House prices have dropped in recent years in France, however the market in Paris remains very strong (as often for major cities, demand exceed supply, and although the number of transactions has slown down, prices stay very high). FNAIM, the national association of French estate agents, tracks these changes with information on housing prices and the market.
Within Paris, prices are around €6,000 - €14,000 per square meter (average of €8,365 in January 2013 in Paris) .
An estate agent (agent immobilier) can be a vital tool for finding the right place quickly. A good agent knows the legal pitfalls and has access to a variety of housing. An agent will provide you with a description of available properties, escort you to viewings, make sure your contract complies with expected standards. It is recommended to contact several agencies. Most specialize in different areas, so find an agent that works in your preferred neighborhood.
Estate agents should also provide a financial guarantee for at least €75,000. If an agent provides a guarantee for more than this amount, the name and address of the guarantor will also be shown on his letterhead. If an agent has a lower guarantee, you should pay your deposit to the notary or another legal professional involved in the sale. Make sure your agent holds a professional card (carte professionnelle) issued by the Préfecture.
There are no government controls on agents's fees. However, they are required to post a list of charges (barème). Fees run on a sliding scale between 5 and 10 per cent. The lower the price of the property, the higher the percentage. On the most expensive properties an agent's fee may be negotiable. An agent's fees is usually paid by the buyer.
Most agents in France are French, but there are a few foreign agents. If you can find an appropriate agent, there may be advantages like if they are English-speaking or accustomed to your interests. Confirm that they are listed on the local registre du commerce and possess a registration number and a SIRET number. Some agencies offer a "complete homebuying service" by connecting foreign buyers with French estate agents, notaires, lawyers, etc. However, if a foreign agent refers clients to a French agent, they may share the commission with the French agent or charge extra for their service. Foreigners are no longer permitted to act as self-employed 'sales representatives' (agents commerciaux).
A notaire (notary or solicitor) is a public official that is able to advise on property law, family and succession law, and corporate laws. They legalise property purchase transactions and provide security to the contracts they supervise as they are liable for their professional acts. Using a notaire to buy a property is mandatory. They are responsible for preparing documents, confirming the seller's title to the property, checking that there are no existing mortgages on the property, the final conveyance and the registration. The purchaser may find their own agent or hire the cendor's agent. If there are two notaries the fee is split. To find a notary in France, search notaires.fr.
A marchand de biens is a property "trader" who is only permitted to sell property that they have owned for at least three months. They do not need a licence, so you should consult with a legal advisor who has your best interest at heart before buying from them.
Online listings can give you a great feel for the market and allow you to determine if a place fits your specifications. Most sites allow you to set-up alerts to find the best property for you.
Networking with contacts can help you find the place of your dreams. Some places are never advertised, just found through friends, family members, classmates, work colleagues, neighbors, etc. The more people that know you are looking, the higher the chance you will find the perfect place.
Newspaper classified are another option. These usually advertise an open house or the ability to set-up an appointment. You may need to use a real estate agent to contact their agent.
Once you have decided on a property, it's time to make an offer. To figure out an adequate price, calculate how much you can afford, how much competing interest there is in the property, prices recently paid for comparable properties (assuming that information is available), what you wish to include in the price, and your preferred date of entry (or completion). Location is the prime factor in determining value. Also consider the state of the property market (whether properties are selling fast or slowly) and the amount of work that needs to be done. The real estate agent usually handles this step for you, but you have final say.
Before you sign any documents, including your contract with your realtor, have it looked over by a lawyer or advisor. It is extremely important that every element of a contract be understood before signing.
A preliminary contract (contrat de vente or contrat de vente sous clauses suspensives if there are conditional clauses) is sometimes offered to test out the terms. A promesse d’achat is a commitment on the part of the buyer to purchase a property. These tend to be standard, but you can make any changes that you see fit. The notaire is responsible for ensuring that the contract is drawn up correctly and that the purchase price is paid to the vendor.
After the seller and buyer have reached an accepted offer, they must sign a sales contract (compromis de vente or promesse de vente). This may be drafted by a notaire or Agent Immobilier, but not an agent commercial. Once the contract is signed, the buyer is obliged to purchase the property, subject to any conditions that may be included in the contract. There is a seven day "cooling off" period in which the seller may change their mind.
Example of a compromis de vente
A deposit (acompte/dépot de garantie or apport personnel) or reservation fee (réservation) of up to 10% of the purchase price is usually paid on signing of the agreement. The safest and fastest method of paying the deposit is by a bank-to-bank transfer from your bank to the notaire’s or agent's bank account. Note that an estate agent must be bonded to hold clients's monies.
If the deposit is described as a dédit, the buyer will lose his deposit if he withdraws. If the vendor defaults, they must pay a penalty equal to the amount of the deposit. If the deposit is acompte, neither party can withdraw and the sale can be legally enforced.
Most fees and taxes are calculated as a percentage of the cost of a property, therefore the more expensive a property, the higher the fees. Most of these fees are associated with a mortgage, so cash buyers incur much lower fees. Chambre des Notaires de Paris can help you calculate fees.
Notaire’s Fees - Notaires collect the fees associated with a purchase and are generally referred to as frais de notaire. Notaires’ fees are calculated as a percentage of the purchase price on the sliding scale shown below, which is fixed by the government with maximum fee limits.
Land Registry Fees - Expenses associated with land registration (droits d'enregistrement) depend on the size of the mortgage and the number of searches made by the notary in order to draft the deed of sale. Usually these fees total around 0.6 per cent of the property's value.
Mortgage Fees - Mortgage fees may amount to around 1 percent of the purchase price. There's also a fee payable to the notaire for registration of the mortgage at the bureau des hypothèques,. This is between 1 and 1.8 percent of the mortgage amount depending on the type of mortgage.
In total you can expect to pay fees of about 8% of the purchase price.
Taxes are assessed on residential property. These are collected by the State and assessed at individual rates according to location. In addition, property fees are based on the declared value of the property, which may be less than the purchase price or its market value. It is advisable to ask the estate agent for these details when looking at properties to buy.
Older Property - Properties over five years old are between 7% and 10% of the purchase price, excluding estate agency fees.
New Property - Taxes are around 2% in fees and registration taxes, plus VAT at the rate of 19.6% on the purchase price (except for sales between private individuals), excluding estate agency fees.
Value added tax (VAT) is at 19.6 per cent must be paid on properties less than five years old when they're sold for the first time. If you sell a new property within five years, you must pay VAT on any profit. Note also that most of the other fees associated with buying property, including notaire’s fees, are subject to VAT at 19.6 per cent.
A mortgage or home loans (hypothèque) is how most people afford to buy a home. They are available from all major French banks (for both residents and non-residents) and many foreign banks. It is important to shop around and compare interest rates, terms and fees to find the best fit for your needs.
To calculate how much you can borrow, multiply your total net monthly income by 30 per cent and deduct your monthly mortgage, rent and other regular payments. An example would be €600 per month at 6 percent over 15 years for a mortgage of €60,000. Earned income isn't included if you're aged over 65.
Once a loan has been agreed upon, a French bank sends a conditional offer (offre préalable). The offer cannot be accepted until after a "cooling off" period of ten days. The borrower usually has 30 days to accept the loan and return the signed agreement to the lender. The loan is then held available for four months in the case of a normal purchase.
It is a condition of a French mortgage, you must take out a life insurance policy equal to 120 per cent of the amount borrowed. The premiums are included in mortgage payments. An existing insurance policy may be accepted, although it must be assigned to the lender. A medical examination may be required, although this isn't usual if you're under 50 years of age and borrowing less than €150,000.
It is best to take a mortgage in the currency in which you're paid or the country where a property is located. This protects you from sudden devaluation of a foreign currency.
The sale contract contains a clause stipulating a date by which completion should take place and when the deed of sale will be signed. To ensure the property is in the condition expected, visit the property the day before completion. If the buyer approves of condition, they are invited to the notaire's office to sign the deed of sale (acte authentique). There is no requirement for the buyer and seller to be present in front of the notaire to complete the formalities. When the deed of sale is signed, you should ask the notaire for a certificate of purchase (attestation). This offers the buyer to gain access to public services for the property. This certificate is necessary to set-up public utilities. Once the title is transferred by the notaire, the buyer receives a copy of the deed of sale, together with a detailed statement of fees and costs.
Buying at auction is very exciting and can offer you a significant savings. Note that this buying method is not for novices as there are many pitfalls. These are usually properties that are difficult to sell and/or need serious renovation. If you are determined to buy through this method and are unexperienced, get the advice of professionals and preferably bring someone with experience. It is also advisable to attend a few auctions as an observer before placing a bid.
Auction sales are not common in France, but there are some sales. Buying at auction is only recommended for experienced buyers. If you are not well-versed in auction sales and real estate, bring a trusted advisor.
Voluntary Auctions (Ajudications Volontaires) - Public auctions held through the auspices of a notaire. Selling at a voluntary auction may be either private owners, executors of an estate, or public bodies who wish to dispose of surplus property. Judicial Auctions in France (Adjudications Judiciaires) - Auctions held in a Tribunal de Grande Instance allow the public to bid only through the use of an advocate acting as intermediary. These are common in liquidation (saisie immobilière) or in case of contested inheritance.
Find information for auctions at Encheres-Publiques.