Credit check – to prevent the property sale from falling through

Your prospective buyer is likeable, you go with him to the notary and sign the purchase agreement. But then comes the unpleasant surprise: the property sale has to be reversed and the marketing process started all over again. Why? Your buyer's financing has fallen through. This can be avoided with a credit check.

Reversing a property sale and starting the marketing process all over again is not only inconvenient, it can even have financial disadvantages for you. For example, if prospective buyers see a property again on online portals, it makes them skeptical. They wonder if there's something wrong with the property. Often, a property can then only be sold below market value in order to find a buyer at all. That's why reputable real estate agents check the creditworthiness of potential buyers.

How high is the risk?

Before you sign the purchase agreement with the buyer, you should find out if they can afford your property and the associated closing costs. These closing costs are considered jointly and severally liable. If the buyer doesn't pay them, the tax office can demand them from you as the seller. You can then, in turn, claim the closing costs from the buyer.

Credit agency

To check the creditworthiness of a prospective buyer, you can contact a credit agency such as Schufa. However, these agencies typically only provide information to their members. Since membership fees are often high, this is rarely worthwhile for a one-off property sale. Furthermore, Section 29 Paragraph 2 of the German Federal Data Protection Act (BDSG) requires a "legitimate interest." Demonstrating this requires skillful wording.

Self-disclosure

You can, of course, also request a self-disclosure report from the prospective customer. They can obtain this from a credit agency. Ensure that it is up-to-date and includes the prospective customer's personal data, credit scores that allow you to assess the risk, as well as positive and negative payment experiences.

Financing commitment from the lending institution

An alternative is a financing commitment from the prospective buyer's bank. In this case, you should pay close attention to the following: The loan should be explicitly designated for financing the property. Furthermore, the disbursement should not be subject to any additional conditions that could prevent timely payment.

High-quality real estate agents know how to assess a prospective buyer's creditworthiness. They will find the right buyer for you and help you avoid the hassle of reversing the sale. Seek advice from a real estate professional.

Do you want to ensure that your potential buyer is creditworthy? Contact us! We'd be happy to advise you.

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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