Mortgages and Mistakes, With Justin Mavity

Luca: Justin, it’s lovely to have you back.

Justin: Grazie.

Luca: Now physically.

Justin: Yes, actually in presence!

Luca: Yes, in, in presence, and, can I disclose with a glass of wine?

Justin: Yes. As it should be.

Luca: He has not touched on the wine yet. No, I’ve not. Let’s see how far he can go before the end of the podcast.

Justin: This is not an episode of drunk history.

Luca: No, no, but it might become one. So I’m here with Anna and Gill, my co-hosts. And we’re very, very happy to have, Justin Mavity back.

Justin: Grazie.

Luca: And our podcast with Justin, you can find it in the archives, was very successful, and he was, well he still is super charming. And he told us a lot about the buying process in Italy. Maybe we could start, though, with the topic that interests the most people looking at buying in Italy, mortgages for non-residents.

Justin: Hmm. [00:01:00] Hmm.

Luca: Is it possible to get one?

Justin: First off, yes, it’s possible to get one. Of course, you need to have a good financial background to make that happen, as you would anywhere in the world. You can’t walk in with no money and expect to get a 100% loan. But I would say generally a 40, 50, 60 even percent loan is possible, if you have a good financial background, yes.

Luca: Does it make a difference whether you are living in Italy or whether you maybe wanna buy a second home but you still wanna live in the US or whatever?

Justin: If you’re a resident in Italy, it’s a bit easier actually. But if you’re living in the United States or living abroad, you can still make this happen. Again, you have to have a solid financial background.

Luca: Do they care, for instance, if you have worked abroad? Even though, let’s say you’re moving to Italy-

Justin: Hmm..

Luca: And you know, you wanna bring in your employment history.

Justin: Certo.

Luca: Is it, does, is it worth something to them to see that you were employed abroad and how much you were making?

Justin: Absolutely. Yeah. The more background you can provide, the better. So I’m working on a mortgage right now with clients, [00:02:00] and they asked for three years, just as they would in, in other countries, three years of past employment history, of income, of tax returns.

And that was, that was really great to see, that this particular bank we’re working with wanted to do that kind of due diligence for the client. So yeah, the more you can provide, the better. So it does help.

Luca: I don’t know with which banks you’re working. We probably don’t wanna mention them specifically, but do you always have to work with branches in big cities, or…?

Justin: It’s better… No, it’s the same as opening a bank account in Italy. It’s always better to go to a branch in a big city, in the center of the big city, where they’re going to likely have somebody who speaks English. They’re familiar with the foreign banking regulations and how to open an account for a foreigner. It’s better to go there first. But, you know, typically with most of my clients, I use a mortgage broker because, again, they can shop around between different banks in a way that I get the best rate … exactly, that I don’t have time for and I necessarily can’t do as a real estate agent.

Luca: How does that work exactly? Do they, are they bound to present the best [00:03:00] offer to the client?

Justin: That’s an excellent question. Again, not being licensed in that field, I don’t wanna say what they are bound to and not bound to. I don’t know what that licensure…

Luca: What do they do?

Justin: I mean, what they do is they shop around. You know, they have your background, the presentation you give them. They say, you want to buy this house, which is potentially X amount of money And then they shop around to the banks and see what offers come up, who will even accept you, and then what offers come up. Yeah, sometimes it’s very limited. Typically with foreigners, there’s usually only two or three banks that will loan to foreigners consistently.

Gill: And I know it’s hard ’cause every case is obviously going to be different.

Justin: Sì.

Gill: But can you give us an idea of timeframe for when you start to when you actually manage to get the money sorted?

Justin: Yeah, I mean, it’s really interesting. So in that initial phase, give yourself a month of time, you know, to get the, get set up with the mortgage broker, get all of your documentation sent to the mortgage broker, and then for them to shop around with the banks. That’s just a nice cushy timeframe. Don’t wait until the last minute. Then once you’ve found the house and made the offer, you’re going to need [00:04:00] around 40 days for the appraisal.

Luca: Oh, you’re saying that you should start the process before you find a house?

Justin: Assolutamente sì.

Luca: So you get, so to say, pre-approved for a certain range of borrowing.

Justin: Yeah, so the pre-approval is kind of a new thing that’s coming into the Italian market. It doesn’t necessarily exist with every bank. They don’t always do a predelibera. But with the mortgage broker, they can kind of present you as a possible client to the banks and get a taste for if the bank has an interest in that transaction or you as a client or not.

Luca: Ha senso.

Justin: Yeah. Mm-hmm. And so that saves you a bit of headache, after you’ve made the offer. So that’s really important to do that first, so then the mortgage broker knows, “Okay, I’m not gonna ask these three banks ’cause they already said no. These other two banks are possibilities, you know, and this one has the best rate- so I’m gonna start there.” Right. Um, so that’s important.

Gill: And in England, for example… sorry to interrupt. No. In England, there, you, you have a, a 90-day-

Justin: Mm …

Gill: window for, for, before that offer that you’ve been given from the mortgage expires.

Justin: Mm-hmm.

Gill: What’s it like in Italy?

Justin: It is all [00:05:00] custom. You have to write this up. Your agent has to write this up in the offer, and then the seller has to accept it. Okay. Typically, I tend to insert 40, 45 days for my client to receive a formal negative offer- Rejection … from the bank, which of course then that would cancel the…

Luca: offer. This transaction altogether.

Justin: The transaction altogether, exactly. So that’s the typical timeline here. Some people do 30 days. I find with foreigners, that’s way too short. You know, I think 40, 45 days is pretty accurate here.

Luca: Do you have any indication for what kind of fees the mortgage brokers charge? And do they work on a percentage basis, fixed basis?

Justin: No, it’s a percentage basis. And just like real estate agents, it’s up to the individual mortgage broker. There is no fixed percentage. I’ve seen it be 1%, I’ve seen it be 3%, I’ve seen it be 1.5%, so it really depends on the broker, the transaction.

Luca: So low single digits?

Justin: Yeah, low single digits. Yeah. Okay.

Luca: Okay. Okay.

Justin: I think many people would find that pretty [00:06:00] average. The 3% one I saw recently was a bit shocking to me. Oh, shit. Yeah, I was like, “Oh, okay.

Luca: That’s a bit salty.” No, I think at, at an international level I would say that’s pretty fair-

Justin: Sì

Luca: and normal.

Justin: Sure. But for the Italian market, I think that’s maybe a little bit higher than an Italian would find if they were using a mortgage broker.

Luca: Absolutely. An Italian, generally speaking, would probably go to the bank that their ancestors have been going to for 200 years, will get their parents to sign for the guarantee even though they are 55. I mean, the borrower, not the parents. And then, and then they get the mortgage.

Justin: And then they get the mortgage, yeah. I mean, you can go that route too and, you know, I’ve talked to people who do have… They already have an existing bank account in Italy, they’ve had that, that account for years or they know a banker really well. You know, those are situations where you should approach the bank directly. You know, “I’ve had an account with you for 10 years. I’m, you know-

Gill: Yeah …

Justin: now interested in buying a home here. What can we do?” That’s a whole different discussion. Yeah. But if you’re a foreigner who’s coming here, you have no- [00:07:00] You need the assistance … financial history in Italy, you’re going to need that assistance.

Luca: Absolutely. Still, I would say that it’s probably good due diligence to go on those price comparison portals-

Justin: Sì.

Luca: Yeah … and get an idea of the baseline rates for the banks

Justin: It’s funny you say that. Going a little off topic, I had that experience. We had to do the insurance on our scooter a while ago. And so I went on the state, the Italian state insurance comparison portal, and I found the best rate- That’s brilliant … that I thought was great, and I went to that agency and I said, “I want this one.” “Let’s negotiate.” “I want

Gill: questo

Justin: one.” “

Gill: I want

Justin: this one.” They’re like, “Yeah, that doesn’t exist.” You know, they’re like, “That, that portal’s, like, five years out of date.”

Luca: Tu

Justin: know? It’s

Luca: just made up stuff- Yeah, exactly … that we feed to the Italian government.

Justin: Exactly. So I’m, I’m worried that y- when you’re saying the comparison for the mortgages I think so … this could be a bit of that too.

Luca: Well, well, there, I mean, there are commercial portals, like, I don’t know. We’re in no way affiliated with them. They’re like Facile.it, comes to mind. Yeah.

Justin: Yeah. Oh, yeah. I know that

Luca: one. Comes to mind. Yeah. So it’s just to give you an idea because if it says that, I don’t know, [00:08:00] BCC Rome charges 2.5%, and then your mortgage broker says it’s 7%- Then there’s something’s off … if something’s off- Yeah … maybe something’s off.

Justin: Yeah. But I think that’s a good place to start, but don’t take that as, as that’s what it’s going to be.

Luca: Yeah, yeah,

Justin: Sì.

Gill: I had a friend who, was looking at buying a property recently, and they were very, very surprised to understand how important it is not to sign the document from the agent without some conditions because if the sale falls through, you’re legally obliged to pay the agent’s commission.

Justin: What’s important to remember in Italy is the role of the real estate agent is not defined as real estate agent. It’s intermediary in the field of real estate, right? And what that means is my job as an intermediary in the field of real estate is to set up the deal.

Gill: Sì.

Justin: Right? When that deal is done, I have a legal right to get paid – whether the deal goes forward or not, and that’s the way it’s written in Italian law. So [00:09:00] as you said, Gillian, it’s really important that you write some kind of condition into your offer saying if the deal doesn’t go through, the agent doesn’t get paid, or that you set that up as a separate agreement that you both sign, you and the agent, because yeah, that could absolutely happen. Yeah.

Gill: And what kind of conditions would you also recommend for people to put in, like subject to a quantity surveyor report or things that you can protect yourself so you can pull out if you wish?

Justin: Absolutely. Absolutely. So typically, one that I insert is that the owner has to, at their own burden and expense, put the property in order in terms of building permits, the land registry. If I know the house likely can pass an electrical inspection or a water inspection, I’ll insert that as a clause that they have to provide those certifications at their own burden and expense, unless, you know, as you guys know with this place, that would’ve been impossible here, and then you just accept it as is. So it’s conditional on the property, but there are some, some typical ones that they can insert in there, yeah.

Luca: So the notary, generally speaking, after the reforms over the past [00:10:00] years, will stop the transaction from happening-

Justin: Mm …

Luca: if there are any legalities, but this is a separate thing.

Justin: Sì.

Luca: You’re basically saying to make sure that the contract itself has no validity, you should get a prior check to the matter even showing up in front of a notary.

Justin: Yeah, I mean, I don’t know that you… Depends on what you, you mean by prior. Uh, it can happen after the offer, but as long as it’s conditioned in the offer correctly, then you’re fine.

So the offer is conditioned on the fact that the seller provides, you know, proof that, again, and they do this with the geometra, proof that the house is in order with the land registry, that all the building permits are in order. If you want to condition it, the electrical system’s in order and certified, et cetera, that all those are stipulated in there.

Yeah. Because again, if those conditions are met, are not met, the notary

Luca: Is not gonna give the go-ahead

Justin: Is not gonna give the go-ahead until they’re, they’re met. And then of course, as you know, if they’re not met, then that gives you a way out.

Gill: Sì.

Justin: Sì.

Gill: And speaking of conditions, the one thing [00:11:00] and the worst thing you could possibly ever forget, and you shouldn’t take it for granted that it’s in the contract, is vacant possession.

Justin: Yeah, that has to be very clearly stipulated. And it seems like a small thing too, because-

Gill: But it’s massive when you get left-

Luca: Until the day you have

Justin: the property … Exactly. And it’s

Gill: full of

Justin: crap. Exactly.

Gill: Yeah, 300 years of…

Justin: that has to… And not just things, but also of people. Because again, in an Italian purchase offer, it’s stipulated in the description of property. There’s a little line that says, you know, status of the property, and then, you know, it’s typically vacant or occupied with tenant or whatever the situation is. And then later on, after all the conditions somewhere in there, state at delivery, which, you know, whatever that is, has been agreed upon, it needs to be clearly written in there too – whether it’s free of persons and things or whatever. And then as we talked about another condition in our last episode of the podcast was making sure you have a condition of the day before, the day of the closing, we’re doing a walkthrough of the property with the owners.

Gill: That’s a great idea.

Justin: Yeah, because again, if they don’t clean out the [00:12:00] house-

Gill: You’re stuck …

Justin: You’re stuck. Or if grandma’s still living in there… you’re stuck, you know? And that’s a real problem. So it really needs to be clearly specified. And then again, the notary’s role is to enforce that contract, right? Correctly.

Luca: This would be very uncommon in Italy, and that’s actually the dangerous bit because foreign buyers… i’m thinking Northern Europe, the US for sure, would take it for granted that they will have an inspection prior to taking possession of the place.

Justin: Yeah. Yeah, it doesn’t happen here.

Luca: No, but who knows that? I mean, if you don’t know the rules, the different rules of the game-

Justin: Right …

Luca: then, you come in expecting for that to happen, and then you end up with a contract and you’re like, “I never got to see the place again.” Well, you never asked for it.

Justin: Exactly. But Luca, this is again, when we were preparing one of the questions was on there, what is a, what is one of the most common mistakes that people make? That’s it. You just nailed it. Yeah. They think that real estate in Italy works- Works the same

like it does in their country, and it doesn’t. It- It’s its own thing. You can’t compare it to any other European [00:13:00] country either. We can’t say it works the same as Germany or in Spain because they’re completely different. So coming with that mindset that it’s the same is the biggest error

Gill: Even time-wise, like I know in England it would take three months for what they call it the exchange.

Justin: Sì.

Gill: And the amount of paperwork that gets done, and the backwards and forwards between, you know, the lawyers, and then often the, they try to … gifte or up the offer down. It’s months of… But in Italy, within the week you’re at the notary.

Justin: Sì.

Gill: That surprised me.

Luca: If everything is fine absolutely.

Justin: Yeah, it can be keys in hand in a month and the property’s yours, right? That’s pretty rare here, but, yeah, that exactly. Time is a big aspect of that too, like we talked about in the last episode. Yeah, so people have that in their head that it’s gonna take the same time that it does at home, wherever home is at, and that’s completely false.

Luca: That is actually good advice for sellers. I assume that not that many, but there are some foreign sellers that are listening to the podcast or that are buyers that one day will be sellers. We’ll all be sellers in a sense.

Justin: Mm-hmm.

Luca: And [00:14:00] one good thing to keep in mind is exactly what you guys were just mentioning now. So if you’ve done your paperwork ahead of time, there’s always this, right? Oh, we’re going to the notary. Oh, you haven’t done the paperwork. Now we’ve added three months to the timeline. Well, do your paperwork beforehand. Make sure you have everything properly sorted out. Talk to a geometra, talk to an architect, and make sure that the DNA of the house, is properly classified. And then you really can go to contract in a week.

Justin: In a month, I

Luca: mean- If you decide, or in a month if you decide you want to leave, because everything will be kosher.

Justin: Exactly. And, and this is a mistake that a lot of Italian sellers make. They put their property on the market before doing anything. And they maybe bought the property and the property already didn’t conform, already had problems here 30 years ago when they bought it. They haven’t done anything to address those, and they immediately put it on the market. That’s a real big problem. Yeah. Because again, if we arrive, as Luca just said, to the notary and none of this has been done, that puts the seller in a, i- in a position- In a

Luca: very tough position

Justin: exactly, of, [00:15:00] not being able to conform to the conditions of the contract and being in a situation where they’re gonna have to pay that buyer the double of the deposit that they’ve put back down, because that buyer can walk away at that point. Yeah. So-

Luca: This actually happened in a property that we, uh, we’ve been trying to buy that property for three years now. We’re on a contract. I mean, the guy-

Justin: It’s still just dragging on and on?

Luca: The guy has got to sell-

Justin: Oh …

Luca: and he faces a massive penalty. He wanted a huge deposit, and now that deposit has gone against him- … because if he doesn’t manage to get all the paperwork and all that. The town is totally fighting against him. The town architect died-

Justin: Oh, mamma mia.

Luca: And he didn’t keep the paperwork at the town hall. Of course not. He kept the paperwork at home.

Justin: Of course.

Luca: Now, no one in the town – this is a town of, like, 600 people. No one can find if buil- buildings are legal, if they’ve been, you know, were the building permits. No one knows the cadastro. He had everything in his own home, and he was alone, and he died of a stroke all of a sudden.

Justin: Oh, no.

Luca: So now this guy has been stuck trying to sell to [00:16:00] us for two years. And the new architect in town says, uh, “Sorry, guys, but before I see a piece of paper that says this place was actually built according to standard, I can’t sell.”

Gill: “I can’t sanction it.” Can’t sell. Yeah.

Luca: So you’re gonna find yourself in a position where you’re, hostage to outside forces, like the architect who dies or something else before you can sell.

Justin: Esattamente.

Luca: On the other hand, I do have to say one thing.

Justin: Certo.

Luca: What you just said, that most sellers are unprepared, the paperwork

Justin: Most Italian sellers

Luca: Yeah, Italian sellers. Most Italian sellers. It’s a good thing for you if you’re a shrewd buyer.

Gill: Absolutely. Because you

Luca: could- Why? You could pull

Gill: down the price.

Luca: Well- You can pull down the price … absolutely. Suddenly they have accepted the price. Mm. They say, “Okay, how much is it going for?” “200,000.” “Is your ink, is your blood on the page? Have you signed?” “Yes, it’s 200,000.” Now, whatever problem we find with that property is 200,000. Exactly. You have got to pay for it.

Justin: Esattamente.

Luca: I mean, this sort of property where we’re standing now, it had to have things [00:17:00] regularized. They were missing papers and so on and so forth. And the poor old lady that were here had to shell out 4, 5, 6,000 euro.

Justin: But the problem is that you as the seller have to shell that money out ahead of time. And oftentimes sellers find themselves in that position of I don’t have

Luca: the money. The money.

Gill: Sì.

Justin: Yeah, so it’s a real kind of contradiction here.

Luca: But in order to make money, they should spend the money …

Justin: they have to spend money. But, you know, again, as a seller, the best thing you can do is immediately, I’m gonna sell, I’m contacting a geometra. And at least get them engaged and started on the research, right? And pay them a small amount because you can work through some of these things as they go, as you guys know. It’s not impossible if done that way. It’s of course better if it’s all done ahead of time. Yeah, as we would like it to be done. But as long as they’ve gotten a head start on it, and they’ve done the research and they know what the issues are, then of course…

Gill: Then everything’s fixable.

Justin: Then everything’s… you know what’s fixable, what’s not fixable. You know what it’s going to cost potentially, and so you’re in a better [00:18:00] position than if you just put that property on the market and say, “I want 300,000.”

Luca: Yeah, yeah, yeah.

Gill: Speaking of costs, are there things that some of your expats find surprising when you sit down and finish off all the sums and the invoices?

Luca: It sounds like a list this long.

Justin: No, it’s, not really long. The notary is always kind of a surprise cost to them because it can really vary from region to region. I’ve done transactions in the South where the notary costs 1000 euros, and then you do the same price of transaction in Como, and it costs 4000 euros for the notary to do basically the same thing. The same thing. Because again, they don’t have a standardized table of expenses or fees either.

Luca: It pays to shop around.

Justin: It pays to shop around, but again, if you’re paying 4000 at one notary in Como, the one next door is not gonna be 1000. You know, it’s gonna be 3800 or 4200, yeah. So you’re gonna get a little savings but not drastically. So the notary cost is always a part of it. One thing that in the preparation we talked about was the translator or whatever. If you need a translator, you know, you need to build in [00:19:00] that cost because that’s on you as the buyer who doesn’t speak Italian, so you need to include that in there, absolutely.

And then in some regions of Italy, we were talking about Lunigiana a little bit ago, they expect the buyer to hire their own geometra to accompany the inspection that the seller’s geometra is already doing. And so that’s, you know, another expense that some buyers are not…

Gill: Factoring in

Justin: Factoring in. But these are sometimes regional things that are also even for me surprising if I’ve never worked in that area before.

Luca: Yeah, I guess it’s more custom than the law says.

Justin: Yeah, yeah, exactly, but Italy works that way.

Luca: And just to clarify, it’s not like the notary is ultimately the judge of whether your Italian is good or not. It’s not like you have to come in and show a certificate saying: “I have a B1 in Italian.”

Justin: Again, you can fake it, I suppose, but the notary’s gonna be asking you questions. You go to the notary and it’s not just like: “Sì. Sì. [00:20:00] Sign here.” I mean, there’s a lot of documents that are presented and discussed, and they’re gonna be interacting with you, asking questions. If you declare that you understand Italian, then you’re going, “What?”

Gill: Grazie, grazie for everything.

Justin: Prego, prego for everything. Obviously they’re gonna figure out real quick that you don’t understand Italian, and they risk, you know, their own licensure if they let a transaction go through with a speaker that doesn’t understand what they’re signing. I mean, obviously that’s a big problem for them.

Luca: It’s actually a huge problem. It’s a huge problem. You’re better off paying 500 euro to come and, for someone to come and advise you and to speak for you.

Gill: Because you could be signing anything.

Luca: Assolutamente sì.

Justin: Exactly. I always recommend this. There are bilingual agents out there who don’t do this, but I make sure I do this for my clients. Hire a translator, you know, somebody’s gonna translate the deed, somebody that’s a real translator that’s certified, to translate the deed for you and be present at the rogito. Because then again, you absolve yourself of that fear that you lose something or that something has been mistranslated or left out.

Gill: Well, it’s a stressful transaction in its own right?

Justin: Esattamente.

Gill: If you’re trying to do it, you know, half blind, it’s…

Luca: Besides doing some brutal [00:21:00] maths. And thinking about…

Gill: What percentage it is of the whole transaction. You know?

Luca: Yeah, of course there is that. But also, a property lawyer showing up Instead of you at the deed will cost you three, four, generally 5,000 euro. You’re gonna pay 10 translators for that. So just show up, which is, by the way, really good. You’re gonna be living in the town anyway. You’re gonna meet some people.

Justin: Esattamente.

Luca: And we often talk about reputation. It’s the right thing to do. You might be renovating afterwards. You wanna be seen as someone who’s actually engaged

Justin: in their property, exactly.

Luca: There’s a lot of those expats that don’t actually gel with the local or try to mingle with the local populace, and we’ve seen quite a few of those. And then they’re the same people that say, “You know, I was in the renovation, and I got scammed on all the prices, and people were charging me twice as much as they were charging their neighbor.” Well, you gotta know the neighbor to know how much they’re charging.

Justin: Esattamente.

Luca: So start from there. Show up at the deed.

Justin: Exactly. And you’re gonna need to know this anyhow because someday you’re going to [00:22:00] sell that property, right?

Luca: That’s right.

Justin: And you’re going to need to know exactly what happens at that point. So you’re right. Be engaged from the beginning, yeah? Pay the interpreter, fly yourself there, and sign the paperwork yourself. Best way to start.

Luca: Assolutamente.