How to save money when buying and selling real estate

Anyone who has ever faced the sale of real estate or a inheritance process knows that such procedures are associated with considerable financial expenses. We are referring to taxes, fees, duties, and other mandatory payments, as well as the cost of realtors` services, real estate appraisers, notaries, technicians, private bureaus of technical inventory, and other interested parties.

Of course, a reasonable question arises: how can one minimize expenses in the re-registration of an apartment, garage, residential building, land plot, and other real estate? To answer this, let’s discuss each expense category separately and explore potential areas for significant savings.

Realtor services

Have you ever considered that the services of realtors are often the most substantial expenses in both the sale and rental of real estate?

According to an analysis conducted by the agency Ocenka.UA, as described in this article, the generally accepted value of brokers’ remuneration is as follows:

• When buying or selling real estate (apartments, garages, houses with land, non-residential premises), the size of the so-called «commission» ranges from 3 to 5 percent.
• For long-term rentals of apartments or residential buildings, the customer most often pays the broker half of the full monthly rent.

Next, we will analyze other expenses involved in the property re-registration at the notary. However, it’s worth noting in advance that, in most cases, the 5% realtor «commission» constitutes the majority of the procedure’s overall expenses.

In most cases, it is entirely possible to proceed without the services of intermediaries. Moreover, when it comes to selling ordinary apartments, such as those in Kyiv, brokers may do more harm than good. If you are going to sell an apartment but have not decided whether to enlist the help of a realtor, we recommend reading this article. It outlines how intermediaries might hinder your apartment sale and provides insights on dealing with unscrupulous realtors, brokers, and other real estate scammers.

Regarding potential issues and risks associated with realtor fraud, the appraisal office Real Expert (RealExpert.UA) has an excellent series of articles on their website. These materials cover a range of topics, each with links to the others:

1. Fraudulent schemes and deception by realtors when buying an apartment.
2. 5 signs that a house is rented by a swindler.
3. Selling an apartment – how not to become victim of broker deception.
4. Schemes of deception by brokers when renting an apartment.
5. Eight traps you can encounter when renting an apartment.
6. Black realtors and apartment raiders – how to protect yourself.
7. The deposit, the advance, and the preliminary contract – what’s the difference?

We emphasize that, in most cases, you can manage well without the services of intermediaries. Doing so not only helps save money but also prevents potential problems.

Notary services, taxes and compulsory payments

Regardless of whether you have sought help from a real estate agency, let’s assume that the buyer and the seller have found each other and need to prepare documents for re-registration with a notary. What should you pay attention to?
Notary expenses for the re-registration of real estate consist of two parts:

1. Taxes and mandatory payments, including income tax, military tax, and pension fund contributions.
2. Services of the notary for drafting the contract and registering the transaction in the State Register of Real Property Rights.

One might wonder, where can savings be made in this process? The tax rates depend on various factors such as the type of property, ownership duration, and the nature of the transaction (sale or gift). For instance, if an apartment is gifted to a close relative, and the donor is a Ukrainian citizen, the tax rates are zero. However, if a foreigner sells the property, total taxes may exceed 20%.

A nuance arises from ambiguous legislation, allowing different interpretations. If the notary is not personally known to you, they might interpret the law in their favor to extract more taxes from clients, paying less to the budget.

Given this, a sensible approach is to gather all necessary transaction documents and consult with multiple notaries.

Request each to calculate the total expenses and compare the results. The difference can be substantial, providing a good opportunity for savings.

Moreover, a knowledgeable notary may suggest re-registration options to minimize expenses. For instance, if an uncle (the mother’s brother) wishes to gift his nephew an apartment, it’s often more economical to execute two separate gift agreements: first with the sister, and then she, in turn, gifts it to her son.

In any case, tax rates are calculated based on the so-called estimated value of the real estate. Let’s discuss how the legislation can minimize this estimated value.

Real estate valuation — how to save

For a notary to calculate the taxes for the re-registration of real estate, an expert evaluation is required. This evaluation can take two forms: a free certificate from the state register or an independent appraiser’s report.
The immediate question that arises is: if a free certificate is available, why opt for appraisers and pay for their services? However, in reality, a free certificate may not always be the best choice for both the buyer and the seller, as the state register often provides an explicitly inflated cost for certain properties.
Consider this scenario: you are selling an apartment for 2 million UAH and specify this amount in the sales contract. However, the registry generates a free reference for 2.5 million UAH. It’s not widely known that both these figures appear in the sales contract: the actual sale price and the estimated value of the property. Taxes are always calculated based on the higher value; in our example, it’s 2.5 million UAH.
Now, suppose you have owned the apartment for less than three years. In this case, the seller will pay 6.5% in taxes (income + military tax), and the buyer will pay 1% (pension fund), totaling 7.5%. Since the estimated cost of the apartment exceeds the actual sale price by 500 thousand UAH, the overpayment on taxes would be 37.5 thousand UAH. (!)

It’s evident that, in this scenario, seeking the assistance of a real estate appraiser to align the estimated value with the real market price makes sense. But how much does a real estate valuation cost? According to the offerings from Valuation.Ukraine, the price for a report on the cost of residential real estate for presentation to a notary in 2024 is only 1000 UAH. . Please note that prices vary based on where the documents are submitted, being cheaper for a notary and more expensive for court or a bank.

Therefore, turning to an appraisal company provides an opportunity to save money. Take note of this crucial aspect! In our example, the potential savings amount to 36.5 thousand UAH.

Technical passport — when it is not needed

Here’s a little-known fact about technical passports for real estate. Many real estate owners assume that a new technical passport must be obtained each time the property title is transferred. However, this is not quite the case.

When do you actually need a technical passport? Here are the usual scenarios:

• after a radical change in the layout of the premises;
• when selling a part of a house or apartment as a separate real estate object;
• during the initial purchase of an apartment in new buildings;
• if the real estate documents are considerably old and haven’t been entered into the state registers yet;
• when legitimizing unauthorized or new construction.

So, what does this mean? It appears that having a technical passport is not mandatory in most cases during the re-registration of real estate! Furthermore, it’s not always necessary to update the technical passport if it has been previously issued, regardless of the current owner stated in the title deed.

If you decide to follow our advice and visit multiple notary offices before making a choice, be sure to ask about the necessity of ordering a technical passport registration for the transaction.

In total

In this article, we’ve highlighted potential avenues for significant savings throughout the real estate re-registration process:

• Realtor: If you’re selling or buying a regular place, consider doing it yourself. It’s not rocket science, and you’ll pocket some savings.
• Notary: Notary offices differ not only in the prices for contract formation and registration but also in how lawyers at each office calculate taxes and mandatory fees. Visit 2-3 notaries and compare the overall transaction costs.
• Appraiser: There’s a free service in Ukraine to evaluate your property, but it might be worth consulting with professional appraisers. This is because the registry may provide an inflated value.
• Technical Passport: Contrary to common belief, this document is frequently not obligatory for real estate re-registration. When selecting a notary, inquire about the necessity in your specific case. Opting out of obtaining a technical passport can also result in significant savings. One notary might request it as a precaution, while another might handle the process without it.

In real estate transactions, substantial expenses are par for the course. Know all details of your case! And don’t end up paying more than you need to.