Buying a Home in France: Prices and Fees
- Written by David Hampshire
Apart from obvious points such as size, quality and land area, the most important factor influencing the price of a house is its location. A restored or modernised two-bedroom house might cost €100,000 in a remote or unpopular area but sell for two or three times as much in a popular location. The closer you are to the coast (or Paris), the more expensive a property will be, with properties on the Côte d'Azur the most expensive of all. A Charente farmhouse with a barn and land costs around the same as a tiny studio apartment in Paris or on the Côte d'Azur.
Note that when people talk about ‘inexpensive' homes, they invariably mean something that needs restoring, which usually necessitates spending as much as the purchase price (or much more) to make it habitable. The French think that the British are particularly insane for buying up their tumbled down farmhouses and crumbling châteaux. Few Frenchmen (although it's becoming more common) share the British passion for spending their holidays and weekends up to their elbows in bricks and mortar! They do, however, have a grudging admiration for the British for their painstaking and sensitive restorations.
Despite the recent increase in property prices, a slice of la bonne vie needn't cost the earth, with habitable cottages and terraced village homes available from around €100,000 and detached homes from as little as €125,000. In some rural areas it's still possible to buy an old property for as little as €25,000, although you usually need to carry out major restoration work, which can cost as much as building from scratch. Modern studio and one-bedroom apartments in small towns cost from around €40,000 and two-bedroom apartments from €50,000. A modern two-bedroom bungalow costs from around €75,000 and a rural two-bedroom renovated cottage from around €100,000. However, if you're seeking a home with several bedrooms, a large plot and a swimming pool, you'll need to spend at least €200,000 (depending on the area), and luxury apartments in Paris and villas in the south of France can cost many hundreds of thousands of euros.
Prices in Paris are similar to other international cities (e.g. London). In central Paris, €200,000 barely buys a one-bedroom apartment in some areas and it isn't unusual to pay €2m for a luxury apartment in a fashionable area. Prices are calculated per m2 and in mid-2007 averaged €6,128 for an apartment in the capital, €3,707 in the inner suburbs and €2,918 in the outer suburbs; the table below shows average property prices in each arrondissement of Paris with the percentage increase in prices since mid-2006 (source: Les Echos). Excluding Paris, the average price of apartments in the 100 largest cities and towns in France in 2007 was between €1,266 per m2 (Nevers in Nièvre) and €5,546 per m2 (Boulogne-Billancourt in Hauts-de-Seine).
The average price of a house in the inner suburbs of Paris in late 2007 was just over €340,000 and in the outer suburbs just under €290,000. For further information on the price of property across the regions of France, see The Best Places to Buy a Home in France (Survival Books) and check the prices of properties advertised in French and English-language property magazines and newspapers. Property price indexes for different areas are published by some French property magazines, although these should be taken as a guide only.
In addition to the purchase price, you must allow for various costs associated with buying a house in France, which are higher than in most other countries . Note that prices may be quoted inclusive or exclusive of agency fees).
Make sure you know whether all agents' fees are included in the price quoted and who must pay them (normally the vendor). If you negotiate a reduction, check that the agent or vendor hasn't excluded some fees from the price (to be added later).
Note that it isn't unusual for French vendors to strip a house bare and take everything, including light fittings, internal doors and the kitchen sink, so when comparing prices make sure you know and allow for what's included (and what isn't)
Negotiating the Price
When buying a property, it usually pays to haggle over the price, even if you think it's a bargain. (Your idea of a bargain may not be the same as a French person's.) Don't be put off by a high asking price, as most sellers are willing to negotiate. In fact, sellers generally presume buyers will bargain and rarely expect to receive the asking price for a property (although some vendors ask an unrealistic price and won't budge a centime!).
The practice of dual pricing (i.e. quoting higher prices to ‘rich' foreigners) is rare; the prices advertised abroad are usually identical to those advertised in France. Nevertheless, in popular areas, asking prices may be unrealistically high (up to double the ‘real' market price), particularly to snare the unsuspecting and ignorant foreign buyer. French owners are often astonished at the prices foreign buyers are prepared to pay for property and, although they will complain about foreigners pushing up prices when they need to buy, they seldom object when they're on the receiving end! If a property has been realistically priced, you shouldn't expect to obtain more than a 5 or 10 per cent reduction. In fact, according to the FNAIM, the average reduction negotiated by buyers in 2007 was just 2.75 per cent for apartments and 3.25 per cent for houses.
If you're using an agent, it's worth asking him what to offer, although he may not tell you, as he's acting for the seller. It's therefore wise to obtain an independent valuation (appraisal) to determine a property's ‘true' value. This can be provided by a number of experts.
Timing is of the essence in the bargaining process. Generally the longer a property has been for sale and the more desperate the vendor is to sell, the more likely a lower offer will be accepted. Some people will tell you outright that they must sell by a certain date and that they will accept any reasonable offer. In other cases, you may be able to find out from neighbours why someone is selling, which may help you decide whether an offer would be accepted. Buying a ‘distress sale' from an owner who simply must sell is likely to result in the best deal.
However, if you're seeking an investment property it's wise to buy in an area that's in high demand, preferably with both buyers and renters. For the best resale prospects, it's usually best to buy in an area or community (and style) that's attractive to French buyers.
If a property has been on the market for a long time, e.g. longer than six months in a popular area, it may be overpriced. According to the FNAIM, apartments spend an average of seven weeks on the market, houses ten weeks. If there are many desirable properties for sale in a particular area or developments that have been on the market a long time, you should find out why; there may be a new road, railway or airport planned.
Before making an offer, you should find out as much as possible about a property, such as the following:
- when it was built;
- whether it has been used as a permanent or a holiday home;
- how long the owners have lived there;
- why they're selling (they may not tell you outright, but may offer clues);
- how keen they are to sell;
- how long it has been on the market;
- the condition of the property;
- the neighbours and neighbourhood;
- local property tax rates;
- whether the asking price is realistic (compare similar properties in the area).
For your part, you must ensure that you keep any sensitive information from a seller and give the impression that you have all the time in the world (even if you must buy immediately). All this ‘cloak and dagger' stuff may seem unethical, but you can be assured that if you were selling and a prospective buyer knew you were desperate and would accept a low offer, he certainly wouldn't be eager to pay you any more!
If you make a low offer, it's wise to indicate to the owner a few negative points (without being too critical) that merit a reduction in price. If you make an offer that's too low you can always raise it, but it's impossible to lower an offer once it has been accepted (if your first offer is accepted without haggling, you'll never know how low you could have gone!). If an offer is rejected, it may be worth waiting a week or two before making a higher offer, depending on the market and how keen you are to buy a particular property. Note, however, that if you make a very low offer, an owner may feel insulted and refuse to do business with you!
Be prepared to walk away from a deal rather than pay too high a price. Obviously you'll be in a better position if you're a cash buyer and able to close quickly. Cash buyers in some areas may be able to negotiate a considerable price reduction for a quick sale, depending on the state of the market and how urgent the sale is. An offer should be made in writing, as it's likely to be taken more seriously than a verbal offer.
Don't be tempted by the French ‘custom' of tax evasion, where the sale price declared to the tax authorities (prix déclaré) is reduced by an ‘under the table' (sous la table) cash payment. If you're buying a property direct from the vendor, he may suggest this, particularly if he's selling a second home and must pay capital gains tax on the profit. (Obviously if the vendor can show a smaller profit, he pays less tax.) You'll also save money on taxes and fees, though you'll have a higher capital gains tax bill when you sell if it's a second home.
You should steer well clear of this practice, which is illegal. If you under-declare the price, the authorities can revalue the property and demand that you pay the shortfall in tax plus interest and fines. They can even prosecute you for fraud, in which case you can receive a prison sentence! The authorities can also decide to buy a property at the under-declared price plus 10 per cent within three months of the date of purchase. If you're selling a property, you should bear in mind that, if the buyer refuses to make the under-the-table payment after the contract has been signed, there's nothing you can do about it (legally!).
Buying at Auction
The best property bargains can often be found at auctions (ventes aux enchères) - but this isn't necessarily the case and you must know exactly what you're doing; buying at auction isn't for the faint-hearted. There are three types of property auction in France:
- Voluntary auctions (vente volontaire), run by the Chambre des Notaires, at which properties that vendors wish to auction (e.g. for a quick sale, in the hope of selling for a higher than market price or to save estate agents' fees) are offered;
- State auctions (vente domaniale), organised by the Direction Nationale d'Interventions Domaniales for the sale of public buildings and properties acquired by the state (e.g. where the owner has died without leaving an heir);
- Judicial auctions (ventes judiciares), ordered by the courts, at which you can bid for properties that have been repossessed by mortgage lenders or over which there have been inheritance disputes, for example.
The last type of auction is the most common. Somewhat surprisingly, there often isn't a lot of competition for properties sold at auction, particularly as many are old properties in rural areas which aren't of much interest to French buyers.
Properties due to be sold at auction are advertised in local papers by the Tribunal de Grande Instance (local county court) responsible for the auction, and details are published around six weeks in advance by the person (e.g. the notary or lawyer) responsible for the sale. The form (fiche) contains the date and place of the sale, a description of the property, land details with cadastre references, the name and address of the person handling the sale, details regarding inspections, and the reserve price. Domaines sales are advertised by the local tax office (in Paris, at the Salle des Ventes Domaines, 15 rue Scribe, 75009).
You should check that a property isn't occupied (e.g. by squatters), as it can be difficult, time-consuming and expensive to have them evicted. Properties usually have a reserve price, which is often as little as half the market price. This is included in the cahier des charges, which includes details of the date and location of the auction, times when properties can be inspected and other information, such as the required deposit (which can vary between 5 and 20 per cent of the reserve price). The deposit must be paid in advance by bank draft but is refunded if your bid is unsuccessful.
In the case of voluntary and state auctions, the property will have been valued, and the reserve price (mise à prix) is usually 20 or 30 per cent below the valuation; it therefore obviously isn't wise to bid much more than 30 per cent above the reserve price. With a judicial auction, on the other hand, the reserve price is the amount owing (e.g. to the mortgage lender), which may be far below the value of the property, which means that you may get a bargain. (A lender isn't interested whether a property sells for more than is owed.)
Before making a bid, it's imperative to assess the market value of a property and (if applicable) what it will cost to bring it to habitable condition.
You can bid (enchérir) at a voluntary or state auction, but at a judicial auction you must appoint a notaire or lawyer (avocat) who is registered with the Tribunal de Grande Instance to bid on your behalf. In this case, instructions regarding the maximum price that you're prepared to pay must be provided in writing and bids are delivered in sealed envelopes. It isn't necessary to attend a judicial auction, nor indeed a voluntary or state auction, as a lawyer can act on your behalf.
In addition to normal fees (see below), you must pay for the publication of the judgement, court expenses and lawyer's fees. Court expenses are between 1 and 2 per cent of the sale price (2 per cent or €765, whichever is higher, at a voluntary auction, usually shared between the buyer and the seller). Fees must be paid within a month and the purchase price usually within two months. It's possible to arrange a mortgage after a successful bid, although if you fail to raise a loan you'll lose your deposit.
If you want to buy a property at auction with a bank loan, you must normally advise the lender of the date of the auction, the details of the property and the maximum amount that you'll need to borrow, as well as your personal details, as for an ordinary mortgage.
A judge presides over the auction proceedings and bids, which start at the reserve price and increase in small increments. The sale usually takes place à la bougie (by candle or, more commonly nowadays, by artificial candle!). When the auctioneer has announced the reserve price and any costs to be added, a candle is lit to signify the beginning of the auction. When three candles have burned down (each burns for only 10 to 30 seconds), the auction is finished and the property is sold to the highest bidder at that time.
The successful bidder must wait ten days, during which time someone can make a higher bid (surenchère). If this is at least 10 per cent above the auction price, the property must be re-auctioned, usually within two months, starting at the price bid by the person who intervened. Such interventions are rare and are permitted once only. You can, of course, make no bid at the auction itself but wait until a successful bid has been made. Then, if you decide that it's worth more, you can make a higher bid and force a re-auction, although this may force the price up even higher!
Completion of voluntary auction sales takes place 45 days after the auction, when the balance of the purchase price, plus fees (which include auction costs of between around €3,000 and €6,000 in addition to the standard purchase fees - see page 147), must be paid. Completion of judicial sales takes place within between 30 days and three months depending on the reason for the sale.
If you buy at auction, you aren't entitled to a ‘cooling-off' period before being committed to a purchase, nor can you withdraw from the deal without penalty if you're unable to secure finance.
Paris has the busiest auction scene, with a property auction almost weekly (properties can be anywhere in France). Details of properties for sale by auction can be found by contacting local notaires or via the internet. The Chambre des Notaires' website http:// www.encheres-paris.com - available in English) advertises properties to be auctioned around three weeks in advance of the sale and even offers ‘virtual' tours of some properties. To find properties for auction in a particular area, go to : http//www.info-encheres.com
A variety of fees (also called closing or completion costs) are payable when you buy a property in France, which vary considerably according to the price, the age of the property, whether you're buying via an agent (as opposed to buying direct from the vendor), whether you've employed a lawyer and surveyor, and whether you have a French or foreign mortgage. They can amount to over 40 per cent of the purchase price of a new property and over
Most property fees are based on the ‘declared' value of the property, which may be less than the purchase price or its ‘market' value.
You should never be tempted to under-declare the price in order to pay lower fees as it can have serious consequences if it's discovered.
The fees associated with buying a property in France are listed below, although not all will apply to all sales. (Stamp duty was abolished in 2006.) Fees are payable on the completion of a sale if not before. Before signing a preliminary contract, check exactly what fees are payable and how much they are, and have them confirmed in writing.
The notaire handling the sale collects all the fees associated with a purchase (except a selling agent's commission and sundry fees). These are confusingly referred to as the frais de notaire, although only around 10 per cent of them are made by the notaire himself for his services; these are known as émoluments et honoraires. Notaires' fees are calculated as a percentage of the purchase price on the sliding scale, which is fixed by the government. Note, however, that these are the maximum fees they can charge; they can be (and usually are!) considerably more than the actual amount due (allegedly in case of unforeseen expenses) and you can wait up to six months to receive a reimbursement of the amount overpaid.
This means that the notaire's fees for a property costing €100,000, for example, would be €3,643.37, to which VAT must be added. In addition, a notaire will normally charge you around €250 for preparing a preliminary contract. Note that British solicitors have challenged the notaires' monopoly on conveyancing in France and, should government regulation be abolished, fees will inevitably come down significantly.
Registration taxes (taxes de publicité foncière/TPF) vary according to whether you're buying a new or an ‘old' (i.e. over five years old) property. On an old property registration taxes (known in this case as droits de mutation) total 4.89 per cent, which comprises 3.6 per cent departmental tax (taxe départmentale), which is itself subject to 2.5 per cent frais de recouvrement making an effective tax of 3.69 per cent, and 1.2 per cent communal tax (taxe communale or taxe additionnelle). The same rates apply to building plots and commercial property. On a property less than five years old that's being sold for the first time, TPF is at just 0.6 per cent of the price excluding VAT, which must also be paid (see below).
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, but usually total around 0.6 per cent of the property's value.
Mortgage arrangement fees may amount to around 1 per cent of the purchase price. There's also a fee payable to the notaire for registration of the mortgage at the bureau des hypothèques, which has recently been reduced by around 15 per cent but is still between around 1 and 1.8 per cent of the mortgage amount depending on the type of mortgage.
Value Added Tax
Value added tax (VAT) at 19.6 per cent must be paid on properties less than five years old when they're sold for the first time. There are two ways of recovering the VAT: to enter into a leaseback scheme or to let the property yourself on a ‘serviced' basis, which entitles you to set up a VAT-registered business. In the latter case, you mustn't sell the property within 20 years of purchase (or you'll have to repay the VAT you've reclaimed).
If you sell a new property within five years, you must pay VAT on any profit (plus capital gains tax). Since 1998, there has been no VAT on building plots purchased by individuals. Note also that most of the other fees associated with buying property, including notaires' fees, are subject to VAT at 19.6 per cent.
Selling Agent's Fee
Where the selling agent is an estate agent (agent immobilier), his fee is normally calculated as a commission on the selling price, which can be as high as 10 per cent but is more usually between 3 and 8 per cent, the higher rates normally applying to luxury properties. Advertised selling prices usually include the agent's fee; this is indicated by the terms commission compris or frais d'agence inclus.
The words net vendeur indicate that the agent's fee isn't included. Before signing a contract, check who must pay the estate agent's fee and what it will be. When the selling ‘agent' is a notaire, his fee is generally lower than that of an estate agent and it's always paid by the buyer. Where no agent is used, i.e. in a direct sale, no fee is payable, which should mean that the purchase price is the relevant percentage lower than those of comparable properties being offered by estate agents and notaires.
Other fees may include the following:
- lawyer's fees);
- surveyor's or architect's fees);
- utility connection and registration fees.
In addition to the fees associated with buying a property you must take into account running costs. These include local property taxes, building and contents insurance, standing and consumption charges for utilities, community fees for a community property, maintenance costs (e.g. garden and pool), plus a caretaker's or management fees if you leave a home empty or let it. Annual running costs usually average around 2 to 3 per cent of the cost of a property.
Types of Property
For many foreign buyers, France provides the opportunity to buy a size or style of home that they could never afford in their home countries. In most areas, properties range from derelict farmhouses and barns to modern townhouses and apartments with all modern conveniences, from crumbling châteaux and manor houses requiring complete restoration to new luxury chalets and villas.
French homes are built to high structural standards and, whether you buy a new or an old home, it will usually be extremely sturdy. Older homes often have thick walls and contain numerous rooms. Most have a wealth of interesting period features, including vast fireplaces, wooden staircases, attics, cellars (caves), and a profusion of alcoves and annexes. Many houses have a basement (sous-sol or cave), used as a garage and cellar. In most old houses, open fireplaces remain a principal feature even when central heating is installed. In warmer regions floors are often tiled and walls are painted rather than papered, while elsewhere floors are carpeted or bare wood, and walls are more likely to be papered. When wallpaper is used, it's often garish and may cover everything, including walls, doors and ceilings! Properties throughout France tend to be built in a distinct local (often unique) style using local materials. There are stringent regulations in most areas concerning the style and design of new homes and the restoration of old buildings.
In older rural properties, the kitchen (cuisine) is the most important room in the house. It's usually huge with a large wood-burning stove for cooking, hot water and heating, a huge solid wood dining table and possibly a bread oven. French country kitchens are worlds apart from modern fitted kitchens and are devoid of shiny formica and plastic laminates. They're often comparatively stark, with stone or tiled floors and a predominance of wood, tiles and marble. Kitchens in older apartments in Paris and other cities may be very basic, although modern fitted kitchens (with dishwashers, cookers and refrigerators) are usually found in new properties, and ‘American kitchens' (i.e. open plan kitchens separated from the living or dining room by a bar or counter) are increasingly common. New homes usually also contain many ‘luxury' features, e.g. deluxe bathroom suites, fitted cupboards, smoke and security alarms, and coordinated interior colour schemes. New homes are usually sold décorée, which means not only that they're decorated but also that they have a fitted kitchen.
Refrigerators (frigidaire or frigo) and cookers (cuisinière) are generally quite small. Cookers in rural homes are usually run on bottled gas or a combination of bottled gas and electricity (see pages 359 and 352). Many homes have a gas water heater (chaudière) that heats the water for the bathroom and kitchen. Most houses don't have a separate utility room and the washing machine and drier are kept in the kitchen. A separate toilet (toilette or WC) is popular, and the bathroom (salle de bains) often has a toilet, a bidet, a bath (baignoire) and/or a shower (douche). Baths are more common than showers in older homes, although showers are found in most modern homes.
Note that many old, unmodernised homes don't have a bath, shower room or an inside toilet. Many rural properties have shutters (volets), both for security and as a means of insulation. External shutters are often supplemented by internal shutters that are fixed directly to the window frames. In France, windows open inwards rather than outwards, as in most other countries. In the south and south-west, many rural homes have outdoor swimming pools, and homes throughout France have a paved patio or terrace, which is often covered. Old farmhouses invariably have a number of outbuildings such as barns, which can usually be converted into additional accommodation.
A huge variety of new properties is available in France, including city apartments and individually-designed, detached houses. Many new properties are part of purpose-built developments. Note, however, that many of these developments are planned as holiday homes and they may not be attractive as permanent homes (they're also generally expensive).
If you're buying an apartment or house that's part of a development, check whether your neighbours will be mainly French or other foreigners. Some people don't wish to live in a commune of their fellow countrymen and this will also deter French buyers if you want to sell. Prices of new properties vary considerably according to their location and quality.
France's bold and innovative architecture, as portrayed in its many striking public buildings, doesn't often extend to private dwellings, many of which seem to have been designed by the same architect. However, although new properties are often lacking in character, they're usually spacious and well endowed with modern conveniences and services, which certainly cannot be taken for granted in older rural properties. Standard fixtures and fittings in modern houses are more comprehensive and of better quality than those found in old houses.
The French generally prefer modern homes to older houses with ‘charm and character' (which to the locals mean ‘expensive to maintain and in danger of falling down'!), although new homes often have pseudo period features such as beams and open fireplaces in new homes. Central heating, double glazing and good insulation are common in new houses, particularly in northern France, where they're essential. Central heating may be electric, gas or oil-fired. However, on the Côte d'Azur, where winter temperatures are higher, expensive insulation and heating may be considered unnecessary (don't you believe it!). Air-conditioning is rare, even in the south of France.
Note that most French families live in apartments or detached homes, and semi-detached and terraced properties are relatively rare. Some 45 per cent of the population lives in apartments (although less than 10 per cent in tower blocks), which are more common in France than in most other European countries. In cities and suburbs, most people have little choice, as houses are in short supply and prohibitively expensive. In the major cities there are many bourgeois apartments, built in the 19th or early 20th century, with large rooms, high ceilings and huge windows. Unless modernised, they have old fashioned bathrooms and kitchens and are expensive to decorate, furnish and maintain. Many apartments don't have their own source of hot water and heating, which is shared with other apartments in the same building.
Excerpted from "Buying a Home in France (Survival Books) by David Hampshire
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