The property buying process in France is tricky.
To be able to show properties legally to potential purchasers in France, all agencies must have a licence, called the "carte professionnelle".
In France each estate agency decides upon the amount of fees they will charge. The price of the property presented to you will include the agency fees previously set with the seller.
The amount of fees must be displayed in the estate agents window and inside the office. Normally, agencies will take between 5% and 10% depending on the price of the property.
Your step by step guide :
- 1. The purchase offer
- 2. The preliminary sales agreement
- 3. The security deposit
- 4. The SRU and 7 days cooling off period
- 5. Finance
- 6. The French "notaire"
- 7. The final signing
- 8. French taxes and charges
1. The purchase offer
Once you have decided on a property, the real estate agent will present your written purchase offer to the seller. Once an agreement is reached between the seller and buyer, on the price and terms of the contract, including any conditional clauses (clauses suspensive) and possibly furniture list, the property will be taken off the market after signing the "preliminary sales agreement" (compromis de vente).
2. The preliminary sales agreement
The initial sales contract is very important. It sets out the details of your purchase with information about the property, the parties involved (civil seller and buyer) and the price. It will include an estimate of transaction costs (notary fees), as well as the details of your financing plan. Both the seller and the purchaser can insert into compromise their own terms, including for example a condition precedent to obtaining a loan.
The contract must be signed and dated by both parties. By law the contract must then be notified to you by registered mail or hand delivered by your Notary.
It is also delivered to you the results of diagnostic done on your future acquisition, namely, Carrez law, asbestos, lead, termites, gas, energy performance, electricity, natural and technological risks reports.
3. The security deposit
A deposit of 5 to 10% of the purchase price is to be paid into the escrow account of the notary. This amount will be deducted from the selling price at the signing of the deed.
If a condition precedent to loan was added to the preliminary sales agreement, your deposit is protected until your funding. If your loan is denied, then the deposit will be fully refunded.
4. The SRU and 7 days cooling off period
The SRU law introduced a cooling off period of seven days during which you can cancel your purchase for any reason without having to justify it. After this period, the contract becomes legally binding. The seller in turn has no special conditions so is unable to withdraw from the sale. If you decide not to proceed with your purchase, your deposit will be refunded to you in full. If you decide to withdraw you must, however, make sure that you notify your estate agent of your decision in writing before the seven days cooling off period comes to an end.
French bank account
Even if you only have an occasional holiday home in France, we advise you to open a bank account, to pay the direct debits for taxes due in relation to your property as well as bills for electricity, water, gas and telephone.
To apply for a French loan, you will need to have a bank account in France also.
The bank will then send you your account details - the so-called RIB or "Relevé d'Identité Bancaire". This identification slip is designed for your French (or foreign) creditors and debtors who need to carry out operations on your account (credit transfer, standing orders, payment, etc.). You can now transfer funds to your new account.
If you do not make a cash payment for your purchase, you can use a loan in France.
Interest rates are generally more interesting in France. Your agency will be happy to introduce you to a reputable bank with advisors speaking your language who will provide details of their interest rates and conditions.
As a non-resident, you can usually borrow up to 80 / 85% of the purchase price (excluding notary fees.)
Once you have received your loan offer, you must wait at least 10 business days (not more than 30 days) before signing as an acceptance (according to the Consumer Code). It is important to know that you can not sign the deed (final sales document) until this period has elapsed.
6. The French "notaire"
To purchase a property in France you will have to use the services of a French "notaire" who is an independent public official.
The buyer can appoint his own notaire, if preferred, at no extra cost. In this case the two share their notaries fees. The "notaire" ensures that all aspects of your real estate transaction are completed in a legal and efficient manner. He is also responsible for all searches relating to the current title of the property and for checking that it does not reveal any significant easements or restrictions which could affect its value as well as verifying that no mortgage exists over the property.
At this stage should any of the searches present something important the purchaser will have valid reason to withdraw from his acquisition, the full deposit will be returned and the contract broken.
These fees are normally in addition to the sales price and include the fees received by the notaire for his work, plus his direct costs (e.g. the land registration fees that he needs to pay), as well as property sales tax. These fees are regulated by law, so should be the same regardless of which notaire you use.
The "notaire's" fees (notary fees + state tax) for a new property are about 3% and for second hand properties about 7/8% of the property price.
7. The final signing
There is no statutory period of time between the date on which a promise to sell is signed and the execution of the final deed.
In general the final signing (acte de vente) in front of The French "notaire", normally will take about 2 or 3 months, to ensure there is enough time to assemble all the documents needed for the sale.
When all the paperwork is ready, the "notaire" confirms the date and time of the final signing.
Your mortgage company, if you are using one, should have already transferred the funds to the "notaire's" account and on the final day you must pay the balance of the purchase price to the "notaire". They then, in turn pay the seller. The transfer of this remaining balance should be done in advance as the funds must be in the "notaire's" possession before the contract is signed. We advise you to make the transfer at least 10 days in advance.
Your French property has to be insured in your name from the date of completion and the "notaire" will ask for proof of this along with your passport. We also recommmend you to visit your future property a last time before the final signing.
Keys and a certificate of sale are handed over and ownership is transferred.
The final "acte de vente" papers are sent out around six months later.
You are now the proud owner of your French dream home.
8. French taxes and charges
For anyone looking to move permanently or semi-permanently to France, tax is an issue and you may need some specific advice. If you spend at least half the year in France (183 days), or your main home is there, you will be deemed resident for tax purposes. That means you pay French taxes on your worldwide assets, income and capital gains.
If non-resident, you only pay French tax on those which you incur in France. A taxation agreement between the two countries means that you will avoid double taxation. The tax year is the same as the calendar year in France, and it's up to you to make yourself known to the tax authorities.
Monthly charges (charges de copropriété) cover maintenance of communal facilities. (Guardian, lift, cleaning, insurance etc.…) Sometimes charges include heating, hot and cold water. The property manager must organise a General Assembly of Owners at least once a year to review the budget to cover exceptional costs. We strongly recommend that you attend or appoint a proxy.
Taxe fonciere (land tax)
This is a tax paid by the owner each year. The amount of the "taxe foncière" (land tax) depends on the size and the location of the property. When you purchase your French property, the "notaire" will calculate on a pro-rata basis, the amount you have to refund to the seller.
Taxe d'habitation (local services tax)
This tax is paid by the person who occupies the property. It covers the services and maintenance provided by the local council. If you rent out your property this tax will be paid by the person occupying the property.