What You Need to Know About Buying or Selling Real Estate After July 1

As of July 1, 2022, it will no longer be possible to purchase real estate in Armenia using cash. According to the RA Law on Cashless Transactions, starting July 1, all payments between individuals for transactions resulting in rights subject to mandatory registration must be made cashless if the transaction value exceeds 500,000 AMD. In July 2023, this threshold will drop to 300,000 AMD, reports Hetq.

Cashless transactions provide additional security guarantees to avoid counterfeit cash circulation and various other inconveniences. On the other hand, they imply additional costs for the parties involved, primarily in the form of bank service fees and intermediary charges.

Using the example of buying and selling real estate, we tried to understand what fees and additional burdens buyers and sellers should consider in their calculations. Aside from the fees related to cashless transactions, real estate buyers and sellers also pay agents (if they found a buyer or property through an agent), cadastral fees, and other charges.

While no significant costs arise when taking cash to the bank and transferring it to the seller's account, the seller incurs intermediary fees when they wish to cash out.

Marina Makaryan, a resident of Yerevan, has been trying to sell her apartment since the end of last year. While there have been interested parties, she has noticed an increase in inquiries since May. Recently, a potential buyer visited her and requested that the transaction be completed before July 1.

"They said that if the transaction happens after July 1, both they and I would have to keep a large amount in the bank," says Marina.

Following this alert, we sought to understand from Marina what conditions banks offer citizens intending to buy or sell real estate after July 1.

Despite the many nuances involved in bank transfers and the fees associated with them varying based on numerous factors, our analysis of six banks' conditions suggests that in real estate transactions, the biggest cost is borne by the seller who wants to cash out the received funds. All other expenses are relatively modest. Exchange rate fluctuations play a significant role, given that in Armenia, real estate transactions are settled in dollars while payments must be made in Armenian dram as stipulated by law.

Moreover, these expenses apply not only to real estate transactions but also to other large transfers and transactions. Even today, if a buyer transfers money to the seller via a bank for real estate, these conditions apply.

Here are examples from three banks:

Bank 1
If both parties have accounts at the mentioned bank, no intermediary fees are charged for transfers between these accounts. If the recipient wishes to cash out, a fee of 0.2% of the amount received is charged. If one of the parties, in this case, the recipient, does not have an account, they are offered to open a special account for the transaction, known as an escrow account. This is a temporary account opened for real estate transactions or other major deals where the money is held until the obligations between the transacting parties are fulfilled.

The account opening, servicing, and closing are free of charge. In this case, if the buyer transfers money to the seller's account through the bank, they incur no intermediary fees. However, the buyer will eventually need to withdraw the money from the account, leading to a cash-out fee of 0.2% of the amount. There are minimum and maximum thresholds of 30,000 AMD and 300,000 AMD, respectively. For instance, if the apartment is worth 40 million AMD (approximately 96,000 USD at the current exchange rate), the seller will pay 80,000 AMD to cash out. If they prefer to transfer the funds to another account instead of cashing out, the intermediary fee will depend on the account type and bank but will not exceed 5,000 AMD when considering the stated apartment value. Transfers between accounts at the same bank are free of charge. According to the law, real estate sales are registered and settled only in Armenian dram. However, if the recipient wants to cash out and receive dollars, both the cash-out intermediary fee (up to 3%, depending on the amount) and the daily exchange rate become important.

Bank 2
A bank employee emphasized that they cannot specify what intermediary fees would apply for cashless transactions after July 1. While transfers between accounts currently registered with their bank are free, it is possible that some fees may apply for larger amounts after July 1. According to current rates, the receiver can cash out while paying a 0.3% fee if the amount is in AMD. For a 40 million AMD apartment, that would mean a fee of 120,000 AMD. If the customer's account is in dollars, a fee of 3% of the amount would be charged. If the recipient does not have an account at that moment, they will also incur a charge for opening and servicing the account, which may reach up to 10,000 AMD. Customers can keep the money in the account for as long as they wish, at least temporarily avoiding the cash-out intermediary fee.

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