Bulgaria A picturesque small country called Bulgaria has existed for more than 13 centuries in Europe, linking East and West. Bulgaria remembers ancient civilisations and great people that wrote its turbulent history. Situated in South Eastern Europe, Bulgaria occupies the north eastern part of the Balkan Peninsula. Bulgaria shares a border with Turkey and Greece to the south, Macedonia and Serbia to the west, Romania to the north, and the Black Sea to the east. The capital, Sofia, lies in the western region of the country. Ethnic groups include Bulgarian, Turkish, Roma, and others. The official language is Bulgarian.

Bulgaria has become a very strong property market for the investor since its membership of the EU in 2007.

Bulgaria in the EU including links to Bulgarian Government and Tourist information sites.

Take Care: Buying land in Bulgaria is definitely not for the faint-hearted. However, if you can get over the hurdles then it may well be worth its weight in gold in the future. Where most of the purchases there were originally made for the purpose of selling on to make a speculative gain, most investors are now inclined to hold the properties for rental, either because they cannot sell them or they feel there is more value to be had in the long term.

Careful research is required before you buy, lest your purchase proves to be a costly mistake.

You can find an excellent Bulgarian property at a bargain basement price. Is this too good to be true? Not necessarily, as most offers can be taken at face value. However the property market conceals numerous and avoidable pitfalls. Some of these like the infamous higher prices charged to foreigners are transparent. Others, however, are much harder to gauge.

Below are some of the common pitfalls that you need to avoid

  • Many estate agencies offer a service called “purchasing properties online”. You see photos supposedly providing all the information about a proposed acquisition. Then you tell the estate agent you want to buy that pretty cottage in Elhovo without even viewing it once. Does that seem naïve? Probably, but more then 15,000 British property hunters acquired property online in Bulgaria between 2000 and 2005, lured by vacuous promises boasting of the “potential” of a property. At least 5,000 of these buyers were immediately disillusioned when they actually saw their new purchase. The usual scenario is as follows: the property either looks nothing like the one you viewed online, it may even be derelict. Nobody had forewarned you that you were buying in a godforsaken, isolated region without proper communications. Yet, in spite of this, people continue to buy Bulgarian properties online, perhaps saving a couple of hundred euros on plane tickets but losing far more on bungled deals.
  • Everything seems fine. You have seen your holiday apartment and everything, including the location and building quality, seems ideal. Please re-examine your contract! In Bulgaria, when you purchase an apartment or, as they call it, “the real parts” , rooms, corridors, bathrooms, etc, you also pay for “the ideal parts,” or “the common parts,” of the building, staircases, elevators, etc. Nobody will forewarn you, just as nobody can explain the logic of this strange system, since if you want to have a basement or a garage with the apartment you must pay more. Hence, when you purchase a 100 sq m, or 1,076 sq ft, apartment the real size of your property is actually 80 sq m, or 861 sq ft, but you have to pay for 20 sq m, or 215 sq ft of the ideal parts. You will not be able to erect a fence around 20 sq m, or 215 sq ft, of the staircase you paid for and claim it is yours, as the truth is that they are commonly owned. Your only practical step is to ensure you pay no more than five to 10 percent of the ideal parts out of the total price, because, occasionally, building companies ask buyers for up to 25 percent.
  • For example, you purchased a nice apartment in, one of the most popular ski resorts. You are happy with the price, the quality and the view from your window. Now look at the map, are you sure that this is really the ski resort? Some unscrupulous estate agents sell properties in towns and villages near top ski or coastal resorts, presenting them as the actual destinations themselves. This is how many foreigners own apartments in Dobrinishte, instead of Bansko, or in Chepelare and not in Pamporovo! The difference? Many thousands of euros! Prices in regions near large resorts tend to sell for half the price of the resorts themselves.
  • Now that you have decided to purchase a plot of land in Bulgaria. The agent has told you that you can not own land here unless you register as a local company. This is by no means a dream as you only need to pay a lawyer around 500 euros for registration and wait until the court processes your request. At the moment, Bulgaria's property market has a very quick turnover, so the property you wish to buy today may be unavailable tomorrow. Therefore, you must ensure that the plot of your choice will still be available when you are ready to complete. The problem is that the owner wants to sell it immediately and is unwilling to wait until your court registration is completed. Your agent suggests that you sign a preliminary contract and pay the owner 10 percent of the property's total price which seems to be an acceptable practice throughout the world. The standard duration of a preliminary contract in Bulgaria is 30 days, which is exactly the period required for registering a local company in court. As the time for concluding the deal approaches, you realize that court has worked slowly this month, your company is still unregistered and you still have no right to purchase land. The owner blames you for losing more reliable clients and keeps the 10 percent you have already paid. Why? The contract states you have not kept your side of the bargain and this is considered fair compensation. As a preventative measure you need to insist on a preliminary 40-day contract to avoid this possibility.
  • The privatisation of land after the fall of Communism triggered many inter-family feuds as relatives squabbled about proprietary issues. Hence the current property map contains plots of 1,000 sq m, or 10,764 sq ft, owned by 20 siblings and cousins. Unfortunately if you wish to buy one of these plots, you or your estate agent are burdened with trying to convince these 20 people to peacefully sign the contract. Probably at least one of the owners will change his mind at the last moment and refuse to sign. If the deal proves impossible; you have wasted your time, money and your business plan is ruined, not to mention the nerve racking and humiliating fight you have to endure at the notary office. If there is no way to avoid deals requiring signatures from more than three or four people, you should insist that all owners authorise only one person to represent them. For these reasons and many more, you should find an extremely competent estate agent and thoroughly research the situation yourself. A little spadework may spare you a great deal of agony.
  • Stories of Bulgaria's sky rocketing property prices are not just media hype to tempt foreign investors. According to the “Global Property Guide,” Bulgaria witnessed the world's largest jump in property prices during 2007. This is no small feat. Prices in Bulgaria increased by an amazing 31 percent, allowing Bulgaria to surpass even Shanghai, which for the first 10 months of 2007 had led the pack with a 28 percent rise. Other hot spots seeing major price jumps included Singapore with 28 percent, Estonia with 23 percent and Lithuania with 14 percent. The UK was in 14th place with a 10 percent rise, while Ireland ranked second to last with a 4.7 percent decrease in property prices. The United States was at the very bottom of the list after a decrease of 5.1 percent.

Negotiating the Price: Before you agree to purchase the property, it is always a good idea to negotiate the price, just as you would in many other countries in the world. If you are using an agent, then tell the agent what price you are prepared to pay for the property and the agent will then negotiate on your behalf. But do note that the agent is actually lowering their own commission by negotiating a lower price for you, which is not a good incentive for them to achieve the best possible price for you. They will of course tell you that they will get the best price for you, but what do you expect them to say! It is difficult, as it would not be appropriate for you to deal with the owner directly when going through an agent. What this means, realistically, is that you need to be prepared to walk away. Be firm, and have several properties lined up. You could also consider offering a bonus commission to the agent if they get the price you want. That way, there's an additional incentive for them.

Do your homework and have a good appreciation of the selling prices for the type of properties you are interested in. Some unscrupulous agents may increase the price when they know a foreigner is buying, so be aware of this, and be prepared to negotiate. Many sellers in Bulgaria are prepared to sit on their property or land until the 'right' buyer comes along, so negotiation may not always work in your favour.

Signing the Contract’s: The first contract that you will sign will be the preliminary contract. This will be drawn up in the Bulgarian language so it is advisable to have a translator present to translate its contents to you verbally.

There are some companies who will provide the preliminary contract in English (together with the Bulgarian version), which makes the whole process much easier. Do note that the contract must exist in at least the Bulgarian language to be legal. If you are asked to sign a contract that is ONLY in English, this will not be legally binding in Bulgaria.

The preliminary contract itself is signed by both parties, i.e. you the buyer and the individual(s) selling the property. In this contract, you will generally find the full specification of what you are buying and any land associated with the property will be quoted in square meters. Do ensure that the amount of land quoted is what you were told by the agent or the vendor. The contract will state the actual deposit amount that you will give to the buyer and will contain any protective clauses added by your solicitor.

Also at the time of signing the preliminary contract you will be expected to pay a 10 per cent deposit to the owner. This is generally expected to be paid in cash, and is handed to the owner after the contract has been signed by both parties. However, do not be afraid to request a bank transfer if you are uncomfortable making a cash deposit.

Now, you may be in the situation that you don't carry 6,000 euros for this occasion. So, it is not unknown to agree a smaller amount to be handed over at the point of signing the contract, with an agreement to settle the remainder of the deposit within 7 to 10 days. For example, 1,000 to 2,000 euros is generally accepted at this stage. As a rule this is also added to the preliminary contract, so it is your legal duty to settle the deposit by the date stated.

So, after signing the preliminary contract, is that it? Well, not quite. You now need to go to the notary public, together with the seller. This process will in most cases be managed by your agent. Here, the notary will verify the identity of the buyer / seller and essentially authenticate the preliminary contract and supporting documentation, including any power of attorney documents.

Signing the Final Contract: There are a couple of ways of dealing with the final contract. One is to give power of attorney to someone you trust to sign the paperwork on your behalf. The other is to come to Bulgaria yourself. Clearly, such an important stage in the purchase process would benefit from your presence, so do try to make every effort to sign the final contract yourself. If you are purchasing a new property it is even more important, especially if you did insert additional points to the preliminary contract. In such a case you will have to inspect the property and be sure that the issues have been addressed.

It is advised that you arrange for the final contract to be translated into English, as this will become the final binding legal contract and the preliminary contract will no longer be valid. Do be sure to read through the whole contract. Check that it includes all the rooms, land and that you understand exactly the property that you have purchased, and finally do ensure that you check that the declared purchase price is stated correctly.

The Rental Market: The rental market in Bulgaria is currently still in its infancy. Obviously there are properties available for rental, particularly in the major cities, but the market itself is relatively new.

In the capital, Sofia, you are likely to find more companies that provide property management services, but even these companies are still in the early stages of development and many would say, some way off the standards we have come to expect in Western Europe. If you intend to rent your home out then you should conduct some research into the rental market within your area.

You also need to decide what type of rental you want to provide:

  1. Short-term rental (holidaymakers, for example)
  2. Medium-term rental (6 month - 1 year lets, for businessmen)
  3. Long-term rental (for locals, long-term business lets etc.)

When planning to rent out your property, it is a good idea to consider whether you are aiming for a short, medium or long-term rental market. If you plan to stay in your property for several months a year, it would be more sensible to aim for the short term rental market, especially in the summer season.

If you only plan to stay between 1 week and 4 weeks in a year yourself, then you may be better advised to consider short to medium term rentals.

If you have purchased solely for an investment, you may decide to opt for a secure monthly income and therefore aim towards a long term rental and perhaps consider yearly rentals with an option to renew. The benefit of a longer term rental is the security it provides for a guaranteed income.

A long term rental would almost always have a fixed monthly rental for the term which needs to reflect the type of property, the amenities, the location and the quality of the property. One potential drawback of a long-term rental is that the monthly incomes, whilst more secure, tend to be lower than short-term rentals. You also need to think about who is going to rent your property long term. Bulgaria has a large proportion of people who own their homes, so the concept of local people renting properties is not as high as you may find in other parts of Europe. Therefore, take some time to research the kind of people you are likely to attract.

Based within a few miles radius of Sofia's city centre it may be easy to attract foreign businessmen who want to be within easy travelling distance of their place of work. It may also be more reasonable to expect a higher monthly rental if you are marketing to foreign clients. If, on the other hand, you have opted for the short-term rental market, you are probably focussing more on tourists.

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Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may also vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

24-10-2009