RESERVATION OFFER FOR REAL ESTATE IN ITALY: ACCEPTANCE OF AN OFFER AND ESTATE AGENCY COMMISSION
If you are considering buying a real estate in Italy, hiring a bilingual experienced lawyer specialised in property matters is of utmost importance to safeguard your investment.
Contracts for the sale and purchase of real estate in Italy are regulated by Italian civil code in art. 1470. The contract is a consensual transactional instrument through which a party (the seller or vendor) transfers the ownership of an asset, or a right, to another party (the buyer). Contractually, the buyer agrees to and is obliged to pay a fee to the seller for the asset or right.
Acceptance of a reservation offer for real estate in Italy
In the real estate sector, a property sale contract generally begins with a proposal by the seller to sell a property at a certain price.
In a private property scenario, a potential buyer of the property must make a written reservation offer, which includes the identification of the property, as well as the offer price. Should the buyer’s proposal be accepted by the seller, the seller’s acceptance must also be in written form and reach the potential buyer within an established time frame laid out within the reservation ; until the seller’s acceptance of a reservation offer has reached the address of the potential buyer, no contractual obligations have been established , and the reservation offer is revocable. However, if the promised buyer wishes to keep the proposal firm for a specified time, which requires the seller removing the property from the market for the duration of that time frame, it takes the form of an irrevocable reservation offer. If you are not entirely familiar with the legal and financial implications of the three step property purchase process in Italy, you may wish to read our guide on this subject.
The role and the commission of the real estate broker
As in other countries, Italian property sellers often put their property in the hands of a real estate agency; the real estate broker searches the market for potential buyers and once found, gets the potential buyer to sign a reservation offer to purchase the property. By means of the reservation offer, the buyer undertakes to keep the proposal firm for a certain period of time and if the seller does not progress the sale to a preliminary contract stage within the term set by the buyer, the latter has no obligation. At this stage, it is important to consider the aspect concerning the broker’s commission. Generally, commission payments range from 3 to 8 percent of the property sale price. Some agencies work on a fixed fee commission – based on a percentage of the total sale price. It is always worth asking if a real estate agent’s fees are negotiable.
In this respect, problems may arise when the commitment made by the parties through the signed acceptance of the reservation offer does not reach the next stage of a preliminary contract, but the real estate broker still demands that the agency’s commission be paid at the reservation offer stage. Indeed, the acceptance of a reservation offer between the seller and buyer is not a guarantee that the transaction will successfully complete. Frequently, following all the appropriate searches (due diligence), problems or irregularities related to the property, which had not been previously identified, arise. To avoid any type of unpleasant surprise, it is always advisable to instruct an experienced lawyer in order to manage the complex purchasing procedure.
Italian rulings on the matter…
With regard to the issue related to real estate commission fees, Italian court rulings conflict; however, in order to remove any uncertainty concerning this matter, a ruling by the 2010 Supreme Court stated that, in order for a broker to be entitled to compensation, it is not sufficient that a broker merely puts selling and buying parties in contact in the hope that the transaction concludes successfully.. It follows that any commission is only payable to a broker once a preliminary contract has been signed between the seller and buyer.
The difficulties linked to the successful completion of a real estate transaction arise because there are so many pitfalls that could occur during the negotiation or acceptance phase of the reservation offer stage. To avoid pitfalls, it is wise to seek legal advice before you sign any paperwork related to buying property in Italy. For reasons of vested interests, make sure you choose your own lawyer rather than a lawyer recommended by the vendor or a broker. A lawyer will guide you step by step through the intricacies of the Italian property purchase process, provide invaluable advice and be of the utmost importance in order to avoid future problems; your lawyer can conduct the necessary searches and research related to the property before the payment of any commission to a real estate broker.
De Tullio Law Firm is an Italian Inheritance and Real Estate Law Firm present throughout Italy. We specialise in cross-border residential and commercial property transactions and inheritance matters in Italy. Should you need any further clarification concerning this or other property-related topics, De Tullio Law Firm will be happy to help. Get in touch with us at: firstname.lastname@example.org.