Must I have a French bank account to buy property in France?
If you are taking out a loan from a French bank, yes, since your mortgage payments will be deducted each month automatically from this account. Some banks will open an account for you in processing your loan. If the lender does not have bank accounts as one of its services, you can open an account at another bank. Our mortgage partner can also help you with opening the account as part of managing your financing process.
Is it possible for me to get a loan from a French bank to buy property in France?
Yes. There are several banks that offer loans to non-French residents and foreigners living in France. There are numerous financing options and loans to suit every need. You have the option to work with our professional mortgage partner to ensure that you have all the options available to you and are led smoothly and effortlessly through the borrowing process. You can also have your financials evaluated to determine your budget even before you begin your search.
How long does it take to get approved for a loan?
The loan approval process takes about 3 to 4 weeks once all your documents are in to the bank.
What happens if I am not accepted for a loan on conditions acceptable to me for purchasing the property?
In the preliminary sales agreement, you can request that the purchase be subject to a conditional clause (“clause suspensive”) which lays out the minimum terms of a loan that you are willing to accept to purchase the property. Ordinarily you will have 45 days from the signing of the preliminary sales agreement to secure that financing. If you are unable to do so (in the preliminary sales agreement you obligate yourself to try) the agreement is automatically cancelled. You are therefore excused from purchasing the property and your 10% deposit is refunded.
What is the “loi Carrez”?
The sale agreement relating to the purchase of a property must state the surface area of the property, in square meters. In 1996, a law was passed establishing a standard way of measuring that size, defining what is and is not “livable” surface area. For example, areas under a ceiling lower than 180 centimeters, typical in rooftop apartments, cannot be counted as livable space. To measure a property, a real estate agent or a certified expert is required. A measurement conforming to this definition is the “loi Carrez.” If after you purchase your property you discover that there is more than a 5% difference between the stated surface area indicated in your purchase contract and the actual surface area of the property, you have up to one year to contest the sale, and the seller is legally bound to reimburse you for the difference. If the loi carrez was certified by an expert, this expert is similarly liable for the error.
Who is the notaire and what does he do to help complete the purchase of my property?
A Notaire is the most qualified lawyer of the French legal system, studying seven years to get his degree. The notaire is both a Public Officer and a legal counselor in specific areas of the law, including real estate, family and corporate law. The notaire has the power to authenticate certain agreements, such as real estate sales, which cannot be enforced by any other means. This virtual monopoly prevents almost any subsequent litigation concerning these contracts. The law imposes a broad personal liability on the notaire for his professional acts. Notaires subscribe to a common insurance, which provides an immediate financial guarantee to the client in case of their error. Thus you have the security of working with a specialized lawyer to ensure that your transaction is property completed. The notaire does not ordinarily provide legal advice on the transaction, but Flat Hunter® can get you in contact with specialists who can aid you with whatever legal, tax or other transaction needs you might have. It takes about two months for a sale to be registered by the notaire with the French Registration Authority, which includes verifying the ownership history of the property and other aspects of the condition of the property, such as habitability or the presence of termites, lead or asbestos. This timeframe might seem long compared to other countries, but its thoroughness results in only .5% of real estate transactions being challenged by litigation – substantially less than elsewhere.
What are the steps for purchasing property in France, once the seller and I have agreed on a price?
a) The preliminary sales agreement: promesse de vente or compromis de vente This step is an important one, as all the legal aspects of the final sales agreement are fixed at this time. That is, once the preliminary sales agreement is signed, the commitments of the parties to a contract are final and may not be modified. At this stage, the law does not impose the deed to be authentic, meaning it does not need to be supervised by a notaire. A lawyer or real estate agent, or even simply two individuals, may therefore draft the preliminary sales agreement. When the agreement is completed without a notaire, it is a “compromis de vente.” Notaires use a “promesse unilaterale de vente,” a far more secure form of agreement. Either document is signed by both the buyer and the seller. The best bet is ALWAYS to take this step under the supervision of a notaire, who is uniquely qualified to counsel clients and prepare the contracts, at no extra-cost. This is best both from a legal and a tax stand point, since not only do the two documents have different names but they also have different consequences. From the buyer’s standpoint, the two most important are: A promesse de vente allows for the substitution of another person or entity to purchase the property instead of the buyer signing on the document. For example, this allows the buyer to form an SCI, a closely-held company structure under French law that is most commonly used to hold real property, and to substitute the SCI as the purchaser on the property. It also allows one person to sign alone on the promesse, but to have the final purchase made by that person with others. A promesse is a unilateral agreement to sell; the compromis is a joint sale and purchase agreement. In practice, they usually have the same effect, in that if the buyer rescinds without a proper reason (simply refuses to buy) he forfeits his 10% deposit. With a promesse, this is the end of the transaction, and the seller simply takes the deposit money and can turn around and sell to another buyer. With a compromis, it is somewhat more complicated, since the sale can be forced by either side: the seller retains the right to sue the buyer to force the sale, while the buyer technically could stop the sale of the property to another buyer, even though he didn’t complete the purchase on time. Thus, even if the buyer wants to simply turn around and sell the property to another buyer, he will have to go to court to establish that the compromis is no longer valid. The promesse process solves these uncertainties. The buyer pays the remaining 90% of the property price on the day of the final purchase.
b) The final sales agreement: “acte authentique” Once the preliminary sales agreement is signed and the seven-day legally required “cooling off” period for the buyer has passed, the notaire goes about collecting various documents, such as property titles, property surveys and mortgage documents to verify that all of the paperwork is in order. After the notary has collected all the documents and the financing is in place the final sales agreement (“acte authentique”) is signed. This final agreement is virtually indisputable in court.
How much time does it take to close a sale and transfer the ownership title of a property in France?
From the signing of the preliminary sales agreement to the final closing, the process generally takes between two and three months.
Is there a buyer’s remorse period after I sign the preliminary sales agreement?
Yes. Since June 2001, the law provides a seven day period of reflection for private individuals buying residential property. During this period the buyer can withdraw from the acquisition of a residential property without incurring any financial penalty.
Do I have to pay anything at the signing of the preliminary sales agreement?
Yes. Ordinarily, when you sign the promise of sale, you pay a 10% security deposit to guarantee your commitment to buy. In some circumstances, by agreement of the parties, this amount can be reduced to 5%. The funds are kept in an escrow account to be put towards your closing costs when the sale is finalized.
Can the purchase and sale agreements be signed in English?
All real estate contracts and agreements must be drafted in French in order to be valid under French law. The use of a foreign language is illegal. Some notaries with an international practice may translate the agreements for their clients, usually for an additional fee. Or, you can hire an attorney or translation service to provide a translation for you. Flat Hunter partners with English speaking notaires who can review the contracts in English at the time of the signings, so that you are fully aware of your rights and obligations. In addition, if you choose your Flat Hunter® expert will accompany you to the signing and can also help you understand your rights and conditions at the signing.
What and how much are the notaire fees?
“Notaire fees” is the term given to all the taxes and registration charges that a buyer incurs when purchasing a property. Usually this amounts to between 6-7% of the purchase price, depending on the price of the property. These fees consist of 5.5% tax on the purchase, costs to register and authenticate certain documents, costs to verify certain matters related to the purchase, and the fees to the notaire for doing this work. The actual fees that the notaire earns for his work are fixed by law. Neither the notaire nor the clients may modify these specific fees. For instance the fees for a purchase of an apartment in Paris total 0.825% of the price plus VAT (19.6%). Be aware that, if there are two notaires, the fees are shared between them. Thus retaining your own notaire will not increase the professional fees. It is always advisable to have your own notaire, so that he is working on your behalf and providing you with his full attention and advice on the transaction. Flat Hunter® can put you in contact with English speaking notaires who can guide you effortlessly through the buying process. While for most U.S. purchasers this tax on a purchase seems shockingly high, it is worth remembering that annual property taxes in France are substantially lower than in the United States. Where U.S. property is taxed by the state anywhere from 0.5% to 3% annual, the French property tax (“taxe foncière”) is about 0.1 to 0.2% per year. After only a few years of ownership, you will more than make up the difference.
What are the total closing costs on top of the listed selling price?
A listing agent’s commission, if any, is listed as part of the selling price. Additional costs to purchase a property are: (1) Notaire fees and charges: 6-7% of the purchase price, including: - cost of different documents necessary to complete the transaction (mortgage statement, surveys) - notaire fees for his services (fixed by law at 0.825% in Paris) - Sales Tax (V.A.T.) - fee to register the mortgage loan (imposed by law and applicable to any mortgage obtained in France) Ordinarily the above fees cannot be included in your financing. (2) Mortgage fees: - bank processing fee or mortgage broker fee (3) Flat Hunter® search fee, if applicable Mortgage and Flat Hunter® fees can be included in your financing.
How much property tax should I expect to pay each year on my property?
As a property owner in France you will be responsible for property tax (“taxe foncière”) on an annual basis. The sum depends on the value of the property, it’s size and location. It is relatively low compared with other countries, usually only about 500 euros a year in Paris. If you live in your property, you also pay the local residential tax (“taxe d’habitation), which is about the same amount as the property tax. If you rent the property, the renter is responsible for paying this tax.
How is the building managed by myself and the other owners in the building?
The owners of the building are all part of a co-owners association. Dues to the association range from 100 to 200 euros a month, depending on the size of the apartment, the number of apartments, and the services that the building has to offer: a guardian (building manager), an elevator, etc. A good approximation is about 2 euros/square meter of the apartment. The association is often managed by an outside company that organizes any necessary repair works, as well as the annual owner’s association meeting. At the annual meeting, the owners decide upon any renovations or building works that are necessary. An owner has the right to attend the meeting, or can give a proxy vote to a fellow co-owner. In that case, simple proxy must be sent ahead of time to the association management. When you purchase an apartment, any renovations that were voted upon during the ownership of the seller are the financial the responsibility of the seller.