| Montenegro - Buyer`s Guide
Follow these simple steps and that ideal property in Montenegro will be yours.
1. Research the market
Before you fly out to Montenegro, spend plenty of time researching the market online. Go through all of the information in the Montenegrin section of this site and then start looking for developers, agents or individual properties that look as if they might be interesting.
The Montenegrin Listings section of the site is probably the best place to start your search, but also check out the advertising in this section, and look at the Directory to get some more contacts.
If you are looking for a bargain, then think about subscribing to our weekly newsletter that gives details of selected properties that we think represent good value – these listings aren’t usually advertised to foreigners. Click here for more information on subscribing.
2. Arrange Your Financing (Optional)
Although it is possible to arrange financing in Montenegro through a Montenegrin bank, it is not nearly as easy as in most of the Eastern European countries to do so and interest rates are very high compared to those that are to be found elsewhere in the developing markets. As a result, you will probably find it a lot easier to obtain financing in your home country, perhaps by re-mortgaging your current property or properties. Another option is to discuss the possibilities with a mortgage broker who is based in your home country and has experience of arranging mortgages on property overseas. But, be aware, that there are not so many mortgage brokers who are willing to lend on Montenegrin properties.
It is advisable to do this before heading out to Montenegro so that you have a firm idea as to what your maximum budget is going to be. If you spend all your time over there looking at properties around EUR150,000 and then come back and find that the maximum amount you are able to finance is EUR100,000, your time will have been wasted.
Also, it’s recommended that you talk to an accountant about the best way of purchasing an overseas property in advance so that you minimize your tax liability.
You can find details of potential sources of finance in your home country in the International Directory section of the site.
3. View the Properties
There are currently no budget routes to Montenegro - there aren’t even any direct scheduled flights into the country from the UK or Ireland at the moment. The cheapest way of getting to Montenegro currently is probably to take a budget flight to Dubrovnik in Croatia, hire a car and then cross the border. You can find the cheapest flights to Dubrovnik using our Budget Flights Tool. Once you have flight and accommodation arranged, head out there to look at those properties that look most interesting for you. Check the properties, or the locations if you are looking at an off-plan property. Don’t just check the properties themselves; check out the areas that they are located in as they will all be new to you. Ask plenty of questions.
What kind of tenants are you expecting to work with? If you are looking for short-term tenants (i.e. tourists), then you are going to need something very close to the centre. Are there some good hotels close to the property? If so, you’re looking in the right place. If you are looking for long-term rentals, then make sure that it is in a desirable part of the city, if not the centre. Ask yourself the question, “would I like to live here?” If the answer is no, then chances are that the up-market tenants you are planning on renting the property will also not be so keen.
Take your time making a final decision as to which property to go for – get as many independent opinions as you can. Remember that agents and developers are all going to be trying to sell you hard on what they have available, so don’t expect an unbiased opinion from them. Also, be aware that many sellers list their property with a number of different agents, which often charge quite substantially different prices, so it is well worth shopping around to make sure that you are getting the best price.
4. Hire A Lawyer
Although it is worth speaking to a lawyer before you make an offer on a property, it is worth waiting until you have found a property that you are definitely interested in before making an agreement with the lawyer.
Unlike some territories where it is possible to complete the purchase process without employing the services of a lawyer, this is definitely not the case in Montenegro because the country is known for having the potential for problems with property titles, meaning that it can be difficult in many cases to ascertain exactly who owns the property. A great deal of property has yet to be returned by the state to its former owners and the current land registry system of titling property in the territory is currently out of date.
Bearing the above in mind, you really need a qualified professional to help guide you through the potential minefield of property ownership in Montenegro.
As it is vital that you find a lawyer who is representing your interests and your interests alone, don’t ask the real estate agent or developer to recommend one – it’s better to choose one yourself. You can find details of Montenegrin Lawyers in the directory section.
One other advantage of using a lawyer is that, by giving them ‘Power of Attorney’, they will be able to sign legal documents on your behalf. This can offset some of the costs if it means your having to make one less trip to the Montenegro in order to complete the buying process.
If you do decide to employ the services of a lawyer, reckon on paying EUR250-750 for their services.
Providing that Montenegrins are allowed to purchase property in your territory, then you will legally be able to purchase property in Montenegro as an individual. The only restrictions are that non-Montenegrins are unable to purchase land, although they are able to lease land beneath a building. There are also some restrictions on foreigners buying property that is deemed to be of historic or national importance – something that is very difficult to determine without a lawyer having made a detailed property search.
If this means that you are unable to buy the property of your choice, then another possibility would be to form a Montenegrin company, which is another task that your lawyer will be able to help you with.
5. Finalize The Deal
With the property market in Montenegro being so new it can be quite difficult to ascertain the correct market value for any particular property. This means that it is often the case that you can see two seemingly quite similar properties with vastly different prices. Because of this situation, you can consider any asking price to be simply the starting point for negotiations. Don’t be afraid to ask for a substantially lower price than that which the seller is asking for – the worst that can happen is that they can say no!
Once you have agreed on a price, make sure you know exactly what costs are covered in the final selling price to avoid any nasty surprises further down the line. Typically the estate agents’ fees, which are usually in the region of 3%, will be paid by the seller. If you are buying an older property, then there will be a Transfer Tax of 2% which is typically paid by the buyer. With newly built property, however, VAT of 17% is payable, which is typically paid by the seller.
6. Arrange Local Financing (Optional)
If you haven’t already arranged financing in your home country, you need to arrange it locally. As has been mentioned before, there are not so many options available for local financing in Montenegro as in other territories, so obtaining the funds in Montenegro is far from guaranteed and will also come at a high price in terms of interest rates currently. If you’re going to be buying off-plan, then check with the developers to see if they can recommend a local bank. If not, you’re on your own. Check out the links to Montenegrin Banks in the directory section.
The process of obtaining a mortgage in Montenegro from a bank is going to be similar to that in your home country. They are going to see some proof of income before committing to a loan, so make sure that you bring all of your important documents with you to a meeting with a bank. Expect to have to wait for a minimum of a week or two in order to get a final decision from the bank, perhaps longer.
7. Sign An Initial Contract
If you’re buying an off-plan property (although currently there is not much development here going on), then perhaps the developer will require you to sign a reservation agreement before you get to this stage but the main document is an initial sales and purchase contract that will be drawn up by your lawyer on your behalf. This is a formal, legally-binding contract which contains all of the key information about the agreed deal including the details of the property, the total amount payable, the deposit, penalty clauses, etc. It will also include details of any conditions that the seller must complete before the final contract (i.e. repairs, etc.)
As with all contracts in Montenegro, this will need to be signed in front of a notary. Typically, your lawyer will have some time to check the Title Deed and the property’s history before preparation and signature of the final contract, but this tends to be quite quick in Montenegro compared to most other territories. Make sure though that this is sufficient time for you to have all of your funds in place to complete the purchase because, if you aren’t ready to complete the purchase on the contracted date, you could very easily lose your deposit. Typically, a contract will state that, if the seller fails to honour the contract, then he will forfeit twice the value of the deposit.
Immediately that the agreement is signed, the buyer will pay a deposit, usually around 10%, to the seller.
8. Inspection Period
While your lawyer is checking the status of the property, you will now have a certain amount of time to inspect the property. It is not so common in Montenegro to request for a surveyor to make a full structural report on a property. If the property has been built recently, then a survey should not be necessary as the building will be under guarantee from the builders. Check the property out yourself. Chances are that it will be OK, but if you see anything that could cause you sleepless nights, then perhaps it is worth the money to get the property checked out first.
You can find details of Montenegrin Surveyors in the directory section.
During this time, you should also be arranging the final financing deal with your bank or mortgage broker so that all of the funds are available at the time of completion.
The final contract is signed once your lawyer has carried out all of the necessary checks and searches by checking the Title Deed and the seller has provided all of the relevant title documents and permissions for use (known in Montenegro as ‘Justus titulus’). As always, your signatures will have to be notarized.
Notary fees cost EUR30 for any agreement over EUR5,000, plus 0.25% of the amount exceeding EUR5,000, but the additional amount should not exceed EUR300. Therefore, the maximum amount for notary fees is EUR330.
And naturally you are also going to have to pay the balance of the cost of the property itself. Often this is paid via your lawyer who keeps the money in an escrow account until the sale is finally completed.
Once the final purchase contract has been verified by the court, a department within the Local Council Offices determines the value of the property and the buyer then has to pay 2% Property Tax on this estimated value. This is the case with all property except for those that are newly constructed, in which case the seller has to pay VAT of 17%. Once this is accomplished, the property can then be registered with the local Area Property Registry (known in Montenegro as ‘Modus aquirendi’).
Congratulations! You’ve just bought yourself a property in Montenegro! That wasn’t so difficult now, was it?!