Thursday, January 20, 2011

Which are the costs for the title deed?

I often get the question: Which are the costs for a title deed?
A very relevant question when buying a real estate in Turkey.

A title deed as such costs nothing, the correct question to ask would be: "What is the cost of registering the title deed?". So let us take look at that.

First and foremost you must paid 3.3 percent of the property value in taxes. In addition, around 300-500 TL in extra costs for various taxes and documents in relation to the application etc.

What is interesting here is primarily the 3.3 percent tax of the registered value since the registered value can differ a lot.
Strictly speaking the registered value should correspond to the contract price. But this is rarely the case. Without going into details, this is due to the fact that of registering the value of the property below actual buying price.
This will save money in taxes and is silently accepted by the Turkish authorities as part of a real estate deal in Turkey.

The good question is who decides the registered value? Well, the authorities decides the amount ...
It is simply the seller of the property who takes his deed to the authorities, shows his deed and finds out which amount he should register. And no one asks what the seller actually sold the property for that amount.
Instead the authorities makes a calculation based on various factors. What the "formula" consists of is unknown, but it includes things like property size, location and the at that time registered value. The new registered value will always be higher than the old one, and it is not acceptable to downsize the value of a property, even if it was sold with a loss.

Confused? Then read on ...

As an example, we recently issued two deeds within the same week in the same building for two different buyers and two different apartments.
The flats were sold from private owner to another private owner, and were identical except for size and floor. The smallest of the apartment had one bedroom and was located on the third floor. Here we had to register 140,000 TL. This meant that the owner had to pay about app. 5,000 TL of the registered value in tax.
Property number two was larger, with two bedrooms and a better location on the fifth
floor. This apartment was registered at 80,000 TL, so here the clients only paid 3,000 TL in tax.

How is that so? Logically the bigger apartment should be more expensive than the one bedroom apartment.
Correct, but in this case the explanation is that the smaller apartment was already registered with a quite high official value. This was because the contractor of the apartment had to register a high value, since the authorities demanded this at that time for tax purposes. The two bedroom apartment was registered at a time where the contractor could register a lower value.

And when properties are sold from their first owners, the authorities as described above, look at the initial registered value and determines the new value on behalf of that ...
In this case it results in two very different and values when two homes in the same complex are compared.
Very illogical ....

Are you now even more confused? I understand and even for us who work with these issues everyday, it is complex and we must keep the tongue straight to navigate.

As a buyer you must always be aware of how much the deed costs can be in the end. Therefore it is
important that you only do business with professionals who can guide through all this, and explain the complexity.
In case you are not aware of this part of the deal, you might get yourself a bad surprise when the cost of the deed must be paid.
The only way to check the costs is through personal contact with the authorities, which must be a specific inquiry on the deed.

Make sure to do that, it can protect you against unpleasant surprises.

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