Italian Real Estate- Introduction
Italy is an amazing place, home to spectacular destinations such as Rome, Venice, Milan and Florence. Italy has miles of beautiful beaches and incredible food and wine.

Great properties can be found in Italy without paying high prices, depending on where you look. A medieval house can be found for a low price of $45,000. Most properties will range from $186 to $313 per square foot. The prices for apartments in towns away from the big city centers will be far less.

Italian Real Estate- Average Square Foot Prices
Venice-  $410 to $895 and up
Milan-      $615 to $725 central Milan, $820 around Spigia
Rome-     $235 to $1,120 and up
Florence- $235 to $615
San Remo (Italian Riviera)- $225 to $445
Palermo (Sicily)- $90 to $235

Italian Real Estate- Restrictions on Foreign Ownership
Foreigners have no restrictions when buying property in Italy.

Italian Real Estate- How to Buy
Similar to other countries in Europe, Italy has no multiple listing system, so each real estate agent will have their own collection of properties. The majority of agents in Italy do not speak English, only about 10%.

In Italy, all residential property is freehold and titles are registered, however, the buying process is complex and not the most straightforward. The process generally has three stages.

1- Make an Offer
Once a property is found and preliminary negotiations are made starting with an offer stating the price you are ready to pay, a survey should be conducted before going any further with the process. In charge of conducting the survey is the geometra, who will deal with local land registry searches and planning searches as well. These searches are conducted to ensure the property conforms to the local planning and building regulations. The agency may ask you for a small reservation deposit, a prenotazione of around 3%, but this is not always done.

Next, is hiring a notary, a public official who handles buying and selling process. The notary is responsible for ensuring that all deeds are authentic and incontestable. A notary is not a lawyer and does not act on your behalf, but is rather a witness for both parties. The notary will draw up the preliminary sales contract and, if needed will deal with the final mortgage deeds.

2- Sign Initial Contracts with Seller
A private contract, scrittura private is drafted between the vendor and you. The contract to buy, compromesso will be signed and exchanged. The compromesso is a legally binding document where the buyer is committed to complete the purchase, pay the specified balance of the price agreed upon on the specified date. A deposit of between 10% and 30% will need to be made at the time of signing the compromesso.

A lawyer will be needed if you are not conducting the buying process with an agency that will hold your hand through every step. The lawyer will make the initial contract, work with the notary and make sure the final documents are in order. If you are not able to read Italian, the contracts can be complex.

With contracts, be aware of these terms:
caparra confirmatoria- If the deposit is paid under these terms, the buyer must complete the deal, or the buyer will lose the deposit automatically. Legal action may be taken by the seller to force the purchase. If the vendor backs out of the deal, they are legally bound to pay back double the deposit.

caparra penitenziale- There is no financial penalty for withdrawing from the transaction by any party.

3- Sign the Deed
Sign the rogito or final contract to complete the sale. A public notary must be present to witness the transfer of title and will collect the taxes associated with the transaction. The notary has 21 days to register the new title in your name after the papers have been signed and the transaction is complete.

The mortgage deed will also be registered if the property is bought with a mortgage.

Italian Real Estate- Transaction Costs
Italian real estate taxes can be high. The commission for the real estate agent is split between buyer and seller. The buyer should expect to pay between 2% to 3% of the price of the property, and it is possible it could be as high as 6%. Of the purchase price, expect around 2% to go to legal fees.

The fees associated with the notary will be between 2.5% to 4% of the declared value of the property. For cheaper properties it will be 2.5%.

The geometra’s fees depend on the work involved. If no further work is planned on the property, it will be around $600, however, if the intention is to build on or improve the property, the price could be up to $2,400.

It is important to understand that transaction costs and taxes are usually based on the declared value of a property. Italian law states that property has an official value, “declared value”, and this is usually less than the purchase price. The “declared value” is the value that will appear on documents and in the Land Registry, and it is the “declared value” on which property taxes are calculated.

Italian Real Estate- Taxes
Transfer Tax: This amount will depend on whether you are buying urban or rural property and the intention for use.

If the urban property is intended to be the main residence, government purchase tax (imposta) is 3% plus IVA (sales tax) if buying from a private individual, and 4% plus IVA if buying from a company or agency. If the property is intended to be a holiday or second home, purchase tax will be 10% plus IVA. The purchase tax is calculated from the “declared price” of the property.

If you become a resident before purchasing a home in Italy, you can qualify for reduced registration tax.

If your permanent residence will be the agricultural property and your main activity is agricultural, then the purchase tax is levied at 11%.

For properties that will be a second home, the tax is 18%.

Sales Tax: VAT may be payable on new properties if it is not included in the purchase price. For “non-luxury property”, 9%; and for “luxury property”, 19%.

Inheritance and Gift Tax: No inheritance or gift tax is imposed on legacies or gifts to spouses, children or other relatives up to the fourth degree. It is not imposed on any gift or legacy of up to $168,000 paid to any unrelated person or legal body. Taxes do apply to legacies or gifts above $168,000 paid to unrelated persons or legal bodies. For real estate assets, this is the property registration tax, Imposta di Registro.

Rental Income Tax: Rental income is taxed as regular personal income tax (IRPEF). Rates are on a sliding scale, after allowances have been accounted for; amounts up to $11,000 is 18.5%; amounts up to $15,500 is 25.5%; amounts between $15,500 and $31,000 is 33.5%; amounts between $31,000 and $70,000 is 39.5%; and amounts over $70,000 is 45.5%.

Tax on real estate that is unoccupied is based on an imputed income. A small tax, cadastral tax (rendita catastrale), is equivalent to the imputed income a propery owner could receive from his or her property. All property, earning rental income or not, is subject to cadastral tax of 0.4% to 0.7% of imputed income. The tax will not apply if the property has very low value, is not rented out and is kept for the exclusive use of a foreign owner as long as the owner does not earn any of his income in Italy.

Property Tax: The ICI Imposta Comunale sugli Immobili is Italy’s main property tax and is calculated on a property’s declared value. Local municipalities set the ICI and the rate varies from 0.4% to 0.7%.

Capital Gains Tax: INVIM, a capital gains tax must be paid by the seller and fluctuates in accordance with the length of the time the property is held, and varies from 5% to 30%. First-time buyers will receive a reduction.

Italian Real Estate- Financing
Local financing is possible depending on your situation. If you do not speak Italian, getting a mortgage from an Italian bank will be difficult, and gaining approval will be a long process. Italian regulators govern the mortgage process and extra costs will be involved such as a mortgage registration tax of 0.25% on the value of the loan, and several other different tax stamps.

It is possible to find a bank with English-speaking customer service. U.K. citizens will be able to get loans for larger amounts than other non-resident nationalities. For citizens with residence in the U.K. or France, the maximum loan is 75%; for residents of other EU countries it is 50%, for the rest of the world it is 50%. For Italians and applicants already resident in Italy may be able to borrow up to 85%.