Buying a New Property

If a "pre-owned" property isn't an option for you, you have several possibilities for building your dream home from scratch.

► Purchasing a completed new build

► Buying land and developing a new build project

Realizing a new build project offers several options. You can purchase a prefabricated house, or, for those with DIY skills, a shell house might be a good choice, where you complete most of the interior finishing work yourself.

General contractors typically handle all construction work for the house. Unlike a sole proprietor, a general contractor is permitted to subcontract services or parts of the overall project. However, the general contractor remains the client's sole contractual partner and bears full responsibility. For the client, the advantage of a general contractor is that in case of defects, even if individual trades were carried out by subcontractors, they can contact the general contractor directly, and the general contractor is obligated to rectify the defects.

Pros and Cons

If you have a newly built house, repairs will be rare for the next 15 years. The construction company is liable for any construction defects for a certain period.

You also have the option of having a custom design done, which is a significant advantage, especially regarding the room layout.

Another advantage of new construction is that new materials are used for soundproofing, heating systems, thermal insulation, windows, etc., meaning the comfort is up-to-date. Achieving this level of comfort in a used property requires extensive renovations, which are associated with high costs.

When you buy a property, real estate transfer tax is payable on the notarized purchase price. However, if you buy land and build a new house, you only pay real estate transfer tax on the land purchase price.

The disadvantage, however, is the price, as you pay significantly more for a new property than for a used one. Furthermore, ancillary construction costs do not create lasting value; there is no corresponding benefit.

Since a new building does not yet actually exist, you have to make your decision based on (glossy) brochures or planning documents.

Payments to the developer

The purchase and construction terms are precisely regulated in the construction contract. The funds are paid to the developer in 7 installments in accordance with the German Real Estate Brokerage and Development Ordinance (MaBV). The installments can be composed of the following percentages:

1. 30 percent of the contract sum in cases where ownership of a plot of land is to be transferred, or 20 percent of the contract sum in cases where a leasehold is to be established or transferred, after commencement of earthworks,

2. of the remaining contract sum:
- 40 percent after completion of the shell construction, including carpentry work,
- 8 percent for the construction of the roof surfaces and gutters,
- 3 percent for the rough installation of the heating systems,
- 3 percent for the rough installation of the sanitary facilities,
- 3 percent for the rough installation of the electrical systems,
- 10 percent for window installation, including glazing,
- 6 percent for interior plastering, excluding finishing work,
- 3 percent for the screed,
- 4 percent for tiling in the sanitary areas,
- 12 percent upon completion and concurrently with handover of possession,
- 3 percent For the facade work,

- 5 percent upon complete completion.

If individual services are not rendered, the respective percentage will be distributed proportionally across the remaining installments.

Developer Insolvency

We often hear about half-finished construction projects where work stops because the developer has filed for insolvency. The money borrowed from the bank by the homeowners is irretrievably lost. For this reason, a thorough due diligence of the company is all the more important. Credit reform or Bürgel can provide you with informative reports on the developer's payment history and financial standing in advance. Some developers offer the homeowner a bank guarantee for completion; in this case, a bank guarantees the developer's work, minimizing the risk of insolvency, as the bank is then liable.

TIP:
Ask about a bank guarantee for completion (completion guarantee). These are only issued by solvent companies, and you have the greatest possible security.

Real estate appraisers offer advice before buying a house: www.der-Hausinspektor.de (Link!)

Prefabricated Houses

Many prospective homeowners shy away from prefabricated houses because they doubt their quality, but this is no longer necessarily the case. In recent years, significant improvements have been made to their construction quality, especially regarding the materials used. While asbestos-containing materials were once a concern, today the focus is on excellent thermal insulation. The components of the new building are prefabricated, delivered, and assembled on-site. In most cases, a prefabricated house is delivered starting from the top of the basement ceiling or the foundation slab. Therefore, it is essential for the homeowner to have a basement or foundation constructed. Some prefabricated house manufacturers offer this service themselves or refer these projects to partner companies.

The advantages of a prefabricated house are:

► Short construction time, which saves costs, for example, if you are renting during a long construction phase and cannot yet move into your new home.

► The price is fixed; there is little opportunity for the builder to demand additional charges or surcharges.

► The materials used are already finished and dry, so there is hardly any of the usual construction moisture in the house.

► Buyers can get a good impression of the company and its quality by visiting a model home.

The Shell House

This option is particularly suitable for homeowners who don't want to do the shell construction themselves but are skilled enough to complete certain tasks (usually interior finishing) themselves, thus saving on labor costs. A shell house is generally completely finished on the outside, but some interior work, such as electrical and heating systems, can be done by professionals, allowing the homeowner to, for example, install the flooring or roof insulation themselves. However, be careful: only take on tasks that you can perform professionally.

A prefabricated house isn't necessarily cheaper than a traditionally built home, but it is ready for occupancy much faster. The homeowner also saves on the double burden of rent and mortgage payments.

Tip: Future Attic Conversion

If you plan to convert your attic later, plan for it now. This can save you considerable costs by having the connections for electricity, heating, water, sewage, telephone, etc., installed now.

The Self-Build House

There are basically two ways to achieve this: You can either "pitch in" with the help of friends and acquaintances and build everything yourself, or you can handle the planning (e.g., with the help of an architect), tender the individual trades yourself, and manage the schedule and coordination on the construction site.

In both cases, you can save money, but this requires either above-average craftsmanship or excellent organizational skills.

Tip: Calculate the effective cost savings

Determine as precisely as possible how much you will actually save on each service and consider the timeframe. Some trades, such as earthworks, can be completed much faster by a professional contractor. In these cases, the cost savings are usually disproportionate to your own effort.

If you enlist the help of others in your personal network, you must report this to the construction industry's accident insurance provider. Therefore, find out about the additional costs of this insurance coverage in good time.

Opportunities and Risks

If you have enough time and talent, you can achieve significant savings and reduce overall costs by doing some of the work yourself. However, to carry out the individual tasks, you must ensure that you possess sufficient expertise. The right tools are also crucial.

If this is not the case, it should definitely be left to a professional, as it is usually considerably more expensive to have something repaired later.

Besides the cost factor, another advantage is often the more careful execution of the construction work, because those who are fulfilling their dream of owning a home usually work more conscientiously than a hired tradesperson.

A disadvantage, or rather a risk that is difficult to calculate, is the construction time. Generally speaking, the more work you do yourself, the longer it will take to complete. Another problem is finding a company for a partially completed task. It is even more problematic if the company then has to start dismantling the improperly executed work. The additional costs can be substantial, and the completion date can be delayed.

Tip: Build up financial reserves for unforeseen circumstances.

Be sure to discuss the loan disbursement terms with your bank. And don't be overly optimistic in your calculations. If the bank isn't prepared to provide the necessary funds for work already completed (or to be completed), often the only option (assuming good credit) is a somewhat more expensive bridging loan.

Insurance during home construction:

Firstly, fire insurance (often required by the bank) is absolutely essential, and secondly, insurance with the construction industry's accident insurance provider for any work you perform yourself is mandatory.

If strangers are helping you, you are responsible for their health.

Tip: Builder's liability insurance:

Definitely take out builder's liability insurance; private liability insurance does not provide the necessary coverage. Claims for damages against you will be handled by the insurance company, and unjustified claims will be defended without any costs to you.

Even if you realize your construction project with a developer, you are responsible for any damage that occurs during construction. Construction all-risks insurance protects you against theft, storm damage, and fire damage.

The Architect in House Construction

According to the German Civil Code (BGB), the architect's contract is a contract for work and services, meaning that the success of the project, not the work itself, is the primary focus of the contract.

The total services of an architect are billed according to the Fee Structure for Architects and Engineers (HOAI) and are divided into a total of nine service phases, some of which can also be handled independently by the client:

There are (according to the HOAI) nine service phases:

1. Basic Evaluation
2. Preliminary Planning
3. Design Planning
4. Approval Planning
5. Construction Planning
6. Preparation for Tendering
7. Participation in the Tendering Process
8. Site Supervision (Construction Supervision)
9. Post-Construction Care and Documentation