How French Estate agents work
French estate agents (Immobllier) charge a staggering 4-8% on top of of the sale price for finding a buyer and filling in and getting the appropriate signatures on a 'compromis' (legally binding contract to buy).
The vendor (Seller) of a property has probably had it valued by several estate agents and placed it with all of them at a set price to him. There is little advantage, if any, in having a sole agent.. You will find most properties are on at different asking prices with different agencies. This is because their commission varies and it is always just added to the price the seller is asking for the property.
When an agent is selling your house, they value it quoting a price 'for you.' If that suits you then they just add their commission to the asking price. Hence the variation in asking price. In fact it is really the buyer who is paying the commission to the agent. Be aware that when you are negotiating to buy you are negotiating with both the seller and the estate agent. The estate agent will always reduce their commission, particularly if its in the 8% region, in order to get the sale. You need to beat the price down very hard indeed, as the seller will have an idea of the minimum they will accept and the estate agent will have a minimum commission they will take... The agencies may not admit to this but that is in fact how it works.
The average price of a family apartment/house in France is €250,000. (about £174,000) There are wide variations, with property in the country, which few French people want to buy, being much cheaper and property in a fashionable part of Paris or Nice being vastly more expensive.
Many English speaking people buy large properties in the countryside which are not much in demand by the French, at very low prices. Frequently they are very difficult to sell on, except to other Brits. If it is a permanent home then most end up selling after a few years and buying in a town where there are decent facilities and life is less lonely and easier.
Frequently the sales staff are on virtually a 'commission only' employment deal. Legally they have to be paid minimum wage but that is deducted from the first sales commission each month. This makes them very, very keen to do a deal. They also get a commission on the sale if they introduced the property for sale to their agency. Therefore there are some properties on which they will get double commission if they are the sales person who sells to you. Be wary if they are trying persuade you one property is better than another because it may be true or it may be a double commission for them.
The majority of Estate agencies are 'franchise' operations and combine to run the web sites and share properties for sale. Omni & La Forêt for example. Both are good professional agents who see their 'franchise' operations are properly trained. You will find their web sites are in both English and French and almost every office will have a sales person who speaks English... Some employ local British people to sell for them. French Immoblier - Estate Agents are much like British Estate agents. Some good, some bad, some honest and some not so.... Be wary. They are all charming and helpful but not always that professional after the compromis has been signed.
Some will offer the service of finding good artisans to help you make what ever alterations - changes - repairs you may want to make to your property... Again be wary - sometimes the hard pressed sales personnel are on a commission from the artisans who recover this by sticking it onto your bill at the end of the job!
When you have found your 'dream' property and negotiated a price for it you will immediately be asked to sign a 'compromis' This is a legally binding contract on the buyer and seller to complete the deal. It states an approximate 'completion date' but unlike the UK completion date it is not binding on either party... You can be hung out to dry for weeks after that date if the agents are not entirely honest with you. I have had excellent experiences of buying and selling in France but recently with an English sales agent in La Rochelle an absolutely dreadful one where the actual completion was nearly a month and a half after the stated completion date in the compromis.
If you are buying with a mortgage or need to sell your own house then the compromis will allow a clause to be inserted stating that the contract is subject to you getting a mortgage and you must state the banks you will be applying to for this mortgage or if selling a house then that the deal goes through and you receive the money for that house. The compromis will allow you 45 days to either raise the mortgage or have the purchaser of your house raise their mortgage for certain. If you are selling be very careful. The Estate agent is required to write to you by recorded delivery to ask for an extension of time if your buyer goes beyond the 45 days allowed to get their mortgage. At that point the contract is no longer valid and you are entitled to put your property back on the market and find another buyer. Not to exclude the buyer you already have just remove that buyers exclusive right to your property. The estate agents do not ever want to write the letter they are legally obliged to write in case they loose the sale..... I have personally suffered from this malpractice at considerable cost. You should also be aware that the bank your buyer is using will make an offer of a mortgage 'in principle'. This is NOT a mortgage offer... It merely means that probably they will lend the money. Just because there is a 'in principle' mortgage offer it does not mean the bank actually will come up with the money... If you are selling, less reputable Estate Agents will try to persuade you that this in principle offer is in fact a mortgage offer. It is not and if the 45 days are exceeded you should immediately proceed to find another buyer whilst allowing your purchaser to try to get fixed and final offer from their bank.
If you are buying without a mortgage then there will be no 'let out' clause. You sign the compromis agreeing the sale price, commission to the Estate Agent and the 'legal fees' and put down a deposit of between 5% and 10%. To put down 5% deposit is considered normal. (If you fail to go ahead with the purchase you are liable to a forfeit of 10% of the total price.) Normally your deposit is paid to the Notaire that will be a acting for you. If you have a French bank account then sometimes the Notair will agree to hold the cheque for a period without actually cashing it and paying it into their client account. A few days before the completion of the sale which takes place at the Notairs office. Notaires all work on a fixed by law commission rate. The 'legal' charge you are obliged to pay of between 8-10% of the purchase price mainly goes to the French Government as a sort of house purchase tax. A small proportion of this is retained by the Notair for their fee.
Thanks to Brussels, it is now required that before a compromis can be signed, the property needs to have had a Diagnostic Immobllier. Similar to the house sales pack once required on some UK properties. This consists of an 'expert' being paid to come to the house and diagnose the presence of lead in the paint, termites, asbestos, heat loss, insulation, gas regulations, electricity regulations etc etc. It all costs the vendor around €800-1000. As surveys are normally made or required by banks frequently these documents give you information about the property which can be useful. Estate agents appear to be loath to let you see the diagnostic before the signature of the compromis in case you use it to re-negotiate the price. You should insist on seeing the 'diagnostic' 24 hours before signing the compromis.
IN ANY CASE, YOU HAVE A 7 DAY 'COOLING OFF' PERIOD FROM THE DAY YOU RECEIVE, BY RECORDED DELIVERY, THE COPY OF THE COMPROMIS YOU HAVE SIGNED.
YOU NEED TO PUT YOUR WITHDRAWAL FROM THE PURCHASE OR SALE OF THE PROPERTY IN WRITING, TO THE ESTATE AGENT, BY RECORDED DELIVERY. (Avis de Reception).
If you find something in the 'diagnostic' that worries you then you have every right to bail out... If you just change your mind then you also have every right to withdraw, without any penalty, at this stage.
Capital Gains Tax. Be aware that if the property you are purchasing is your 2nd home - holiday home - not your main residence you will pay up to 70% capital gains tax when you eventually come to sell it. Provided you keep all the bills any work you have done on the property to improve it may be deducted from this tax but only if it is done by professionals. DIY work will probably not be allowed.
If you move to France and it is your main home then you will not have to pay CGT. To proove it is your main home you will need to have 'clocked' into the system and be paying tax in France. If you are non resident in the UK (because you live in France permanently) but you still receive payments (pensions, investments etc) in the UK will almost certainly pay UK tax on that income but none the less you must declare it to the French tax authorities even though you will not be taxed on it again... It is very important to be in the French Income Tax system if you are to avoid Capital Gains Tax when eventually you sell. If you let your property in France you will have to pay tax on the rental income, French Resident or not. You should take professional advice if your case is not a simple and straightforward.
NOTAIRES AND INHERITANCE LAW
In a similar way to UK solicitors the Notaires function is to make sure that the property actually belongs to the person wishing to sell it, ascertain what loans or mortgages are outstanding on it, offer it first to the 'Marie' (town hall) at the price the purchaser has agreed - normally just a formality. They also check out that a motorway is not going to be built through the land in the near future. All this takes at least two months and normally it is three months between the signing of the compromis and the final act of purchase.
The Notair will write to you giving a date for the final signature - act definitive at which stage you need to transfer the funds for the purchase to his account or if you are getting a loan ask the bank to do so. They should be in the Notairs account 4 days before the date he has set for the signature.
You should be aware that 'property' in French 'Napoleonic' Law is considered as being part of the family inheritance - follows the blood line.
Even if you have left a will, in either France or the UK, the French property and money will all go to your children when you die and NOT to your wife or husband
but directly to any children, grandchildren or failing that, your brothers and sisters following the blood line.
Unless it is your intention that your kids get the lot when you die, you need to make arrangements to purchase the property is a way that enables your wife/husband/partner to inherit your part of the property and thus keep their home, if anything happens to you.
There are basically 3 legal solutions to this problem but in the end it is impossible to completely disinherit your children even if you want to! Eventually any surviving blood relative will get the lot when you go toes up! You cannot disinherit them and leave it all to the gamekeeper or au pair.
Even if you make gifts during your life time your children - grandchildren etc can still challenge those gifts after you are gone and eventually reclaim them.
Communaute Universal or Entre Epouse. If you are a married couple you may ask the notaire to organise your purchase in this way so that if either one of you dies then the property goes in its entirety to the surviving spouse. Very similar to English law. The big difference is that when the surviving spouse dies all the property goes automatically to the children or closest blood relatives. Now way around that. This system of purchase works well for married couples with no children from other marriages and wishing eventually to leave all to their offspring. If that is what you want you must inform the Notair early on producing passports, birth and married certificates for all concerned This method of securing the home/property for the surviving spouse is gaining popularity in France amongst modern French married couples.
En Tontine is a method of two people who are married or not married jointly purchasing a property. Each of them is thought to own the property in its entirety, from the outset, so there is no question of children inheriting the half of the person who dies. (This does not stop you having to pay death duties on the half you inherit) It is system that is mainly used in civil partnerships or joint investments with people other than your immediate family. It is not widely known or understood by notairs but is much favoured by non French people. You need to allow the Notair some time to investigate how it will work in your particular case but for unmarried people or married people with children by previous relationships, it is an excellent way of seeing your 'partner' does not loose their home.
SCI (Societies Civil Immobilieres) is a fairly straight forward way of setting up a private limited company which owns the property. If you are living in the UK it does mean you can (in theory) leave the company (and the property) to anybody you like as the law of the land of the owners residence takes priority over French Law. You can give shares to anybody you like in your will. There are disadvantages in that like any company you have to make annual returns. If you rent the property out it must be rented unfurnished. If you live in the property yourself there is a chance the local tax office will invent a theoretical rent for the property and require the 'company' to pay tax on that money even though it actually has never received it from you and you own the company....
You should discuss the best way to purchase the property with the Notair soon after the compromis signature. If you are in any doubt then take specialist advice beforehand. Notairs are basically tax collectors for the state. It is their function to see that the paperwork and documentation before a sale is completed is correct and that all the monies are in place. It is always the buyer that pays all the Notair fees and there is no reason why you have to use the notair of the seller. It is perfectly normal to appoint a notair to represent you (even sign the final documents on your behalf if you cannot be present) but in the end their main loyalty is to the state tax collectors and the law and not to you...
WARNING ABOUT INHERITANCE.
As stated before it is impossible to disinherit your children in France under French Napoleonic Law.
If you are a resident of France and one or other of a couple dies, then all the money/bonds/stocks and shares/ premium bonds etc the couple possess in both France and their home country - everything, except property (immovable objects) will, on the death of one or the other, go directly and immediately to the children or grandchildren, whatever your English or French wills might say to the contrary.
If you are resident in France, when you come to 'prove' an English will, the UK will insist you follow French Law and all your 'financial stuff' will go directly to your children whatever your wills might say!!! Even if you have both UK and French wills saying that everything goes to your spouse this will not happen! It will all bypass the surviving spouse and go to the children and or grandchildren. All the survivor will be left with is 'immovable' property' - houses etc.
You need to have a lot of trust in your children and their partners that they will return all the money (which they now rightfully and legally own) to you! Be very aware that the UK, because of it's EU membership, will follow French law when one member of a married couple dies......
In 2015 there is a move to change this EU law but it remains to be seen as to how these changes will be implemented, as this law exists in most EU countries and one of the few it is avoidable in, is Spain.
21st December 2007 - La Rochelle France
revised 10 March 2013 Spain.