When it comes to the buying and/or selling of real estate in the Baltic states, including in Latvia, it is important to remember at the outset that there is very little dickering over price. In many other countries around the world, the listed sales price for a piece of real estate really is intended as a starting point for negotiations. In many instances, a seller intentionally hikes the listed sales price upward to allow for some bargaining space and room with a potential buyer of the real estate.
In Latvia, and in other Baltic countries, the listed sales price more often than not likely will be the ultimate selling price of the real estate. Simply, there just is not much bargaining or haggling over the price of real estate in Latvia and the other nations of the Baltic region.
In Latvia, a notary performs the major functions associated with the buying and selling of real estate in that country. The notary is responsible for holding in escrow any deposit posted for the property by the buyer, making certain that the title to the real estate is genuinely held by the seller and making certain that there are no liens or encumbrances on the real estate.
The initial step in the real estate sales process in Latvia is the execution or signing of the initial contract for sale. It is at this juncture that the seller will pay to the notary a deposit, which normally is in the amount of 10% of the overall purchase price for the real estate.
After the initial contract has been executed, the notary will go about his or her business in determining if the title to the real estate properly is held by the seller and to make certain that there are no encumbrances on the title that will impact a transfer of ownership to the buyer.
It is also at this juncture that the buyer needs to have a structural engineer check out the real estate being purchased. As was referenced previously, this is important when dealing with an older property. However, and unfortunately, there have been a notable number of situations in which newer construction has not been undertaken in an appropriate and professional manner. In some instances, builders take terrible shortcuts (like not putting studs in walls) which can have horrific consequences down the road. Thus, and once more, a thorough inspection of the real estate is necessary on the part of the buyer. As an aside, it is imperative that the initial contract contain an escape clause for the buyer — including a refund of his or her deposit — if the structural report reveals serious defects with the property.
Once these various tasks have been concluded, the buyer and seller more forward to the execution of the final agreement which will result in the conveyance of the real estate from the seller to the buyer. Upon the execution of this contract, the title will be revamped to demonstrate the ownership interest of the buyer in the subject real estate. The title will then be filed with the land registry authorities in Latvia.
As a final note, foreign nationals (and Latvian citizens as well) need to remember that there is a value added tax attached to and associated with the sale of real estate in Latvia.
The value added tax normally amounts to 18% of the total purchase price of the subject real estate. Therefore, it is vital that the buyer keep this tax in mind when he or she is looking for financing and a mortgage loan. The value added tax assessed by the Latvian government in a realty transaction is significantly higher than similar taxes imposed in some other countries around the world