Tips & facts

Important tips on buying your own home

Find out how to recognize and avoid typical pitfalls when buying a house or apartment.

by UBS Insights 29 May 2024 11 min read

Content:

Protecting yourself from financial risks
Pitfalls when buying a home
How to avoid common mistakes and pitfalls when buying a home
Financing confirmation: the documents you need
To the conclusion.

Many people dream of owning a house or apartment – it’s better to invest in your own home and build up assets than to pay rent. To make your dream come true, we have put together a guide on buying your own home that explains the typical pitfalls.

Preparing to buy a house or apartment

Purchasing a property is the biggest acquisition in many people’s lives. This change can have far-reaching consequences for their personal finances and quality of life. This makes it all the more important to do thorough groundwork beforehand. Make sure you allow enough time.

The first pitfall looms even before you start looking for property – not knowing your own budget. You should therefore start by calculating the maximum price you can afford. It’s not just the purchase price itself you should take into account, but also any conversion or renovation and, in particular, maintenance costs. Make a list of the criteria that are important to you, such as location, size or furnishings. After these two steps, you will be much more focused in your search for your dream property.

Protecting yourself from financial risks

If the property is a new build, you must be especially careful.

As a rule, the seller will assure you that any reservation payments will be offset against the subsequent purchase price. However, many people are not aware of the risks involved. If, for example, the seller (or general contractor) files for bankruptcy during the construction phase, you may lose your deposit.

Any installments and payments on account during the construction phase are also often insufficiently secured. In the worst-case scenario, the apartment may not be ready for occupation on the planned date, or you could become the owner of a ruined building if the funds run out before the project is completed.

More specifically, any security deposits must cover two different phases:

Financial security during the construction phase (performance guarantee)
The risks after acceptance in the event of construction defects (warranty guarantee)

The general contractor’s security for the period from the conclusion of the contract to final acceptance usually takes the form of a performance guarantee. This guarantee comes into play if the contractor fails to fulfill the project in accordance with the contract. It is important to agree in advance on the cost arrangements for this type of guarantee. The general contractor usually bears the costs.

The aim of the warranty guarantee is to protect the client’s claims arising from the contractor’s liability for defects. If, for example, a tradesman is unable to repair any construction defects, the warranty guarantee payments enable the correct repairs to be made.

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Rights and obligations of buyers

The general principle to observe is “buy what you see.” You must check the property and purchase contract thoroughly before signing. Unless otherwise specified in the contract, it is subject to the applicable statutory provisions.

Claims regarding defects in the work or property asserted by the buyer or customer lapse two or five years after acceptance of the work or delivery, depending on the cause. However, depending on the basis for the defect, other limitation periods may apply. The notification and rectification of defects should be demanded rapidly; the burden of proof lies with the buyer. The purchase contract can usually only be canceled in extreme cases. Conversely, you are obliged to pay the contractually agreed sums on time, although a reduction in the price to be paid is possible under certain circumstances.

Pitfalls when buying a home

Contracts: every detail counts

When building or purchasing property, take special care to ensure that performance and warranty are guaranteed.

Despite such assurances, you should consider the risks and your financial security before making any commitments as a buyer: Have all the necessary, appropriate precautions been taken? Have you chosen your construction partner carefully? Have you checked their creditworthiness and references?

You should not base your purchase decision on purely external factors. As well as any conditions you have set yourself (mainly the budget), the legal framework conditions, e.g., the contractual provisions, are also a crucial part of the decision-making process.

In order to ensure that the seller or general contractor really puts the payments received towards the planned construction or property (and not elsewhere), the following points must be observed in particular:

The first payment for a reservation should not be too high and should only serve to compensate the contractor for certain minimum advance payments – in the region of 10,000 or 20,000 francs, for example.
The subsequent payment plan should be based on the actual progress of construction and the circumstances: start of excavation on the construction site, concreting of the basement ceiling, completion of the shell, erection, etc.
If the entire development is financed by a bank, and the bank monitors all the payment flows, this offers important additional security for the buyer.
A frequent risk that must be taken seriously is the risk associated with the builder’s lien: This is a statutory lien on the property a tradesman has worked on that protects their claim for payment. It applies to the owner of the property, regardless of who is a party to the contract. We therefore recommend that you protect yourself accordingly by contract if at all possible. On completion of the construction, request a written assurance that all the contractors and tradesmen involved have been paid. The corresponding information must be recorded no later than four months after completion of the work. You can protect yourself even more if you wait to make your final payment until five months after completion, for instance.

Sales dossier: don’t be fooled by perfect dossiers

Presenting new construction projects using multimedia and digital tools has become extremely popular in recent years. It is easy to lose track of which documents are really relevant and which are not. Brochures, the seller’s website, building descriptions or plans are only binding insofar as they are expressly declared to be part of the contract. And the contract is only binding if it is officially notarized.

So be careful: a show apartment on the top floor that is perfectly staged in the sales dossier is just as much for advertising purposes as a virtual 3D tour. The plans and descriptions of the property submitted for notarization may look completely different. They may also differ from the original plan.

Building description: the more precise, the better

Home buyers must pay attention to every detail. Consequently, a detailed, precise construction description plays a key role as part of the contract. However, if only vague descriptions are given in these documents – such as “Swiss fittings” in the wet rooms or “parquet flooring in the living rooms” – you literally have no idea of what you are actually letting yourself in for.

Imprecise formulations like this leave it completely open as to whether inexpensive or top-of-the-range materials will ultimately be used. For each component and each element, the specific products envisaged should be contractually defined as far as possible. Ideally, they should also be examined in advance.

A conclusive description of all the materials and appliances in the kitchen is also essential. All the elements and the fit-out standard for wet rooms and living spaces must also be defined in detail. What is more, all the windows, doors, blinds, appliances and the positioning of sockets, etc., must be described in precise terms.

When it comes to budget items, it is usually not clear to an inexperienced buyer what they are getting for their money. They may not realize until making their final selection (e.g., in the kitchen showroom) that the price of the oven they want is considerably higher than the corresponding item in the building specification, or that the planned appliance does not meet their expectations after all.

It is important to obtain information and to thoroughly check the services promised by the seller in order to be able to assess value for money. Only a more detailed analysis of the construction quality will show whether an apartment advertised as relatively expensive is really worth its price and whether your expectations will be met.

Completion: what is really important?

The acceptance of the completed apartment poses another challenge.

Many people are not sufficiently aware that condominium ownership is not just about buying an apartment. They are purchasing part of a whole building. Insufficient external insulation of the facade can be much more significant than a few holes in the wall, even if you do not usually have to accept such defects. This is because the shell and the supporting structure of the building generally make up a much larger proportion of the purchase price than the interior fittings of the apartment.

When buying a condominium, it is therefore not only your own condominium unit that should be inspected during the building acceptance phase. It is just as important to examine the communal parts, such as the roof, underground parking, energy systems, playground, outdoor spaces, etc. Errors in planning or execution that affect the outer shell or structure can ultimately have completely different consequences than purely cosmetic defects in the floors or walls. Defects of this kind can lead to considerable additional costs, which is why it is important to report them sufficiently and in good time. Depending on the situation, it may be worth calling in your own expert for the inspection.

Buying your own home: what to watch out for

Clarity: Costs, deadlines and services must be defined precisely and in as much detail as possible. All the documents describing the property must form part of the contract. Caution is advised if the building description is brief and imprecise.

Price: Be wary of promises of fixed and all-inclusive prices. In practice, buyers often find that many equipment details are not included in these flat rates. In addition, high surcharges may be demanded for changes and additional requests.

Modifications: When you buy a property off-plan, it is usual for the buyer to request modifications. The kitchen, floor coverings and bathroom fittings are often customized. Make sure that the procedure is set out in the contract. The additional costs and expenses incurred by the contractor must be agreed in writing in advance. Verbal or unclear statements can be expensive.

Condominium ownership: You should also check the condominium ownership documents. In particular, these include the regulations and the publicly certified deed of foundation, which defines the value quotas and size of condominium units, the renovation fund, etc.

Contact points and sources of information when buying a home

If you need any further information, you can contact the following associations:

Financing confirmation: the documents you need

Obtaining financing confirmation from the bank will enable you to clear an important hurdle on the path toward buying a home. The lender will check your credit rating and the value of the property.

Checklist for preparing a consultation

The following documents are regularly required to obtain financing confirmation:

Personal ID card
Detailed information about the property
Salary statement (for the last three years in the case of variable remuneration components)
Proof of availability of equity
Proof of income (tax return or current salary statement or, in the case of paid employment, balance sheet and income statement for the last three years)
Proof of assets (tax return or separate statement of assets and pension assets)

“Home ownership” checklist

There are a number of points that you should critically assess before choosing your property. We have summarized them in our “Home ownership checklist: important points and requirements when searching for property.”

Home ownership checklist: important points and requirements when searching for property

Bank appointment

Make an appointment with one of our client advisors. They will clarify whether you meet the financial framework conditions and discuss which mortgages are suitable for you.

Contract

The purchase contract for a property must be certified by a notary. As a rule, a notary draws up the contract. It essentially contains details of the parties, the purchase price, any advance payments, payment terms, transfer fees and the date of transfer of ownership. The contract should be available before the notary’s appointment so that you have enough time to check it thoroughly. If necessary, ask for assistance.

Transfer of ownership

You only legally become the owner when you are entered as such in the land register.

Conclusion

It pays to closely examine contracts and to call in experts.

Take a close look at the property and don’t forget the rest of the building (in the case of condominiums, the shared parts, the renovation fund, etc.). You must read and understand all contracts carefully.

If in doubt, you should seek advice.

When obtaining financing, you should ensure that you have a sufficient financial cushion that takes into account not only the purchase price, but also any renovation, conversion and maintenance costs.

Good to know

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This publication is for personal information purposes only within Switzerland and is not to be understood as a recommendation, offer or solicitation of an offer for investment or other specific products and services. It is not intended to form investment, legal or tax advice and should not be used as the basis for financial decisions. Before making a decision, you should obtain professional advice.
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