Reservation Contract Part 1 - What to be aware of
All you need to know before you buy property so you will not regret it later.
We are presenting you a basic outline on how to purchase a property in Prague.
Some basic information about the Prague Real Estate Market: Czech Republic is a non- licensed real estate market.
If you are looking for a property in Prague you should be aware that the real estate market in Prague is a non-licensed market. The Czech real estate agents do not have to go to real estate schools, fulfill any special requirements or pass any exams. There are many agencies with different qualities. We recommend to pick the right agency which will represent you before you start your property search. This could save you a lot of time.
There are number of properties in Prague that are either for rent or for sale. Some of the properties are offered by multiple agencies.
A single database of properties in Prague is missing. There is no single database of all properties that are offered for rent or for sale in Prague. If you wish to scan the entire market, you must visit number of websites, talk to many agents that offers individual listings. For this reason we recommend you to pick an agent who will represent you in the purchase or rental process.
If you have any questions regarding the purchase of a property in Prague, do not hesitate to contact us us at:
Since the market can be very confusing for most of the foreigners we recommend you to pick a professional real estate agent who will represent you. Although you can do the whole process without an agent, it could save you a lot of time and pain if you have one. The agent can organize everything for you while you wait for the results. It is important to know that most of the agents in Prague do not speak English (excluding the government officials).
During the meeting with your agent, please talk about your requirements in detail. The more information you share with your agent the better listings you will receive. Also ask your agent for a detailed introduction of the real estate market (Prague locations, legal specifics, market situation, etc.).
The property viewings are better to set up at least one day before the viewing. Sometimes the landlord can be present during the viewing, sometimes not.
It is always good to ask the seller about information regarding the price. What does the price include? Mostly it includes commission of the selling real estate agent and sometimes it also includes the legal administrative work of the attorney. Be aware that sometimes these fees are not included.
There are no rules about placing a bid on the property you wish to purchase. If you are placing a bid, look at the recent real estate market situation in Prague, the condition of the property (an inspection of the property is recommended), the situation in common areas of the property (in case of an apartment) and the situation in the community (status of fund of repairs, etc.), neighbors, etc. If you have checked everything and you have all the needed information then place a bid. We recommend to do everything in writing (e.g. via email) in order to make everything clear and to prevent any future misunderstandings.
If you agree with the seller on the conditions of the sale, you are most likely to sign the reservation agreement. Always ask for the right to have a check on the draft of the reservation agreement.
- Who signs the Reservation Agreement?
This agreement should be signed among the seller, buyer and the selling real estate agency (if an agency is involved).
- What does the Reservation Agreement include?
The reservation agreement should include the important principles of the Purchase Contract. I.e. the selling price, definition of the property, buyer and seller information, important dates, reservation period, the amount of the reservation deposit, escrow account, etc.
- What is the usual Reservation Deposit?
The reservation deposit is usually the same amount as the commission to the real estate agency. A different amount can be set as well.
- How long is the Reservation Period?
The reservation period could vary. It depends on the agreement with the seller. If you take a mortgage for your purchase, the reservation period could be approx. 30–60 days.
Since the Czech language is the only official language in the Czech Republic, the Purchase Contract must be in Czech. Although you might have an English translation, only the Czech version is valid. The Purchase Contract is usually prepared by a lawyer who has experience in the property selling procedures. You should have a chance to revise the Contract. We strongly recommend to have your own lawyer who will represent you.
There are three possibilities of escrow accounts: attorney escrow account, bank escrow account and notary escrow account.
After the signing of the Purchase Contract and the Escrow Agreement the buyer must send the given purchase price to the escrow account.
The money from the escrow account are usually sent to the seller when the Cadastre of Real Estate (see below) registers the new owner.
- Attorney Escrow Account
The most common escrow account is the attorney escrow account. We recommend to pick the escrow account with an attorney who provides escrow accounts periodically, has many references (do ask for the references) and who has insurance (ask for the insured amount).
- Bank Escrow Accounts
Almost every bank offers escrow accounts for property transfer procedures. It is considered a very safe transaction but on the other hand, you can be faced with a rather long bureaucratic procedure. The price of the bank escrows is higher than the attorney escrow accounts.
- Notary Escrow Accounts
Notary escrow accounts are safe escrows for property transfer processes. On the other hand they are the most expensive. The price of the notary escrow accounts are set by government according to the price of the selling property.
In order for you to become the actual owner of the purchasing property, the Cadastre of Real Estate must register you as a new owner. The Cadastre does the Contract checks if everything is right. The Cadastre also sets a so-called “protective period” that takes 20 days from the time when the Purchase Contract is registered by the Cadastre office. Within this period the Cadastre gives time to the selling and purchasing party to make any objections to the sale. After the 20 days period, the Cadastre has the right to register the new buyer.
When the Cadastre registers you as a new owner, you have the right to receive the property from the seller. The maximum period for the property handover should be mentioned within the Purchase Contract. You can agree with the seller on any day. Usually it should be within 10 days after the registry in the Cadastre.
Don’t forget to transfer the energies and services immediately after the handover. Ask your agent for help!
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All you need to know before you buy property so you will not regret it later.
We have been cooperating with Philip & Frank brokers for a few years. Throughout that time it has been proved that it was a good choice. We are especially satisfied with their transparency and regular information about the progress of each project. At the same time we have always been in control of all decision-making. We will be happy to recommend them and their legal services to our friends and relatives. It was our pleasure warking with them.
While we were selling our flat, we approached the brokers of Philip & Frank who had been recommended to us. I was really satisfied and delighted. Their truly professional approach – meetings with us, organization of tours of the flat with clients and arranging the formal aspects of the sale, including cooperation with an excellent lawyer – was astonishing. I appreciate their competence and I recommend this real estate agency to other clients.
Thanks to the professionalism of Philip & Frank real estate brokers I learned that even purchasing a property can be a pleasant experience. Their thoroughness, reliability, helpfulness and kindness enabled us to concentrate only on the property. We were relieved of all the worries regarding the purchase and we could simply enjoy buying the flat. That is what you dream of but I would never have thought that it could come true. Thank you for your perfect services!