Partial sale of real estate: What you need to know

Why is the partial sale of real estate so relevant for real estate owners in countries like Germany? According to the Statistisches Bundesamt (Federal Statistical Office), over 46% of adults in the German real estate market own property. However, especially in old age, when a modest pension meets ongoing expenses for maintaining and modernising the property –– keeping their home investment becomes interesting –– especially when their bank balance is limited.

In this article, we delve into the topic. You will learn all the essential information about this financing solution's functionality, advantages, disadvantages, and standard processes. Get a general overview and be prepared if you, as an estate agent, want to advise potential sellers on this topic.

What is a partial sale of real estate?

The partial sale of a property is an innovative solution that an increasing number of property owners in Germany consider in order to achieve financial freedom during retirement or to address urgent financial needs. With this strategy, property owners sell a portion of their property but continue to use or live in it for a set period.

How does a partial sale of real estate work?

In essence, a partial sale of real estate is similar to a conventional sale of the property: owners want to release capital, experts determine the market value, a notary certifies the sales contract, and the property is sold, but only up to a maximum of 50%. The crucial difference is that only some of the property, a maximum of 50%, is sold.

What are the advantages of a partial sale of real estate for owners?

Why do more and more property owners consider a partial sale of real estate? Let's have a look at the most common benefits you can highlight when advising potential clients:

What are the disadvantages of a partial sale of real estate?

So now you know why property owners consider selling part of their property. Now let's look at what concerns you should consider when talking to owners:

What should property owners look out for when selling a part of their property?

Property owners should carefully choose reputable partners. Potential risks can be minimised by selecting established and trustworthy investors or companies. Here, as a mediator between buyers and sellers, real estate agents can offer valuable support to property owners. Additionally, contracts should be thoroughly reviewed before finalisation. Engaging legal counsel is recommended to protect individual interests adequately.

What alternatives are there to the partial sale of real estate?

In many cases, a loan or credit may serve as an alternative to a partial sale of real estate. Due to the various costs that accumulate over time with a partial deal, a loan might be more cost-effective. However, obtaining a loan is subject to multiple conditions, such as age, making it challenging for elderly individuals to secure.

Many lenders require repayment during the borrower's lifetime and may only accept borrowers of a certain age. Moreover, taking on substantial debt through a loan can be burdensome, especially in old age, potentially leading to an inheritance burden on their children or grandchildren. A partial sale might be a viable solution for individuals unable to secure bank loans.

Another alternative is a life annuity. With this financing option, owners sell their property entirely but retain a lifelong right to live there. However, they forfeit any say in renovations or improvements.

Lastly, the reverse mortgage should be mentioned. In this financing form, homeowners convert their property into a pension by receiving loans or regular payments from a bank or lender and repay the debts only after selling the property.

Conclusion: Is a partial sale of real estate worth It?

Under what circumstances is a partial sale of real estate advisable? The partial sale of property may be considered under certain conditions, such as when the property cannot be sold otherwise, when a substantial decline in property value is expected, or when current loan conditions are particularly unfavourable.

As a real estate agent, you are responsible for informing your clients about the advantages and disadvantages of financial solutions, raising awareness about potential risks, and assisting them in making informed decisions. Our solutions for property valuation can be a valuable first step in this process. We would happily provide you with further information in a personal conversation.