Resale

Resale - Resale refers to the subsequent sale of a property by the current owner to a third party. It is subject to the same notarial certification requirements as the initial sale and may have significant tax implications depending on the length of ownership. Of particular relevance is the speculation period of 10 years under Section 23 of the German Income Tax Act (EStG), during which a capital gain is subject to income tax.

Legal Framework and Speculation Period

When reselling a property, the same formal requirements apply as for the initial purchase: notarization of the purchase agreement (Section 311b of the German Civil Code (BGB)), entry in the land register, and payment of real estate transfer tax by the buyer. The tax treatment of the capital gain is crucial for the seller. If less than 10 years elapse between acquisition and sale, the transaction is considered a private sale under § 23 EStG.

The profit-sales price minus acquisition costs, incidental expenses, and subsequent construction costs-is then taxed at the personal income tax rate of up to 45%. For high earners with a capital gain of 200,000 euros, the tax burden can thus exceed 90,000 euros-a significant factor in deciding when to sell. An exception applies if the property was exclusively owner-occupied in the year of sale and in the two preceding years-in that case, the profit remains tax-free, even within the speculation period.

The following reduce the acquisition cost: notary fees, real estate transfer tax at the time of purchase, real estate agent’s commission at the time of purchase, costs for appraisals, and subsequent construction costs (modernizations, additions). However, pure maintenance expenses (ongoing repairs) that have already been deducted as business expenses increase the profit again.

Special Considerations for Resale Within a Short Period

Anyone who sells three or more properties within 5 years risks being classified as a commercial real estate dealer by the tax office (the so-called “three-property limit”). In this case, additional trade tax and sales tax apply, and all profits are subject to current taxation-even for properties held for more than ten years that would normally be tax-exempt.

Prohibitions or restrictions on resale may also arise from contractual agreements: Municipalities often secure a right of first refusal or an obligation to retransfer the property in the event that the buyer resells the property within a certain period when selling land at a reduced price. Such clauses are secured as a land registry annotation in Section II and are binding on the buyer and all legal successors. Typical time limits range from 10 to 25 years-an aspect that should be carefully examined when purchasing subsidized housing projects.

Resale restrictions may also apply when purchasing a property from a foreclosure auction or through insolvency proceedings if the insolvency administrator or the court has attached specific conditions to the sale.

Costs and Deductions Upon Resale

The following typical costs are incurred by the owner upon sale:

• Brokerage commission: In Bavaria, typically 3.57% of the purchase price including VAT, often split equally between the buyer and seller
• Early repayment penalty: In the event of early repayment of an outstanding mortgage, depending on the remaining debt, remaining term, and current interest rates-can reach 5-10% of the remaining debt for large loans
• Mortgage discharge: Notary and land registry fees approx. 200-500 euros
• Energy performance certificate: Mandatory document for sale, costs approx. 100-500 euros
• Taxes: Income tax on the capital gain if sold within the speculation period

The real estate transfer tax of 3.5% (Bavaria) is borne by the buyer, not the seller.

Practical Tip for Property Owners in Nuremberg

We recommend that owners in Nuremberg carefully review the holding period before reselling: For properties in sought-after neighborhoods such as Gostenhof, St. Johannis, or Erlenstegen that have significantly appreciated in value in recent years, the capital gains tax can be substantial. We first prepare a current market value analysis and coordinate the optimal timing of the sale with your tax advisor.

If the property was acquired through the City of Nuremberg or the wbg Nuremberg housing association, you should check in advance whether any resale restrictions or retransfer clauses were agreed upon in the purchase contract. The same applies to properties from social housing projects or municipal infill development projects-here, lock-in periods of up to 25 years are not uncommon, and these must be disclosed upon resale.

For planned resales within a short timeframe-such as when an investor sells after a renovation project-we also recommend keeping an eye on the commercial use threshold. We work closely with tax advisory firms in the Nuremberg region that specialize in real estate tax law and can provide contacts upon request.

Frequently Asked Questions

When is the resale of a property tax-exempt?

The profit from a resale is tax-exempt if at least 10 years have elapsed between the purchase and the sale (speculation period under Section 23 of the German Income Tax Act (EStG)). For owner-occupied properties, the tax exemption applies earlier: If the property was used exclusively for personal residential purposes in the year of sale and the two preceding calendar years, taxation does not apply regardless of the holding period. It is sufficient for the property to have been owner-occupied at the beginning and end of each calendar year-continuous occupancy for all 36 months is not required.

What costs are incurred upon resale?

For the seller, the primary costs are the broker’s commission (in Bavaria typically 3.57% including VAT, often split between the buyer and seller), any early repayment penalties in the event of early repayment of the mortgage, as well as costs for the cancellation of land charges in the land register (approx. 200-500 euros). Added to this are costs for issuing the legally required energy performance certificate (approx. 100-500 euros) and, if applicable, preparing sales documents. The buyer is responsible for the real estate transfer tax (3.5% in Bavaria).

What does a resale restriction in the purchase agreement mean?

A resale restriction is a contractual clause that obligates the buyer not to resell the property for a specified period. Such agreements are particularly common for subsidized land or subsidized housing projects. Violation may result in contractual penalties or the rescission of the purchase agreement. The prohibition is typically secured by a notice of restriction in Section II of the land register and automatically expires upon the expiration of the agreed-upon period-typically 10-15 years.

Do I have to disclose defects when reselling?

Yes. Fraudulently concealed defects-that is, known defects that the seller fails to disclose-entitle the buyer to contest the purchase agreement and assert claims for damages, even if a warranty exclusion was agreed upon in the contract. This applies in particular to water damage, mold infestation, structural defects, or known environmental contamination on the property. We recommend that owners fully document known defects in the purchase contract to rule out future liability risks.

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