Real Property Purchase and Sale

REAL PROPERTY PURCHASE AND SALE

In order for the buyer to pay the purchase price as safely as possible, and the seller to hand over the property to them, it is necessary that they adhere to the established process of real property purchase and sale. Therefore, this article shall explain how exactly does the process of real property purchase and sale work.

The first step of real property purchase and sale

If the buyer decides to buy a property via a housing loan, they should first check their creditworthiness in the selected bank. If they are determined to be creditworthy, the next thing they must do is verify the ownership of the property registered in the land registry of the municipal court in the area where the property is located.

Land registry extract

A land registry extract is the only proof of ownership of real property or of some other right subject to registration in the land register, and consists of three parts. From the property sheet (sheet A) in which the real property is registered, the buyer may obtain data on the land registry parcel number, on its size and cultures thereon, with the title deed (sheet B) they may obtain data on the owner of the property, and from the charge deed (sheet C) it is evident whether the property is burdened with the rights of third parties, such as mortgage, right of first refusal, rent or lease. Also, the buyer is authorised to ask the owner of the property for all documents about the building and land he owns, energy certificate, and check whether the overhead costs for property he is buying are properly settled and whether there are any debts.

Real property purchase and sale procedure – Preliminary agreement

After the buyer has checked all the documents which they have requested from the owner of the property, to proceed with real property purchase and sale they must conclude a preliminary agreement. The preliminary agreement must be concluded before the main agreement and serves as a way of reserving real property. With it, the buyer undertakes to conclude a purchase and sale agreement with the seller on the agreed date, and the seller undertakes to sell the property to the buyer.
The preliminary agreement includes basic land registry data on the property (cadastral municipality, parcel number, land registry folio number in which the property is entered), the description of the property (address, total area, description of the premises, if it an apartment also the floor number and apartment number), the total price of the property, the date of conclusion of the final agreement, and the buyer undertakes to pay the down payment to the seller.

Down payment upon concluding the preliminary agreement

The down payment usually amounts to about 5 to 10% of the value of the property, and is considered cancellation fee. This means that if the buyer withdraws from the purchase of the property, the down payment shall be retained by the seller, and if the seller withdraws from the sale, he must pay the buyer double the down payment. The date of conclusion of the agreement is usually a date within 3 months from the date of conclusion of the preliminary agreement.

Real property purchase and sale procedure – Real property purchase and sale agreement

On the date determined by the preliminary agreement, the seller and the buyer shall conclude an agreement on the purchase and sale of the property and the buyer shall pay the seller the rest of the purchase price in HRK. According to the Civil Obligations Act (official gazette of the Republic of Croatia ˝Narodne novine˝, Nos. 35/05, 41/08, 78/15, 29/18), the real property purchase and sale agreement must be concluded in writing and must be certified by a notary public.
In addition to everything stated by the preliminary agreement, this agreement shall contain the date of handover of the real property to the buyer and the seller's guarantee that there are no rights of third parties on the property. If the buyer is purchasing the property by a bank loan, the agreement shall have to be previously certified by a notary public, and the bank must enter a mortgage on the property.

Quitclaim deed

It is important to note that the buyer does not acquire ownership of the property by concluding the main agreement and paying the purchase price, but by registering it in the land registry, based on the purchase and sale agreement and the quitclaim deed. A quitclaim deed is a document by which the seller declares that the property has been paid in full and that it allows the registration of ownership rights in the land registry in the name of the buyer.
The seller must issue a quitclaim deed to the buyer if the buyer has fulfilled their obligations in an orderly manner, i.e. paid the agreed price. Thus, with a quitclaim deed, the seller authorises the buyer to obtain the registration of ownership rights in his own favor and in his own name without any further question and no further approvals needed.
By registering the ownership rights of the real property in the land register, the buyer becomes the new owner of the property and acquires the right to dispose with it, own it, use it, and exclude every third party therefrom, thus completing the process of the real property purchase and sale.