A common question of foreign investors is how the purchase process works in Czech Republic and what kind of time frame will things be accomplished in. This will be presented on the basis of how our standard procedure works at Czech Point 101, which has been successful for many years now.

First a property is identified and the price negotiated to agreement of buyer and seller. Sound like an easy process? In Western countries it definitely is and it can be here but is often not the case. Please refer to our November/December 2006 newsletter for tips on Czech negotiation. Now what?

At this point there will be great pressure to sign a reservation contract and pay a deposit.

"We have another buyer who is willing to pay full price tomorrow" and "We have lots of interest in this property so we'll only hold it for you overnight while you make your decision" are common ideas you will hear from the real estate agent. Believe me, unless you are the first person to see the property or it has just been put on the market, you have time to think about things. The agent would sell the property to someone else in a second if there was a serious buyer.

A note of caution: NEVER, EVER sign a reservation contract with a real estate agent before getting it checked by an independent attorney. Of course and especially if it is only provided in Czech. The agreements a real estate company will offer are most often one-sided and setup for the buyer to lose their damage deposit. We have even heard of cases where the seller withdrew from the purchase and acknowledged this in writing and the real estate agent still refused to return the deposit.

Usually, work can begin immediately on the pre-purchase (or future purchase) contracts (in the case of a mortgage) or the purchase contract (in the case of a cash purchase) and this will satisfy the real estate agent/owner and prevent them from offering it to other buyers. However, this is not a sure thing.

Often the seller will put forward a pre-purchase agreement and it will take about two weeks to negotiate the terms of the pre-purchase contract. This is the main bulk of the negotiating and legal work since the pre-purchase normally contains the complete text of the purchase agreement.

At this point an arrangement is made for a date to sign the pre-purchase/purchase contracts. It would be safe to allow for a week and a half to find a time that is suitable for both buyer and seller.

From this moment the two paths and time frames depart from a common path depending on whether the purchase is with cash or with a mortgage.


Purchase Contract (cash purchase)

Upon signing of the purchase agreements the purchase price is deposited (this is the recommended route) to an escrow or third party account. Normally the escrow agreement allows 15 days from signing for this amount to be transferred to the notary account. If it is ready and just needs to be wired, it normally takes 3 to 5 days.

During this time period, the signed purchase contracts are held by the escrow agent, whether a notary office or attorney. When the purchase amount arrives on the account, the purchase contracts are released to the Land Registry for registration.


Pre-Purchase Contract (mortgage purchase)

Upon signing of the pre-purchase agreement, often an amount of purchase price is deposited to the escrow account. This is often the amount that the buyer is using from their own cash. In the case of 100% financing, this does not have to be the case.

Now the mortgage application process begins in earnest. The collection of required documents, time for the bank to approve and drawdown is about a six week process. Depending on the complexity and bank, it can be more or less.

Once the mortgage has been approved there is usually drawdown and deposit of the mortgage amount to the escrow account before the purchase agreement is signed. Allow a week and a half to conclude a mutually suitable date for signing the purchase agreements between the buyer and seller.


Common Conclusion

Once the documents are submitted to the Land Registry it is just a matter of time before the change is registered and you as the buyer become the owner.

As of this writing, the process has been going faster and Prague Land Registry changes are being registered in 2 to 3 months and in Brno, from 2 to 4 weeks. This is a great improvement over the past.

During this time period of registration, it can be possible to agree on the turnover of the property, but often this is in exchange for some of the purchase price being released from the escrow account.


Breakdown of Property Purchase Timeline (cash purchase)

Description/Average Length of Time (days)
Negotiation of Purchase/14
Finding Mutually Agreeable Signing Date/10
Transfer of Purchase Amount to the Escrow Account/10
Registration of New Ownership in Land Registry - Prague/60 to 90
Registration of New Ownership in Land Registry - Brno/14 to 30
Handover of Property/20

Totals:
Prague/114 to 144 (4 to 5 months)
Brno/68 to 84 (2 to 3 months)


Breakdown of Property Purchase Timeline (mortgage purchase)

Description/Average Length of Time (days)
Negotiation of Pre-Purchase Contract/ 14
Finding Mutually Agreeable Signing Date for Pre-Purchase Contract/10
Securing Mortgage with Bank/42
Drawdown and Transfer of Purchase Amount to the Escrow Account/10
Finding Mutually Agreeable Signing Date for Purchase Contract/10
Registration of New Ownership in Land Registry - Prague/60 to 90
Registration of New Ownership in Land Registry - Brno/14 to 30
Handover of Property/20

Totals:
Prague/166 to 196 (5.5 to 6.5 months)
Brno/120 to 136 (4 to 5 months)


The amount of time this can take really surprises a lot of buyers who are expecting a quick purchase and turnover of the property. One thing to realize when it comes to Czech business, things do not move quickly! Be patient, set your expectations realistically and your goals will be realized.