Picture this: On a sunny day (although whilst this is being written, it's raining...), after you have visited several houses or apartments, and finally, with or without the help of a real estate agent, you find exactly what you were looking for. Your dream home! Then what?
Well then, you have the bidding process to look forward to. You will have either enlisted the help of a real estate agent who will represent you, or you are taking the plunge and deciding to do it yourself. Either way, a bid must be made!
Once the seller and you have reached a verbal agreement about the most important aspects of the purchase such as the purchase price, date of delivery and special conditions such as the financial ones, you have bought yourself a house. The next thing that will happen, will be that the seller’s estate agent will record these conditions in a purchase deed.
In Amsterdam, there is an exception to this rule however. In the capital, purchase deeds are drawn up by a civil law notary. Usually this is done in the presence of the seller, the buyer and their respective real-estate agents.
After signing the Purchase Agreement, you have three days to change your mind about the purchase. If for whatever reason you no longer wish to proceed with the purchase, you have to let the seller and his/her agent know. It's recommended that you do this in writing.
However, before you sign, some very important dates have to be agreed upon in the Purchase Agreement.
The financial clause is very important. As a buyer you do not automatically get the condition subsequent for the mortgage loan. Therefore you must always make your bid conditional on being able to obtain finance for the new home. The term for this clause is normally three to four weeks. During this period you and your financial advisor will have to make sure that a bank makes you a suitable offer for a mortgage. In most cases you will probably already have consulted a financial advisor before you started house hunting and you will have a fair idea of your financial situation.
However, if for some reason you cannot obtain a mortgage loan, you will have to react before the date stipulated in the Purchase Agreement by letting the civil law notary and the seller know in writing that you cannot get suitable finance and the deal is off. This has to be supported by two letters, from two different banks stating that you are denied a mortgage loan. Your financial advisor will also be able to help you get these letters. Therefore the date of the financial clause is a very important one to look out for in the Purchase Agreement.
The Purchase Agreement is the date of the deposit and is also very important. On this date you will need to transfer an amount of (usually) 10% of the purchase price into the account of the civil law notary. This is first and foremost a security for the seller in case you, as a buyer, for some reason do not proceed with the purchase after the sale has become unconditional. The deposit secures the payment of the penalty you have forfeited.
For those of you who either do not have such cash available or who’s cash is tied up otherwise, do not worry. It is perfectly normal in the Netherlands to ask the bank to send a bank guarantee of 10% of the purchase price to the Notary instead of making the payment of 10% in actual money. Your financial advisor can arrange this for you and the bank will charge you 1% of the guarantee amount (being 10% of the purchase price). So for example, for a house costing € 250.000 the bank will charge € 250 for the bank guarantee.
The last and also very important date is the date of the transfer of ownership. On this date you actually become the owner and all rights and duties related to the house will transfer to you. On this date you will go to the Notary, probably accompanied by your real-estate agent and sometimes by your financial advisor as well.
Although uncommon – the presence of your financial advisor can be valuable when the mortgage deed is being executed. On this date the Civil Law Notary will read out the deeds drawn up by him or her. The first one will be the deed for the transfer of ownership and secondly the mortgage deed.
If you do not understand the contents of the deeds (legally in Dutch of course), a translator should be present. The deeds should reflect what has already been agreed upon by you and the seller and by you and the bank respectively. But before this great day, a lot of work and coordination has taken place. You and your financial advisor have probably met several times to discuss the mortgage possibilities and your financial advisor has worked behind the scenes together with the bank to obtain the mortgage offer on time and later to get the mortgage papers and the money to the Notary in time. The Notary and his staff will have been in contact with the real estate agents, the financial advisor, the bank and you.
So once you have signed a Purchase Agreement, you start off a chain of events and work. The work of the real-estate agents, the valuator, your financial advisor, the bank and the Notary should all be coordinated well. For this, time is of the essence. It is for this reason, that it is recommended that the dates in the Purchase Agreement should not be set too lightly or too tightly. Your real-estate agent’s advice and that of financial advisor can save you a lot of hassle!
Article by de Boer Financial Consultants. For financial advice when moving to the Netherlands, contact +31 (0)70 511 8788.