Romanian Property News

When it comes to signing on the dotted line, we all look for one thing when buying a property, whether it’s in Romania or anywhere else: the price. As highlighted by earlier posts, some of the developers prefer to provide the information on a “need-to-know” basis (which sounds a bit ludicrous, but it’s not far from the assistants in the shops arranging the price tags so that you can’t see the price until you’ve already decided it’s something you want to buy).

In a recent article, the Romanian Financial Week website highlighted some of the dangers posed by the pitfalls that may appear when considering/purchasing flats or villas in the ongoing real estate projects. While the list is not complete, it does raise awareness on the “need-to-know” is often far less than the common sense would dictate it and it provides a first level of advice for interpreting the small print when purchasing a property on the Romanian market.

To begin with, it’s the price itself. In an ideal/normal situation, you would be told the actual price and the area of the unit. However, most developers start by removing the VAT; the resulting figure is meaningless, as there are very few buyers that will be able to recover the VAT, so there is no point highlighting the difference. Then you have the heavily publicised price per square meter. For flats, it is a bit more difficult to juggle with the figures, but even there you might end up with a calculated price that also includes the balcony. When it comes to houses, it’s far worse – annexes, terraces, garages might end up bundled in the calculation of the sale price, so that the resulting figure is considerably reduced. What is the alternative? Very simple: ask for the price, ask for the plans (if you want to know the actual surface) and make the calculation yourself.

The second area that can cause headaches is the delivery date of the apartment or villa. There are no significant delays so far (or at least none that the media picked up on) for the finished projects, but with such a large number of ongoing developments it is likely that we will see at least a few of them taking longer than expected, particularly due to the seasonal workforce migrating to western Europe. Although more appealing to an outsider, finishing the work earlier is just as bad for the buyer due to the financial commitments associated with it.

Third on the list are the delivery conditions for the project. While most real estate developers self-impose limits for the amount of changes from the original specification, the article flags the case of Cosmopolis, which includes a clause stipulating that the developer is only restricted to change by more than 2% the area of the unit. As a result, the entire shape, size, look, number of flats in the building may change by the end of the project and the appealing penthouse in a 4-story block may end up on the middle floor for an 8-story block.

Last but not least are the cancellation terms. The typical initial payment for buyers is around 20-30% of the value of the contract; should the buyer withdraw, he/she loses the money; should the project fail to succeed due to the developer, the buyer doubles the investment. Although it might sound like a better deal, you should avoid percentages under 20% for this first payment. Why? Because some of the projects will take at least 2-3 years to complete; with a “guaranteed” market increase of 5-10% / year, the developer may realise that, even after paying an additional 10% to the buyer, they would still be able to make a profit by selling the flat at a price 20-30% higher than the one agreed in the initial contract. Further, once again Condominium apparently got creative here and included a clause saying that profits from any resale of a flat before completion date will go towards the developer rather than the initial buyer…strange, isn’t it?

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