The Purchase Process
The rules of the real estate market in Paris are different than you might expect. Our tips will help you brush up on the buying process and begin your foray into the market with confidence.
- Tip 1: Full or Shared Ownership in Paris
- Tip 2: Finding the Perfect Location to Buy in Paris
- Tip 3: Mortgage Broker And Currency Exchange Service
- Tip 4: Find The Absolute Best Apartment; Don’t Settle For Less
- Tip 5: Getting the Best Results from Paris Real Estate Agents
- Tip 6: Remodelling Costs in Paris
- Tip 7: If You’re Not 100% Certain...
- Tip 8: No MLS in France: The Value of a Good Search Agent
- Tip 9: How does the Purchase Process Work in France?
- Tip 10: Can I rent my Paris apartment short term?
The Purchase Process In France - In Simple English
Purchasing property in France is relatively straightforward for locals and foreigners alike. Napoleonic code defined the process centuries ago, which has long-standing legal procedures to assure that your interests and investment will be secured.
It starts with the notaire. A good notaire will facilitate the process, review all documents and help you navigate the paperwork.
The Role of the Notaire
The notaire is not the same as a notary public in the U.S. The notaire has a highly respected position in France as the public official who prepares the title deeds relating to the sale and purchase of land. They must carry out a number of tasks and attest on public record that the deed has been signed in his or her presence and understood by the parties involved.
The notaire must carry out the following before he is ready to propose a date for the final purchase:
- Confirm the property matches the title deeds and registry documents.
- Confirm the identity of buyer and seller (you will provide copies of your birth certificate, marriage license, etc.).
- Confirm that the seller is indeed the owner of the property to be sold.
- Confirm that the property is unencumbered and that there are no factors that might adversely affect the property.
- The notaire searches the Land Registry to confirm there are no restrictions regarding the sale, such as easements or other mortgages on the apartment.
- If the property has a mortgage, the notaire must ensure that the purchase price will be sufficient to redeem the mortgage completely.
- The notaire must obtain the planning rules from the local town hall that relate to the apartment.
- They must inform anyone who is entitled to a pre-emptive right to the apartment and give them two months to make a decision on whether they will take up their purchase right.
Legal representations on both sides are important. One of our clients purchased a beautiful apartment in Paris that had been declared "empty" by the sellers and their notaire. Unbeknownst to their notaire, the sellers had a sitting tenant in the maid's room belonging to the apartment. The owner had been negotiating with the tenant for months to find a replacement apartment. This means the apartment could not be declared "empty." We discovered this on the eve of purchase and notified our buyer's notaire.
This caused a serious problem for the sellers since they had misrepresented the fact that there was a sitting tenant with legal rights to stay there. Their notaire was furious and explained to the sellers that the buyer could walk away from the sale with no consequences. The sale was delayed briefly, until the tenant moved out. Without that confirmation, we would have told the buyer to cancel the sale because it is very difficult to remove sitting tenants in France. Because of the misstatement, the buyers would have been able to walk away with a full refund of their deposit.
Important Advice: The same notaire can represent both the buyer and seller, and real estate agents often propose this. Don’t do it. We recommend the buyer use their own notaire to be sure their own interests are fully represented. There is no extra cost to choosing your own notaire, as the fee is the same and will be split between both. Our recommended notaire has represented our owners and us for decades. He is smart, efficient and looks after our buyers’ interests down to the smallest detail. We are happy to put interested buyers in touch with him.
The Purchase Agreement
There are several types of purchase contracts, and the most common are the Compromis de Vente and the Promesse de Vente. It is important to know that once a contract is signed, there is a ten-day grace period in which buyers can change their minds and receive the full initial deposit. However, after that ten-day grace period, the buyers will lose their deposit if they walk away, subject to the "Special Conditions" clause of the contract.
Offre d'Achat: Sometimes a real estate agent will ask you to sign an Offer d'Achat, a formal written offer. Be careful about signing this. We recommend you only do so in the presence of your own notaire or lawyer. If the other party accepts your offer, then a legal contract is developed, subject to any conditions that may be in the offer. It is forbidden for a seller or agent to ask for a deposit at the time an "Offer to Buy" is made. If they ask you to pay a deposit, walk away.
Compromis de Vente: This is a bilateral agreement where both the buyer and seller are bound to the sale. The owner agrees to sell to the purchaser and the purchaser, in turn, agrees to buy from the owner, subject to any conditions (Conditions Suspensives) that may be stipulated in the contract.
Promesse de Vente: This is a unilateral contract by the seller, similar to an "Option to Buy." Under a Promesse de Vente, the seller is obliged to sell the property to the buyer at the agreed price, within a specified duration (which can be several months or longer). Prior to 2015, a Promesse de Vente could be signed and accepted immediately by the seller. The buyer had ten days to back out without repercussion. Then the process of obtaining the important documents would begin, taking up to three months on average before the sale was finalized.
New Ruling for Promesse de Vente: As of 2015, all the official documents pertaining to a property and the owner’s right to sell it - including the inspections of the property - must be provided before the Promesse de Vente is signed. The most important documents include: the ‘"loi carrez" (official size measurement); inspections for termites, asbestos and lead paint; energy efficiency; annual annual building meeting notes. These must be obtained before the Promesse de Vente or the Compromis de Vente are signed.
Because the seller must now provide all major documents before the signing of the Promesse de Vente and Compromis de Vente, the signing of the documents takes much longer - two to seven weeks or more - rather than immediately.
This has good and bad news for the seller and buyer. For the seller, the bad news is that they may gather all the paperwork over a period of weeks/months only to find the buyer has walked away. Since the buyer had not signed the Promesse de Vente, they are under no obligation to continue.
The good news for the buyer is that they have more time to obtain financing and reflect. But the bad news is if the property is really fabulous, the seller will select the buyer who has no conditions to their purchase, such as a mortgage. If they really want the property, this obligates the buyer to the purchase without knowing whether they can obtain a mortgage.
A Recent Example: We found a three-bedroom apartment for buyers from San Francisco who we arranged to view the apartment half an hour before official viewings started. They fell in love with it, and we wrote an offer on the spot at full asking price. The agent knew there were two other serious buyers and insisted our buyers write they did not need a mortgage to finance the purchase. The seller accepted their offer in writing, which guaranteed their purchase.
Later the same day, two other offers came in, both without "special conditions" such as mortgage approval, either at or above the asking price. If the seller had not officially accepted our buyers’ offer in writing, and because there was no signing of a Promesse to bind the seller, our buyers could have lost the apartment.
Special Conditions: Your notaire may add several suspensive conditions in the offer and Promesse – special conditions that would invalidate the contract if they are not met. The most important release clause allows buyers to withdraw from the contract with the return of their deposit if they cannot obtain a mortgage or if the mortgage has worse terms than those specified. This is important because if you haven't written in a financing clause and don't receive your loan, you will lose your deposit if you have to back out. Be sure your notaire is advising you well in these matters.
Grace Period: As mentioned above, once the Promesse or
Compromis are signed, there is a ten-day grace period in which the buyer can withdraw from the purchase. Note that the ten-day period of retraction does not start until the day after the letter of confirmation has been received. If you back out, you must send a written notice (by registered mail) of your cancellation, within the ten days. If the letter is mailed before ten days, regardless of when it is received, it is valid. The seller is required to return the deposit within twenty-one days.
Some people think this is a "get out of jail free" card, a way to block an apartment and have the time to reflect more carefully. This is a tricky issue, and you should use this option carefully because once you've walked away, the seller and agent will not want to deal with you again. In Paris neighborhoods, the name of an unscrupulous client is quickly shared among all agencies.
An acquaintance we know put in an offer on an apartment that was accepted by the seller. The buyer reconsidered and withdrew from the purchase within ten days, sent written notice and walked away. A month later, they realized it had been a good deal and approached the agent again; he refused to even contact the seller, letting them know that the buyer was so angry at the previous experience that he would never sell to them, even if it was the only offer made. In short, do not make your decision lightly.
What Must the Promesse de Vente or Compromis de Vente Include?
The format will vary slightly, but all Compromis de Ventes will include the following:
- The Civil Status (Etat Civil) of the buyer and seller: full names, contact details, professions, birth and marriage certificates, passport copies, details of ex-spouses
- The confirmation of the name and ownership of the property
- The full description of the property, including storage rooms, number of units in the building, the floor plan (as it is recorded in the Land Registry of your local Commune)
- The agreed price (this may include furnishings)
- The actual size of the property in Loi Carrez (square meters). It is important to know the official Loi Carrez because agents will sometimes include extra meters, which are not allowed (such as the square footage under a Mansard roof or of a mezzanine). This can become a negotiating point in terms of price.
- The amount of deposit, usually 10%, held by the notaire
- Any circumstances under which the deposit may be forfeited
- Declarations by the seller about the property and obligations of the purchaser in buying the property
- The inspections for lead, asbestos, energy efficiency, and termites
- Any provisional conditions (Clauses Suspensives). These may include standard conditions such as no other title claims or that the property searches do not reveal any problems. This is where the buyer would insert an "obtaining finance" clause or guarantees that something will be repaired or any other comments.
- The real estate agent's fees and provision for legal fees
- Penalty clauses if one side fails to complete the negotiations
- A target completion date (the date can be shifted for any number of reasons, but this represents a good estimate)
- Co-ownership deeds and all amendments, statement of the building management accounts, the last three co-owners annual meeting notes, etc.
After the Promesse or Compromis de Vente is signed, expect it to take up to three months for completion of the sale. The process of obtaining all the documentation and a bank loan are very time-consuming in France.
What Entity to Choose as the Buyer
You can own your apartment in a number of ways, and there are tax advantages to consider. Be sure to get advice from a French tax lawyer before you decide, because the cost of passing a property on to someone else can be very high.
Our recommended tax lawyer understands the tax codes in France and the U.S. He can advise on the most efficient tax structure for purchase, set up SCI’s and advise on inheritance rules; he can also recommend bilingual accountants in Paris.
Options for purchasing a property:
- In your own name
- In joint names
- In the names of your adult children or the person you wish to inherit the property from you
- In the name of an ordinary limited company, whether English or French
- In the form of a SARL (Société à Responsabilité Limitée), generally with other family members
- In the name of an SCI (Société Civile Immobilière), a special type of French company which exists to own and manage properties in France. This is the most common used.
Closing the Acte de Vente
When the buyer's notaire has completed the title searches and is comfortable that the apartment is an unencumbered asset, is the size stated and belongs to the sellers, then a date will be set to complete the Acte de Vente (Closing). This is the definitive act that transfers the title of the property to you. It will be registered at the Bureau de Conservation des Hypothques and a copy of the Acte will also be kept at the notaire's office. If you can't be present, you may assign a Procuration (Power of Attorney) to someone else to act on your behalf. This can be a search agent, your notaire, your lawyer or any person of your choosing.
Costs Associated with Purchasing a Paris Apartment
Payments and Closing Costs
You should never make deposits or final payments directly to the seller; they must go through your notaire. This is part of the function of your notaire, who will deposit the funds in an official bank account until required.
Upon closing, you'll pay the remaining amount due, generally between 90% and 95% of the cost of the apartment.
You are responsible for your own legal costs and expenses, transfer of property costs and, if an agent is involved, the agent's commission. This is stated in the purchase price, and these costs amount to approximately 7.5% of the value of the apartment. If you're taking out a mortgage, the arrangement fee is about 1%.
The legal costs include the following and are the same for every buyer, whether French or foreign:
- Land Registry Taxes (known as TPF - Taxes de Publicité Foncière), approximately 5.1% of the cost of the apartment
- Miscellaneous expenses, such as for searching and examining the deed of sale, usually less than €700.
- The notaire's fee is calculated according to the value of the property and size of the mortgage. The fees are 0.825% for properties over €16,800 and are subject to 19.6% VAT (Value Added Tax).
Taxes will differ if you are a resident versus a non-resident. If you spend less than 184 days a year in France, you are usually classified as a non-resident.
For recurring bills, we recommend you set up a direct debit from your French bank account. These may include:
- Utilities such as electricity, water, gas and phone
- Local real estate taxes ("impôts locaux")
- Property management fees
- Capital Asset Taxes: You must make a declaration of capital assets in France, and, if appropriate, pay tax on them.
- Income Taxes: You must declare income and pay taxes on any income derived from activities in France.
Would you like more information about our search services? Contact Us here.
Please read more about our tips here, including:
Tip 1: Full or Shared Ownership in Paris
Tip 2: Finding the Perfect Location to Buy in Paris
Tip 3: Mortgage Broker And Currency Exchange Service
Tip 4: Find The Absolute Best Apartment; Don’t Settle For Less
Tip 5: Getting the Best Results from Paris Real Estate Agents
Tip 6: Remodelling Costs in Paris
Tip 7: If You’re Not 100% Certain...
Tip 8: No MLS in France: The Value of a Good Search Agent
Tip 9: How does the Purchase Process Work in France?
Tip 10: Can I rent my Paris apartment short term?