to sign on their behalf. This is particularly useful for international buyers or sellers who cannot be physically present in Bulgaria.

There's no universal deadline for signing the property purchase agreement. The timing often depends on the negotiation process, the completion of due diligence, and the preparation of necessary documents.

Once signed, the contract is valid until all obligations have been fulfilled, typically until the transfer of ownership is complete and the full payment has been made.

The final step in the process is the registration of the property transfer with the local Registry Agency. This is crucial as it legally records the change of ownership. The notary usually facilitates this process.

After the contract has been signed, making amendments is generally not straightforward. Both parties must agree to any changes, and the amendments must be formalized, often requiring notarization.

The total time frame from signing the agreement to completing all necessary paperwork and approvals can vary.

Typically, it might take a few weeks to a few months, depending on the complexity of the transaction, the speed of obtaining necessary approvals, and the efficiency of the local authorities in processing the registration.

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How is the payment handled when signing a property purchase contract in Bulgaria?

In a Bulgarian real estate transaction, understanding the financial aspects is crucial. Here’s a breakdown of what you need to know.

When you sign the sales agreement, you’re usually required to pay a deposit. This acts as a commitment to the purchase and a sign of good faith.

The down payment, often synonymous with the deposit in Bulgaria, is typically around 10% of the property’s sale price. However, this can vary based on the agreement between the buyer and seller.

In addition to the down payment, there may be other upfront costs. These can include notary fees, legal fees for drafting the sales agreement, and any real estate agent fees if an agent is involved.

The down payment is usually made directly to the seller or into an escrow account. An escrow account provides more security, as it holds the money until all the conditions of the sale are met.

The down payment is generally due at the time of signing the sales agreement. The remaining balance is typically paid upon finalization of the sale, which is when the property ownership is transferred.

In Bulgaria, there are property transfer taxes, and these are usually a percentage of the property’s purchase price or its tax valuation, whichever is higher. This percentage can vary based on the property's location.

It is possible to negotiate the down payment amount with the seller. This negotiation is part of the overall terms of the sale and can be adjusted based on what both parties agree upon.

If the sale falls through, the down payment may be refundable under certain conditions, like a failed inspection or if you’re unable to secure financing. This should be explicitly stated in the sales agreement.

Whether you can use a mortgage loan for the down payment depends on your agreement with the lender. Some lenders allow this, while others require the down payment to come from your personal funds.

An attorney or real estate agent can provide guidance on the payment process, ensuring all legal requirements are met and funds are transferred correctly. They don’t typically handle the payments directly but can oversee the process.

You should always request a receipt or confirmation of payment for the down payment. This serves as proof of transaction and is important for your financial records.

For the seller, there may be capital gains tax implications depending on the profit made from the sale.

As a buyer, you should be aware of ongoing property taxes and any tax implications associated with your mortgage, if applicable.

What are the potentials risks and pitfalls?

You might be interested in reading our article about the common risks and pitfalls surrounding a property transaction in Bulgaria.

In Bulgarian real estate transactions, understanding potential risks and pitfalls is key to a smooth process.

Both the buyer and seller can potentially withdraw from the agreement, but the circumstances and consequences depend on the terms specified in the contract.

There's no standard "cooling-off period" in Bulgarian property law once the agreement is signed. If either party withdraws without a valid reason outlined in the contract, they may face penalties.

A buyer can back out if they are unable to secure financing, but this must be stipulated as a contingency in the agreement. Similarly, a seller can withdraw if certain conditions, like a failed payment, occur.

If one party fails to meet their obligations, the consequences depend on the agreement's terms.

For example, if the buyer doesn’t pay as agreed, they might lose their deposit. If the seller fails to transfer the property as agreed, they might have to return the deposit along with a penalty.

Penalties for not fulfilling the agreement vary. They often involve financial compensation, like forfeiting the deposit or paying additional sums.

In other countries, real estate transactions might include a mandatory cooling-off period, allowing the buyer to back out without penalty for a short time after signing. Some countries also have more stringent regulations regarding property inspections and disclosures.

Buyers should be wary of properties with unclear legal status or unresolved ownership disputes. Sellers should ensure that buyers have secure financing. Both parties should be clear about the property's condition and any obligations, like unpaid taxes or liens.

Disputes in real estate transactions can occur but aren’t overly common if due diligence is done properly. They are usually resolved through negotiation, mediation, or, as a last resort, in court.

A typical dispute might involve disagreements over property boundaries or defects discovered after signing.

If a dispute arises, the first step is usually negotiation between the parties. If this fails, mediation or arbitration can be sought. Legal action is the final step if other methods fail.

If defects are found after signing, the buyer might seek compensation or repairs from the seller, especially if the defects were known and not disclosed. This depends on the contract terms and Bulgarian consumer protection laws.

It’s crucial for buyers to conduct thorough inspections before signing. Sellers should disclose known defects to avoid future legal complications.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.