With the “credit crunch,” rising interest rates and falling property prices raising the spectre of recession in the West, there have certainly been better times to contemplate buying a home. Whether – or just how far – the Polish real estate market will be affected, within the context of an otherwise bullish economy, remains to be seen. In the July issue of the Krakow Post, I set out my personal reasons for choosing to buy a flat in Krakow. What follows here are the experiences of a first-time property buyer in Poland. Read Part I here.
AGENT / OFFER
So, you’ve spent the usual weeks and months trekking around and now you’ve actually found that special house or flat. Assuming the property, like most, is being sold through an estate agent (nierochumosci), the first thing you need to do is to agree their commission. Now, in Poland, estate agents charge both the seller and the buyer. The typical fee is 3% (plus tax). However, they are open to negotiation, especially in a quiet market. This done, you put in your offer for the property. This is done formally, with a document being prepared by you and the estate agent (this is not a verbal process, as it is in, say, the UK). Detailed in the offer document are the dates and amounts of the part-payments that, if your offer is accepted, you must legally adhere to as part of the buying process, together with a final hand-over date. All this is regardless of whether the owner accepts your initial offer or not. If not (as in my case), you and the estate agent then tear up the old offer and prepare a new, similar document, with details of the new, higher offer.
So, after several phone calls between all three parties, the owner accepts your offer and you, the owner and the estate agent sign to show acceptance of the offer. Now it’s time to arrange the mortgage. Note that, unlike in some Western countries, you must have an offer accepted on a particular property before being offered a mortgage. It is not possible to get a mortgage offer in principle, allowing you from the offset to confidently scour the streets for the property of your dreams. This is important for the unwary foreigner to note, as in Poland it is common practice to pay a non-refundable deposit (zalicki), typically 10% of the agreed price, from your own funds to secure the property, often before receiving confirmation that you will be given a mortgage. Buyer beware.
One thing you will definitely need before seeking a Polish mortgage is to be registered (zameldowany) at a Polish address. To be registered is a legal requirement for any foreigner living in Poland longer than three months. Whilst failing to register is quite common and does not usually cause any day-to-day problems, it is very handy to be registered and essential when seeking a mortgage. To register, you need to go to the appropriate local government office (urzad miasta) with, if necessary, a Polish-speaking friend to translate. You must present either the tenancy agreement for the property in which you live or take with you the owner of the property who will then present their proof of ownership and state that you are living there (as, for example, in the case of a foreigner living in his/her Polish partner’s flat).
Similarly, if you happen to be in possession of a NIP (tax) or PESEL (social insurance) number, so much the better.
In my case, the process of applying for and being granted a mortgage was a long and tedious one. Not, in fairness, because of any particular problem with the bank (although the usual Polish bureaucracy and inflexibility were much in evidence), but mainly because of my personal circumstances. Although I had been banking with a major Polish bank for three years, my major stumbling block was that I didn?t have a work contract. Now, proof of future earnings is a standard and reasonable requirement for any bank, of course, but not something that every aspiring property-owning ex-pat may have. I needed advice, and so began my association with an independent financial adviser (doradca finansowy).
Polish financial advisers take their commission from the lender, not from the borrower. As such, using their services you are safe in the knowledge that, should you, for any reason, pull out of the process, you will not be charged even 1 zloty. But check and be clear on this point from the start.
FRANCS VS. ZLOTYS
Now, ideally, reader, you do have a work contract (or your own business) and a long Polish banking history (twelve months minimum is the norm). But if, like me, you don’t, you will be severely limited in your options. At the beginning, I wanted to buy a 25-year mortgage, payable in Swiss francs. Perhaps a trifle exotic for this homeboy, but quite common in Poland and, due to low and stable Swiss interest rates, much cheaper than a similar mortgage based on zloty. However, in my case, my financial adviser could find only one bank willing to offer me any kind of mortgage (with each separate application seemingly necessitating reams of documents to sign, email and fax ? all in Polish, of course): a 30-year term, payable in zloty. We filled out the necessary documents, including the crucial estate agent’s “offer document” and, in due course, I received the loan, complete, of course, with a four-figure bank commission charge, which I was able to add to the term of the loan. Note that, should you wish to switch from a zloty to a Swiss franc mortgage, you are typically free to do so after twelve months.
Perhaps I should say that, lacking a work contract, it was probably only the fact that I had a 40% cash deposit that secured me the remaining 60% from the bank. Without such a contribution, I may not have been deemed so credit-worthy. Of course, some Polish banks allow you to make a “self-declaration.” Self-declarations dispense with the need for proof of earnings providing you can provide something like a minimum of 40% cash. However, such documents have, in the West at least, received bad press over the years, encouraging buyers to over-extend themselves (remember the term “credit crunch?”). If offered credit in this way, be realistic with your ability to repay.
I was also required, by the bank, to have the flat valued. Again, this is not, as far as I am aware, standard practice for many Polish properties, but your bank may require it, at your own cost (around 600 to 800 zloty), so be prepared.
If all goes well, you now have your mortgage offer and a hand-over date. The estate agent takes details of both parties’ bank accounts and arranges a three-way meeting with a local solicitor. If your Polish is poor, you will need to arrange a sworn translator to be in attendance (this cost, a few hundred zloty, is borne by you, although the estate agent will no doubt help you to locate one). All parties meet at the solicitor’s office – cost to you, several hundred zloty – and you take legal ownership of the property on an agreed future date. Take great care with the document (Akt Notarialny) you receive as you walk out of the office: this is your title deed and it will need to be shown to utilities, banks and government offices on many occasions.
When, finally, the bank transfers the money shortly after, you may allow yourself a smug grin and a house-warming party (parapetowka). But with the post-party hangover, the real fun begins: dealing with the block’s administration department, sorting out utilities, discovering problems with the flat that, somehow, the previous owner forgot to tell you about and, possibly, a disruptive and costly process of renovation. I wish you luck.