Follow these simple steps and that ideal property in Estonia will be yours.
1. Research the market
Before you fly out to Estonia, spend plenty of time researching the market online. Go through all of the information in the Estonia section of this site and then start looking for developers, agents or individual properties that look as if they might be interesting.
The Estonian Listings section of the site is probably the best place to start your search, but also check out the advertising in this section, and look at the Directory to get some more contacts.
If you are looking for a bargain, then think about subscribing to our weekly newsletter that gives details of selected properties that we think represent good value – these listings aren’t usually advertised to foreigners. Click here for more information on subscribing.
2. Arrange Your Financing (Optional)
Although it is possible to arrange financing in Estonia through an Estonian bank, you will probably find it a lot easier to obtain financing in your home country, perhaps by re-mortgaging your current property or properties. Another option is to discuss the possibilities with a mortgage broker who is based in your home country and has experience of arranging mortgages on property overseas.
It is advisable to do this before heading out to Estonia so that you have a firm idea as to what your maximum budget is going to be. If you spend all your time over there looking at properties around EUR150,000 and then come back and find that the maximum amount you are able to finance is EUR100,000, your time will have been wasted.
Also, it’s recommended that you talk to an accountant about the best way of purchasing an overseas property in advance so that you minimize your tax liability.
You can find details of potential sources of finance in your home country in the International Directory section of the site.
3. View the Properties
Use the Budget Flights Tool to work out the most affordable way of getting to Estonia and then head out there to look at those properties that look most interesting for you. Check the properties, or the locations if you are looking at an off-plan property. Don’t just check the properties themselves, check out the areas that they are located in as they will all be new to you. Ask plenty of questions.
What kind of tenants are you expecting to work with? If you are looking for short-term tenants (i.e. tourists), then you are going to need something very close to the centre. Are there some good hotels close to the property? If so, you’re looking in the right place. If you are looking for long-term rentals, then make sure that it is in a desirable part of the city, if not the centre. Ask yourself the question, “would I like to live here?” If the answer is no, then chances are that the up-market tenants you are planning on renting the property will also not be so keen.
Take your time making a final decision as to which property to go for – get as many independent opinions as you can. Remember that agents and developers are all going to be trying to sell you hard on what they have available, so don’t expect an unbiased opinion from them.
4. Finalize The Deal
Whereas in markets such as the UK, the initial price is known as an ‘asking price’, with both the buyer and seller expecting the final sale price to be somewhat lower than this, don’t expect the same in Estonia. There’s no harm in trying to negotiate a reduced price, but sellers here usually expect to get the full amount. Make sure you know exactly what costs are covered in the final selling price to avoid any nasty surprises further down the line. Typically, the seller should be responsible for paying 18% VAT, plus the estate agent’s commission (which is probably going to be in the region of 5% of the total). Sometimes the seller will try and split the commission, however, so you really do need to check this first. You, as buyer, will be responsible for all of the other buying costs as detailed below.
5. Arrange Local Financing (Optional)
If you haven’t already arranged financing in your home country, you need to arrange it locally. If you’re going to be buying off-plan, then check with the developers to see if they can recommend a local bank. If not, you’re on your own. Check out the links to Estonian Banks in the directory section.
The process of obtaining a mortgage in Estonia from a bank is going to be similar to that in your home country. They are going to see some proof of income before committing to a loan, so make sure that you bring all of your important documents with you to a meeting with a bank. Expect to have to wait for a minimum of a week or two in order to get a final decision from the bank, perhaps longer. The bank will charge an arrangement fee of around 0.5% of the total value of the loan.
6. Hire a Lawyer
Although most Estonians buy and sell property without being represented by a lawyer, as a foreigner it will be in your best interests to have unbiased help to guide you through the process. Expect to pay somewhere in the region of EUR300-500 for a lawyer to guide you through the property buying service.
As it is vital that you find a lawyer who is representing your interests and your interests alone, don’t ask the real estate agent or developer to recommend one – it’s better to choose one yourself. You can find details of Estonian Lawyers in the directory section.
One other advantage of using a lawyer is that, by giving them ‘Power of Attorney’, they will be able to sign legal documents on your behalf. This alone can pay for their costs if it means your having to make one less trip to Estonia in order to complete the buying process.
7. Sign A Sales-Purchase Agreement
If you’re buying an off-plan property, then perhaps the developer will require you to sign a reservation agreement before you get to this stage, but the main document is a sales-purchase agreement that will be drawn up by a local notary on behalf of both the seller and the buyer. This is a formal, legally-binding contract which contains all of the key information about the agreed deal including the details of the property, the total amount payable, the deposit, penalty clauses, etc. Typical penalty clauses will be that the buyer loses his deposit if he pulls out of the agreement while the seller will forfeit double this amount.
The cost of this agreement is usually paid for by the buyer, but the price is usually only around EUR20. Immediately that the agreement is signed, the buyer will pay a deposit – usually around 10-20% to the seller.
8. Inspection Period
You will now have a certain amount of time to inspect the property. It is not so common in Latvia to request for a surveyor to make a full structural report on a property. If the property has been built recently, then a survey should not be necessary. Check the property out yourself. Chances are that it will be OK, but if you see anything that could cause you sleepless nights, then perhaps it is worth the money to get the property checked out first.
You can find details of Estonian Surveyors in the directory section. Expect to pay EUR150-300 for a full survey.
Your lawyer should also use this period to check that all is present and correct from a legal standpoint. During this time, you should also be arranging the final financing deal with your bank or mortgage broker so that all of the funds are available at the time of completion.
The final stage involves another visit to the notary. This time the payment is based upon the cost of the property and will be in the region of 0.5%. Here the notary will draw up the final agreement, which will involve the official transfer in the Land Registry from the buyer to the seller. The final agreement will be in Estonian, so if you want an English translation, it will cost another EUR100.
Upon signature, you will need to pay the remainder of the agreed price. This is often paid via the notary who keeps the money in an escrow account.
You will also need to pay a state tax to the local authority (equivalent to Stamp Duty in the UK). This will cost 0.25-0.5% of the sale price of the property.
Congratulations! You’ve just bought yourself a property in Estonia! That wasn’t so difficult now, was it?!