Purchasing real estate in Italy in 10 steps

Britain's Royal Institution of Chartered Surveyors last year singled out Italy as one of the most profitable countries in which to invest in real estate as its market has kept a stability singularly missing from the rest of Europe and the US. Why? Italian banks' stringent lending criteria means just 8.5% of Italians have home loans (19% in the UK), hence Italy avoided the easy credit that sparked the property boom and bust elsewhere.
Another fillip, especially for UK buyers is the fact that in the four years to March-June 2009 Italian property prices rose by almost a third while the Euro strengthened by nearly as much against the Pound - meaning a Briton with a typical Italian property saw its Sterling value soar by 66% over that period.
Italian tax changes have reduced purchasing costs by 10-15%. Allied to Italy's timeless appeal it means there has rarely been a better time to invest in Italian property. Yet as with any property purchase, especially in a foreign country, there are commonsense guidelines to abide by to ensure buying your dream home doesn't become a nightmare. Here are the 10 most important:

1) GET TO KNOW ITALY
Tuscany is Italy's best-known region, attracting one in three visitors who comes to the country. It's also it's most expensive. Yet other areas such as Le Marche, Calabria and Abruzzo are far cheaper and also have spectacular landscapes and beaches. Spend a few days at a time to see what areas you like best. Ensure you are within easy reach of local amenities, unless you deliberately want to be in splendid isolation. And when it comes to viewing properties, there is such a thing as too many. Trying to cram 40 visits into a weekend simply turns into a gruelling slog. And by No 35, chances are you'll remember little of the first two dozen.
2) GET REAL ON PRICES
One can pick up a stunning property for Euro 250,000. But not if it's advertised at Euro 500,000. Italian prices have not had the freefall of some other countries, so expect discounts of around 10%.
3) FIND A RELIABLE AGENT
By law all estate agents must have a professional licence, qualification and indemnity insurance and be registered with their local chamber of commerce. Additionally, their website and other publicity material should show they belong to either the AICI (Italian Association of Estate Agents), FIMAA (Federation of Mediators and Agents) or FIAIP (Federation of Professional Estate Agents). When investing in a foreign country it's important to find professionals you can trust, so this is one occasion to be thankful for Italy's fastidious legal framework.
4) KNOW WHAT'S RIGHT FOR YOU
Frances Mayes' bestseller Under The Tuscan Sun inspired thousands of overseas buyers to try converting an Italian ruin into their dream home. Great in theory, but be prepared for the hard work and finance it entails. Budget up to Euro 1,000-1,500 per sq m for a total restoration. Whether you go for a fixer-upper or not, avoid taking on more space, land or facilities than you need. A villa with pool set in 10 acres sounds idyllic, but bear in mind the maintenance it will require.
5) ENGAGE A LAWYER
Despite an unfamiliar legal system in an unfamiliar language, some foreign buyers cut corners by blustering their way through the process without a lawyer (avvocato).
The dangers are countless. First, many sign papers they do not understand and are then bound to an irrevocable legal commitment. Second, it means a number of vital checks that a good lawyer would carry out instead go ignored.
They include ensuring the vendor has a registered title and is legally authorised to sell. Where a property is jointly owned by a number of family members, all must agree to the sale And the property must have proper planning permission.
Also, Italian law means any loans, mortgages, utility bills, etc, relating to the house pass to the new owner, so a lawyer must ascertain no such charges remain.
Try to hire a reputable, independent English-speaking avvocato who comes recommended. Or consult a lawyers' directory such as hg.com.
6) KNOW THE PROCESS
Once buyer and seller decide a price, the buyer deposits around 5% and makes an offer (proposta irrevocabile di acquisto) to "reserve" the home for around 15 days. If his surveyor and/or lawyer give the go-ahead, a preliminary sales contract (compromesso) is signed in which both parties agree a timetable and the buyer makes a second deposit, bringing his payments to 25-30%. Either side risks financial penalties for defaulting at this step. The final stage sees the final deed of sale (atto di vendita), signed in a notary's office. The buyer settles the outstanding sum with an Italian bank draft.
7) KNOW YOUR COSTS
Taxes, fees and commissions can add 7%-10% on top of the price of resale properties and 12-15% for new-builds. Typically, this can include 3% to the estate agent, Euro 150-200 per hour for a solicitor, Euro 500-1500 for a surveyor and Euro 2,000-5,000 for the notary.
For new-builds, 4% VAT is payable if within 18 months of purchase you register for official Italian residency - a relatively straightforward process. Otherwise the rate rises to 10%. For non-new-build properties, the buyer pays 3% of the "cadastral value" if residency is registered for within 18 months. Otherwise the rate rises to 10% of cadastral value. Cadastral value - often far less than the purchase price - is assigned by the Land Registry based on factors such as floor area, number of rooms, etc.
8) GET THE BEST CURRENCY DEAL
Over 2009, Pound-Euro values plunged to £1/Euro 1.059 at their trough and hit £1/Euro 1.185 at their peak. So a UK buyer weighing up a Euro 400,000 villa could have faced shelling out up to £41,250 more just for taking the plunge at the wrong moment. Hence the importance of using a specialist currency exchange company, who can fix rates for future deals to safeguard against currency fluctuations. They have far better rates than other financial institutions and could in comparison mean a £30,000 difference on a £750,000 transaction.
9) MAXIMISE RENTAL POTENTIAL
Will your property primarily be a holiday/retirement home or do you plan to rent it out at some stage? If the latter, proximity to transport hubs is vital. Aim for a maximum 90 minutes from the nearest international airport. In cities, bear in mind how close your property is to public transport as not all holidaymakers will have a car. Properties near a beach not only rent better, they also keep their value because of restrictions on additional construction near the coast.
10) HAVE A GO AT THE LANGUAGE
Try to speak some Italian, even if you use your Italian property only for a couple of weeks a year. The further south you head, the less likely it is people will speak anything other than Italian. Your efforts, no matter how clumsy, will endear you to them.
Adriana Giglioli works for Italy real estate website Homes and Villas Abroad, which showcases 2,500 properties in Italy. Her specialisms are Sicily property and Tuscany real estate.