How to Take an Italian Apartment on Credit Without a Bank
October 15, 2020
23
A foreigner who cannot or does not want to take out a loan for an apartment in Italy, but wants to become the owner, should pay attention to the assignment of the loan. What is it, how does it differ from a normal purchase and sale transaction, and how to organize the process? Elena Arna, a forensic specialist in Italian real estate, shares her experience.
What are the terms for a conversation about the assignment?
First, let's define that the assignment of an apartment and the assignment of a loan are two different schemes. In the first case, we are talking only about the assignment of property rights. The second is about a situation in which one person takes on the credit of another.
Here is a small dictionary of terms in Italian:
Assignment of real estate – cessione dell'immobile
Assignment of credit – accollo del mutuo
Mortgage loan – mutuo
Mortgage (only record on the apartment, loan guarantee) – ipoteca
The bank that issued the loan – banca mutuante
What properties are referred to as "assignment of credit"?
Assignment can apply to any loan. For example, a father can take on the son's debts. But in daily life, this scheme is rarely used. As a rule, accollo del mutuo is used when buying real estate.
This procedure can be performed by anyone (including a foreigner) who does not want or cannot apply to an Italian bank. Instead, you go to the person to whom it was approved earlier, and you assume obligations to pay it.
According to accollo del mutuo, you can become the owner of any property both in a new and old building. You can even buy a house under construction. This can be either ordinary apartments or houses, villas, townhouses, as well as commercial premises. The main condition is that the property has been initially taken on a mortgage.
How do I find a suitable property?
First of all, you can find a credit property from developers. The vast majority of them (99%) build compounds not with a loan from a bank. Then they split this amount into many small loans and offer them to customers.
You can also search for similar options through individual owners, on the Internet, newspapers, social networks and real estate aggregators. Find out whether the apartment has a mortgage and whether the individual is ready to transfer it. As practice shows, it is unlikely to be possible to negotiate such a scheme without an agent.
First, to explain the request and agree on all the nuances, the buyer must have confident knowledge Italian. And secondly, such a scheme most often assumes that the seller remains responsible for the mortgage even after it is transferred to another person. And if they do not pay, the bank goes to the one who transferred the loan.
This is what a competent and professional agent is needed for to convince the seller to shift financial responsibility to another person.
However, the possibility to release the seller from liability remains. To do this, you need to contact the bank with a request to check the buyer's solvency and agree on their sole responsibility. However, banks rarely agree to such conditions.
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What could be the reason for selling an apartment on assignment?
The assignment of a loan may mean that the person who took it earlier had financial difficulties. There is no question of any problems with the documents and the law: if the bank has already approved the mortgage, it means that its appraisers have checked and approved everything. It's just about the money.
The contract with the bank is drawn up in such a way that in case of non-payment, the person is responsible not only for the credited apartment, but also for all their property (present and future, until they cover all their debts). If an apartment is put up for auction, as a result of which its owner gets only a part of the required amount, they still owe the bank.
This procedure is predatory. Therefore, in the event of financial difficulties, people prefer to transfer their credit obligations to another party.
What specialists are involved in the process of acquiring a property for assignment?
An agent and notary are mandatory participants in the transaction, in addition to the seller and buyer. A bank employee can also participate in the process, if it was decided to release the seller from further financial responsibility. But neither a lawyer nor an accountant are involved.
What documents are required for a legal assignment transaction and who certifies them?
Everything is done by a notary. They draw up a notarized contract of sale, certify and register the transaction.
They also record accollo as a means of payment (now the act must specify how the apartment was paid for). For example, when buying an apartment worth €100,000 (where €80k is a loan), the following wording can be used: "Party A buys an apartment from Party B. A check for €20,000 is accepted as a payment, another €80,000 will be paid by accepting responsibility for the mortgage loan".
Should the assignment be agreed with the developer?
If the first owner is an individual seller, then the transaction has nothing to do with the developer. You only need to get an approval for the transfer of the loan from the owner's spouse, if the property was purchased in marriage. If the couple was not married at the time of buying the property, then the issue of assignment is decided only by the current owner of the mortgage apartment.
It is good, if the transaction is also approved by the bank, but in practice it is often not even informed.
What are the risks when buying real estate on assignment?
In fact, there are no risks for the buyer. The main thing is to check that the apartment has only one mortgage from the bank and there are no claims from third parties. This check is performed by the agent.
But the seller is at risk, since they are financially responsible together with the new buyer until the end.
Moreover, the contract may specify that the bank prohibits accollo. And if the seller (and then the agent) did not finish it and did not double-check it, then within 24 hours from the moment of conclusion of the assignment transaction, the bank may demand to fully repay the debt. If this does not happen, the procedure for withdrawing the apartment from the seller will be launched.
Therefore, before entering into a contract, a competent agent must make sure that there is no prohibition in the contract and/or that the bank has agreed on the procedure of transferring the loan.
Are there any fraudulent schemes?
The assignment of a loan does not imply fraud: payment for the loan is still received not to the account of an individual, but to the bank.
However, you should not transfer money to the seller's account until the notarial act is registered, you can leave it with the notary.
What is the step-by-step algorithm for making a transaction?
Find a person who has a loan and is willing to transfer it to you.
Negotiate with them through an agent who checks the purity of documents and the absence of bank prohibitions on the implementation of the assignment transaction.
Leave a symbolic deposit (a hundred euros is enough) and agree on the date of registration.
Receive a confirmation from the bank that the transaction is possible.
Go to the notary with a check for the amount that will be paid to the previous owner of the apartment (for example, €20,000). The debt part (for example, €80,000) is "removed" from it and you take it on yourself.
As a result, a notarial act is signed with the entry "the cost of the apartment is €100,000. Must be paid using the following payment instruments: cheque (€20,000) and accollo del mutuo (€80,000).
How are the money transactions conducted?
In Italy, paying in cash for a property is prohibited. Any transactions with cash in the amount of more than €3,000 are impossible. Now there is talk that this amount will be reduced to a thousand euros.
Therefore, the money is either transferred to your account and then written a check for the required amount, or sent to the account of a notary or seller (very rarely and only after checking the agent).
What is the responsibility of the new owner of the assigned apartment?
Only financial obligations for credit, taxes and any other payments related to the apartment.
How and why can the assignment agreement be terminated?
As mentioned above, the contract for the first owner of the apartment may contain a ban on the assignment of credit. If this point is not settled with the bank, it may require immediate refund of money from both owners. Otherwise, the apartment will be put up for an auction.
What additional expenses are waiting for the buyer of the assigned apartment?
First, the purchase tax (2% with a residence permit, 9% without a residence permit). Secondly, the work of a notary and an agent, the cost of which directly depends on the amount of real estate. If the apartment costs less than €100,000, the agent takes €3,000, the notary takes about €1,000 (if the person plans to get a residence permit) or €5,000 (without a residence permit). If the apartment is more expensive, the agent receives 3% of the total amount, the notary – about €1,500.
If the new owner has a residence permit in Italy, they do not pay the property tax. It only has the obligation to pay for garbage collection at a low rate. A foreigner without a residence permit is charged a tax on ownership (according to internal city rates – an average of €800 per year for an apartment of 100 sq.m) and charges for public utility services at high rates.
How does the Italian law protect a foreign buyer during the transaction process?
Most importantly, the contract is considered invalid if it is written only in Italian. The law stipulates that the contract is valid only if it is translated into two languages – Italian and the one spoken by the buyer.
In addition, the licensed agent is responsible for the progress of the transaction. If he makes a mistake, all expenses are reimbursed by his insurance company-this is stated in the notarial act.
Is it possible to buy an apartment on the assignment remotely?
You can do it by proxy. I periodically post photos and videos of such transactions on my Instagram account and on my YouTube channel.
What are the advantages of purchasing an apartment on assignment?
First, a person gets a loan that for some reason could not get earlier, also at a low European rate, let’s say, 1.5%.
Second, everything happens relatively quickly. It takes a bank two or three months to approve a regular loan, and no one can guarantee that this will happen. In case of assignment, after an agreement with the owner, you can go to the notary the next day and draw up documents.
Finally, as I said, you can't pay in cash in Italy. Everything must be legal, and the origins of money must be legal. However, some people who did not take care of the legalization of capital in time, cannot provide the bank with the history of the origins of funds.
For such people, accollo, registered in a notarized act as a legal payment method, is a great way out. You can pay fees for it from your wallet.
