Our advice and tips for your real estate sale in Luxembourg

Find on our blog the tips and advice of our real estate experts. We answer basic questions such as capital gains tax in the event of a property sale, the most frequently asked questions and the pitfalls to be avoided when selling a flat, house or land.

Taxation of real estate capital gain (also in case of inheritance)

First of all, if it is your main residence, there is no capital gains tax. 

For all other cases (e.g. sale of an inherited property, a second home, a rental property, etc.), the explanations below should answer all your questions. 

Which tax rate applies?

The gain on sale (i.e. the capital gain you realize on the sale of the property) is taxed at the half overall rate, i.e. half of your annual tax rate. 

However, if you sell a property within 2 years of its acquisition, it is no longer a sale profit but a speculation profit, which is taxed at the overall rate. 

Therefore, what date should be taken into account as the acquisition date to determine whether it is a disposal profit (the disposal takes place more than 2 years after the acquisition) or a speculative profit (disposals within 2 years of the acquisition)? The date to be taken into account is the date of the notarial deed by which you acquired the property. In the case of free acquisition (i.e. donation or inheritance), the acquisition date is the date on which the property was acquired for valuable consideration by the previous holder. 

How is the profit (from sale or speculation) calculated?

The profit is equal to the difference between the selling price (as stipulated in the deed of sale) and the acquisition price and the procurement costs. 

The acquisition price is made up of all the expenses incurred by the owner to put the building in its condition at the time of sale. This is therefore the price paid for the property, increased by costs such as transfer duties, VAT, notary fees relating to the deed of sale, etc. 

Procurement costs are the costs incurred in direct connection with the sale of the property. This mainly concerns the agency commission and the costs for the energy performance certificate.  

It should also be noted that, except in case of speculation profit, the acquisition price is revalued. This is done by multiplying the acquisition price with a coefficient that depends on the year of acquisition of the building. These coefficients change from year to year, so we cannot give a specific example here. The coefficients can be found here.

The allowances

The profit thus generated may be reduced by one or two allowances, namely:

  • Decennial allowance of € 50,000 (increased to € 100,000 for spouses / partners collectively taxed);
  • one-off allowance of € 75,000, as long as the transferred building was acquired by direct inheritance and used as principal residence by the transferor's parents, in accordance with Article 130 (5) LIR.

First, some additional explanations in relation to these 2 allowances:

The decennial allowance of 50.000 EUR per taxpaying partner is, as its name suggests, based on 10 years, ie every 10 years the counters are reset to 0 and you can again fully benefit from this allowance.

Imagine that you are married and in 2010 you sold a building with a capital gain of 70,000 EUR. Since the allowance is 50.000 EUR per partner imposed collectively, you can benefit from a reduction of 70.000 EUR and thus reduce the gain to 0. You will not be taxed at all.

In addition, you still have 30.000 EUR of allowance  which you can use on another real estate capital gain until 2020 (2010 + 10 years). So if you sell another building in 2018 on which you realize a capital gain of 50.000 EUR, you will be able to deduct the remaining 30.000 EUR and you will be taxed on only 20.000 EUR.

Then, from 2020 (ie 2010 when you used the first allowance + 10 years), the counters are reset to 0 and you will again be able to benefit again from an allowance of 50.000 EUR per partner imposed collectively. So, if you sell another building in 2022, you can deduct EUR 50,000 per taxpayer from the realized capital gain.

This decennial allowance is not limited to inheritances but each taxpayer can benefit from it.

The one-off allowance of EUR 75,000 is only valid on the sale of a property acquired by way of inheritance in direct line and used as principal residence by the parents of the transferor!

This allowance is not doubled by taxpaying partner and can only be used once.

If, for example, you inherit a flat in 2015 from your father on which you realize a capital gain of 40.000 EUR and you use the allowance, the remaining 35.000 EUR are lost. If you then inherit in 2018 a house from your mother, on which you realize a capital gain of 80.000 EUR, you will not be able to benefit any more of this abatement, or even of the 35.000 EUR which you have not yet used.

The single allowance of 75,000 is however valid per heir, ie if you are 2 heirs, each of the 2 can benefit from this allowance of 75,000 EUR.

As said before, this allowance can only be used if the property was used as main residence by the parents. So, if you inherit one or more properties that were not used as residence, you cannot use the single allowance but you can of course use the decennial allwance to reduce the taxation on these properties.

Let's take a concrete example to illustrate all this.

  • You are 2 heirs in a direct line of a house inhabited by your parents.
  • You decide to sell the house and the capital gain is 300.000 EUR.
  • Heir A is married and has not yet used the single allowance, but has already used a decennial allowance 2 years ago, up to 40.000 EUR.
  • Heir B is not married and has neither used the single allowance, nor a decennial allowance in the last 10 years.

The capital gain on the sale of the building is EUR 150,000 per heir (ie capital gain of EUR 300,000 divided by 2 heirs).

Heir A can deduct the single deduction of 75,000 EUR and a decennial allowance of 60,000 EUR (decennial allowance of 50,000 EUR per spouse - 40,000 EUR already used). Hair A will therefore be taxed on a capital gain of 150,000 EUR - 75,000 - 60,000 = 15,000 EUR.

Heir B can deduct the single deduction of 75.000 EUR and a decennial allowance of 50.000 EUR. Heir B will therefore be taxed on a capital gain of 150,000 EUR - 75,000 - 50,000 = 25,000 EUR.

For more details on the tax rate, the revaluation coefficient and concrete calculations, please contact us at 585 506.

The 6 most frequent questions when selling a property

1. When should I start selling?

If you start too early, you will reduce the number of interested buyers because most will not want to wait too long before they can take possession of their new home or investment. You may therefore not sell within a reasonable time, which will make other buyers suspicious, because they will imagine that there is a problem with the property. Starting too early can therefore be dangerous. 

On the other hand, if you start too late, you may find yourself in an emergency situation where you may be forced to accept a bad offer. It is therefore essential to aim for good timing.

For "normal" objects we always recommend taking into account a period of 6 to 8 months between the beginning of the process and the expected sale. We count 2 weeks to start with the sale of your property, about 3 months to find a buyer, 1 month to obtain the buyer's bank agreement and 2 to 3 weeks to fix the notarial deed. This leaves a reserve of 1 to 3 months for possible contingencies (e. g. if the buyer does not obtain a bank agreement) or simply as a security reserve. 

On the other hand, if it is an "abnormal" property (e.g. a very expensive house or one requiring a lot of work or a property of a very particular style or with some major weaknesses such as a flat without parking or elevator...) more time should be allowed. 

In any case, we will advise you on a case-by-case basis to get the job done.   

2. How to determine the right price?

Determining the right price is as important as it is difficult. Even good agencies, which are familiar with evaluation methods and have the necessary experience because they make many sales each year, can sometimes have quite divergent opinions. 

For this reason, we always recommend obtaining 3 different estimates from reliable agencies. Then, compare these estimates and, if necessary, challenge the agencies with the estimates of the other agencies. 

It is precisely this whole process that Homexperts performs for you, in order to be able to give you sound advice and to select, together with you, the best selling price, but which is nontheless realistic.  

3. How am I taxed?

First of all, if it is your own principal residence, there is no tax.

For all other cases (sale in the event of an inheritance, sale of a property for rent or a second home...), read our article "Taxation of real estate capital gain" dedicated exclusively to this theme. 

4. How to coordinate the sale with the purchase of a new property?

There is no miracle answer to this question, because it depends mainly on your state of mind. Some people want to avoid risk at all costs and therefore want to sell first, in order to be sure of the price they will get before committing to the purchase of a new item. Others do not want to sell until they are sure they have a new home. 

The best way to go ahead is to call us, so that we can understand your situation and your state of mind and give you informed advice. We can also help you find a new home more easily. 

5. Do I need to renovate before putting my property up for sale?

Very often, it's a bad idea. Many owners think they are doing the right thing by investing to increase the potential value of the property, but unfortunately this is often more of a waste than anything else. Why? Simply because the buyer will probably have other tastes and may not appreciate the renovations. Imagine that you are repainting your apartment and the owner will want a different color... Or that you are renovating the kitchen or a bathroom, which will not be to the buyer's liking.... 

However, if your deck is not waterproof or there is a leak in the house, the work is important to solve the problem and reassure the buyer. 

We therefore advise you to do as little work as possible and to limit yourself in all cases to work that affects the objective quality and not the subjective beauty of the property.  

6. Do I have to remove all the furniture first?

In general, it is advisable to remove as much furniture as possible before the visits. Interested visitors will be able to project themselves better into the building if they are not influenced by any furniture. If this is not possible (we know that sometimes time constraints do not allow it...) take out at least all the personal belongings (paintings, photos, decoration, clothes...) to leave only what is really too difficult to remove in the time available. 

Do you have any further questions?

Feel free to contact us by email (info@homexperts.lu) or phone: 26 57 07 07.

The 6 most frequent mistakes when selling your property (and how to avoid them)

1. Start too early

Buyers don't like to wait too long. If you cannot vacate the premises within a reasonable time, you may discourage buyers. Consequence: in a first step you may not find buyers, since they will prefer to turn to properties available more quickly. In a second step, buyers will think there is a problem with your property, since it has already been on the market too long. At the end of the day, you thought you were doing well by starting early, but you made the sale unnecessarily complicated.

2. Start too late

That's right... starting too late is also risky. To be sure to sell on time, you may accept an offer at a price that is too low. So make sure you have the time to find the buyer who will accept your price or ask for a small discount, but avoid finding yourself in an emergency situation that will make you accept a bad offer. 

So you have to aim for the right time!

Our advice for the 2 first points: unless it is a very typical or particular property, start the sale process 6 to 8 months before your planned move. For special properties (e.g. very expensive or special properties; requiring a lot of renovations...), refer to the advice of your experienced real estate agent. Homexperts can of course advise you objectively. 

3. Determine the wrong price

Too high, and you will stay too long sitting on your property. Too low, and you are not optimizing your assets.

Determining the right price is certainly the most critical element of the sale. Unfortunately, many agencies do not master this task, either because of a lack of competence or simply because of a lack of experience. Because one thing is certain: it is not enough to compare prices on real estate portals. As this is not an exact science, valuation methods, recent experience and the interest of potential buyers in the property in question must be mixed to end up with the right price.

Our advice: Make sure you work with an agency that is familiar with the valuation approach but that also makes enough sales per year to have the necessary field experience and that maintains databases of potential buyers. At Homexperts, all these points are part of the selection criteria for our partner agencies.

4. Get a single estimate

Determining the selling price is not an exact science and depends on experience but also on recent similar sales and many other factors. Even among serious and professional agencies, the same property can sometimes be assessed with differences of 10% or more.

Our advice: Always ask 3 serious agencies for estimates, compare the 3 estimates and if necessary challenge the agencies with the other agencies' estimates. The agencies' explanations will allow you to judge the validity of the estimates and the chances of making the sale at the indicated price. At Homexperts, we ensure this process for you and present you with the results of the 3 estimates as well as our analysis and recommendation.  

5. Working with the wrong agency

Finding a good agency is not easy at all. But even a good agency is not necessarily the best one to sell your specific property.

Why? There are several reasons. First, geographical specialization. Most agencies will obviously tell you that they sell throughout the country, but few can do it effectively. Conversely, local agencies often do not have the databases of buyers that will allow you to maximize the sale price. Secondly, the type of usual properties sold. Here too, most agencies will tell you that they can sell any type of property. But more often than not, those who usually sell apartments are not in the best position to sell an expensive home. On the other hand, an agency specialising in luxury goods will not necessarily have the best motivation to sell a small flat. And finally, it is mandatory that your agency has a database of potential buyers for your type of property. Because if the agency only publishes the property on real estate portals to find a buyer, its added value is very limited. 

Our advice: Ask the right questions and don't be too gullible. But the exercise is not easy. That is why at Homexperts, we objectively advise you on the 3 partner agencies that we believe are best placed to sell your property in question. Because we have no interest in favouring one or the other of our partner agencies, but only to ensure an efficient and effective sale under the best conditions.

6. Renovating too much

Renovating before selling is often a bad idea. You spend your money on something that may not please the buyer. As a result, you will have wasted money and will be frustrated when the buyer does not appreciate the renovations at their true value. Conversely, some renovations can be useful and beneficial for the sale, especially if they solve problems that may discourage buyers.

Our advice: avoid "cladding" renovations (painting, new flooring...) and limit yourself to really necessary improvement work (e. g. waterproofing problems on a terrace...). Ideally, before starting any work, ask a trusted real estate agent for advice.

"Another agent gives me X euros for my property !"

When serious estate agencies meet owners with a property to sell, they’re used to hearing this phrase.

Unfortunately, in order to get you to sign up with them, many estate agents have no argument to make other than "promising" an exaggerated sale price.

You should be aware that when an agent signs a contract they can never promise a specific sale price. Even the price the agent decides to write into the agency contract is worthless! Because when it comes down to it, it’s the purchaser – i.e. the market – that is going to dictate the final sale price, and not the agent.

Unfortunately, very often the owner – gullible and acting in good faith – interprets these false promises as being a definite guarantee that the property will get sold for the price the agent has "promised". It simply doesn’t work like this!

Often it’s those very agents who promise the highest prices who are also, sadly, the least competent. This is because determining the real "market price" firstly requires expertise and extensive experience, and secondly some pluck... to get the owner to accept the correct market price. 

So you ought to be somewhat sceptical of an agent who "promises" you the highest price. Don’t let yourself be blinded by unsubstantiated promises, but instead trust your instinct as to whether the agent you’re dealing with is reliable and has sound expertise.

Demand to have your property correctly valued!

First of all, what is a “correct valuation”?

There’s only one answer: it’s the valuation which is closest to the "market value", i.e. the price which buyers are willing to pay for your property (and which the banks are willing to fund).

It’s definitely not the highest price that an agent "promises" you (sic). To be sure, such a price can make you dream – but what’s the point of dreaming if your property won’t get sold? 

Why is a correct valuation so important?

As was explained in another article on our blog, it takes on average 15 months to sell a house and 17 months a flat. This is a really long time. However, based on these figures from the Observatoire de l'Habitat this is indeed how it is. One of the main reasons why it takes this (enormous) length of time is that very often the asking price is too high. However, you won’t hoodwink anyone: buyers are no fools... and the banks even less so. So your property won’t sell for more than the market price. This means that your house or flat will only sell after you’ve dropped the price (repeatedly). 

To save all this time (and your nerves), it’s worthwhile aiming to determine the correct market price from the outset. And you’ll only do this with a correct valuation. 

How do you know when you’ve got a correct valuation?

Unfortunately, it’s not an exact science and there’s no miracle solution (at least not yet). So you’ll have to rely on your agency having the experience, expertise and reliability:

  • experience, because a correct valuation takes years of working in the sector to be able to give a sound, spontaneous assessment
  • expertise, because there are various specific methodologies which can be used to estimate the price fairly accurately. Such methods include calculations based on surface area, volumetric analysis, rental return, price comparisons, etc. And real understanding of these methods, and all their particular ins and outs, is required.
  • reliability, because ultimately correct valuations are not made hastily by one person and by using a single method only, but by involving at least two colleagues who’ll value your property individually and use at least two different methodologies. 

If you bear all this in mind, you’ll very soon realise how serious your agent’s valuation is. If they "reel out" a price verbally or even in writing, but without explaining the methods used, warning lights should start to flash. On the other hand, if your agent is able to explain to you in detail the methods used and gives you a carefully worked out document outlining all their conclusions, you’ll know you’re dealing with a professional. If you’re in any doubt, don’t be afraid to challenge your agent on any point, and usually you’ll see straightaway if they really mean what they say.

"Let’s give it a go... we can always drop the price later"

We’ve already looked at this in other articles: it’s tempting to put your property on at a high price.

However, to explain the risks, let’s take a scenario that crops up on a regular basis. 

Scenario 1

  • Owner: I’ve compared other properties on the Internet and mine is worth EUR 800,000.
  • Unscrupulous agency, which knows for a fact that the actual market price is more like EUR 700,000: That seems a bit high to me, however, it should be alright, okay no problem... I’ll draw up a contract for you at EUR 800,000.

Outcome: after more than a year the property will be sold for EUR 700,000. 

Scenario 2

  • Owner: I’ve compared other properties on the Internet and mine is worth EUR 800,000.
  • Professional agency: Based on our analysis using this method and that method, we estimate the market value to be EUR 700,000. We can put it on at EUR 735,000 EUR, but EUR 800,000 is unrealistic. 
  • Owner: Let’s give it a try all the same at EUR 800,000; we can always lower the price afterwards.

This is a common reaction, but it’s also a typical pitfall. 

So what are the real drawbacks of "giving it a go", i.e. asking a high price only to lower it afterwards?

  • First of all, you need to realise that buyers are not idiots. A buyer will usually spend months, if not years, looking round properties before buying. So your buyer knows exactly what the prices are... and your buyer also knows exactly which properties get reduced on a regular basis. And behind your buyer is their bank, which is also completely up to speed with current prices and will not fund a purchase which is overpriced compared to its market value. Unless you have a uniquely exceptional property, there’s very little chance of selling it above the market price.
  • Secondly, practically 80% of views of property adverts happen during the first week of publication. If the advertised price is too high during this week and then you lower it subsequently, buyers who might have been interested will no longer be looking at your advert. This means you’ll have missed the best time to reach potential buyers.
  • You shouldn’t bank either on attracting buyers and then negotiating a price reduction when they visit. Since they’re far more on top of sale prices than you are, they won’t even bother to come and view your property if it’s too expensive. So you won’t even get the opportunity to offer them a reduction at a viewing.
  • So after a few weeks (or months), you’ll come to realise that the advertised price is too expensive and the fateful moment will arrive when you’ll "drop the price later". However, by now the damage is done. Since from this point on, the buyer is going to wait for the next price drop, and the next... Until the price comes down to the actual market price. However, by the time this happens you’ll have wasted a lot of time and frazzled your nerves.

Please note that we’re not saying that you have to put your property on at a reduced price. Quite the opposite. You should put it on at the right price, i.e. at the price the market is willing to pay (or very slightly above)... and to do that you need a professional valuation determined by using several methods and ideally several agencies. 

Can you trust sale prices advertised on property portals?

When owners want to sell their house or flat, one of the first things they do is search on property portals to compare prices.

This seems a logical, understandable way of going about things; however, you need to be aware that as a rule the prices shown are not the prices at which the properties are sold.

According to various independent estimates, properties are in fact sold at prices often 10 to 20% below the advertised price!

So if you work out the value of your property by comparing it with similar ones on the Internet this may give you ideas for a price that’s actually quite unrealistic.

If all you’re going to go by when deciding your selling price is this price comparison, you’re likely to waste a lot of time trying to sell your property. And at the end of the day, in order to sell it, you’ll still have to drop your price to the market price.

Analysis of recent statistics from the Observatoire de l'Habitat shows that on average it takes 15 months to sell a house and up to 17 months for a flat. This is mostly because the initial asking prices are too high – since properties which are correctly priced will normally sell within five to six months.

What’s to be gained by using an estate agency?

The question you really should be asking yourself is "What’s to be gained by using a good estate agency"?

Because there’s no point at all in using a second-rate, dishonest intermediary who doesn’t have the right expertise. Even if they lower their commission, you’re still going to lose out.

So let’s suppose that you have found a committed, honest and competent agent with the right networks and budget to do the job properly. 

This agent can offer you many real advantages:

  • Firstly, your agent will give you objective advice to decide the correct sale price. This is absolutely essential, so that you don’t waste precious months (with a price that’s too high) or money (with a price that’s too low).
  • Drawing on their experience and solid research, they can also identify possible opportunities to significantly increase the value of your property. For example, if you get planning permission to extend your house, officially convert the loft or simply turn your house into flats, this can have a huge impact on the price.
  • Your agent can also give advice about ways of making your property more attractive and therefore increase its value, e.g. by doing some redecoration or a little renovation. By making an investment of EUR 5,000, it’s quite common to then be able to raise the sale price by EUR 20,000. 
  • Your agent will have a good database of potential buyers. It’s often said that the best properties never even get advertised on Internet portals, and this is quite true.
  • Your agent will present your property professionally (i.e. with attractive descriptions and photos) on property portals, where your agent has taken out expensive subscriptions to ensure that your house or flat will stand out from the hundreds of other properties being advertised.
  • Your agent will take care of the visits for you. You might not think it, but this will actually save you lots of stress, hassle and time.
  • Your agent will negotiate with the buyers, and if they’re good they’ll be in control of the negotiations, and most importantly will have all the right arguments ready (and not a sales pitch) to uphold the "market price" that you and the agent have worked out together. 
  • And last but not least, your agent will support you throughout the whole sales process, clearly explaining the various stages in the sale, and giving you fiscal and legal advice etc. 

So you can see that using a proper agent you can trust will help to save you lots of time – and most importantly money too. The key is finding your agent.

Should I sell to a property trader?

Let’s start by explaining first of all the difference between estate agents and property traders. 

Estate agents are sales intermediaries who act on behalf of the vendor and find a third party buyer. For their work, agents receive an agency commission, which is usually 3%.

On the other hand, property traders buy the property for themselves and then sell it subsequently, having often carried out at least some renovation beforehand. 

Quite often an estate agency may combine both roles. If this is the case, so that there’s no conflict of interest, it’s essential that the agency plays fair by being absolutely clear about its intentions and role.

But let’s go back to our main question: is selling to a property trader to be recommended?

You need to be aware that it’s the property trader’s job to buy properties below the market price!

This is quite logical – since being good professionals they know very well that they’re not going to be able to sell the property above the market price. So if they want to make any profit out of the transaction, they’ll need to buy it below this price. 

So you know from the outset that you’re going to sell your property for less than the market price.

However, this still doesn’t mean that selling to a property trader is necessarily a bad thing. You may also find there are certain advantages:

  • You’re going to sell a lot quicker. So it can be worth your while if you need the money quickly. 
  • You can be pretty certain that the property trader has the funds available. So you won’t be running the risk of dealing with a private buyer who may be refused a mortgage forcing you then to start all over again from scratch.
  • You don’t pay any fees to the agency. You will of course get less for your property, but you’ll also save the 3% agency commission.

In the end, you’ll need to look at your own personal situation and weigh up the pros and cons.