The French real estate agency system
A houseowner in France wants to sell his house and usually commissions several estate agents to do so. In addition, the seller can also look for a buyer himself, outside of the estate agents.
As a result of the above, the housing market in France lacks transparency and has its own logic. Estate agents who have been given the task of selling a house by the owner will try to find a buyer as quickly as possible. It is important for an estate agent to be able to prove to the owner that a prospective buyer has been introduced by him, so that he will receive his fee if the house is bought by this prospective buyer. That is why a ‘Bon de Visite’ is always signed with the estate agent during a viewing.
There are several types of sales contracts, this is called a mandat in French.
The sales contract (le mandat)
The seller has the possibility to choose one of the following three types of mandates: a simple mandate, an exclusive mandate, or a semi-exclusive mandate.
The most common form of assignment is the ‘mandat simple’. The homeowner can commission several estate agents to sell his house and find a buyer himself circumventing the estate agent. An increasingly common mandate is the ‘mandat exclusif’ whereby one estate agent has the chance to sell the house exclusively. A variant of this is the ‘semi-exclusive mandate’ whereby the homeowner can also search for a buyer himself. Generally, the estate agent’s commission is payable by the seller unless otherwise agreed. The commission is usually included in the asking price.
In the case of a ‘mandate simple’, estate agents advertise the same house on the internet separately from each other. That is why a house is often shown on the same websites with different photographs, descriptions, prices and without mentioning the exact address. The photos on the websites are often very vague and of poor quality and the advertisement often lacks clear photos of the exterior and the location. This prevents prospective buyers from finding the property themselves and trying to reach an agreement directly with the owner circumventing the estate agent. The estate agents do the work, but in that case are not paid for it.
The sales agreement (compromis de vente)
When the buyer has been identified, the provisional sales agreement is drawn up: the ‘compromis de vente’. This purchase agreement is drawn up by the notary and signed by the buyer and the seller. At that point the buyer has a cooling-off period of 10 calendar days in which he can still withdraw from the purchase free of charge. At the end of this period, the purchaser generally pays 10% of the purchase price into the notary’s escrow account.
The deed of delivery (acte de vente)
At least 2 months after signing the ‘compromis de vente’, you will sign the ‘acte de vente’ also known as the ‘acte authentique’ (deed of delivery) at the notary. You are now the owner of the property and will receive the keys. Prior to this appointment, the purchase price must have been paid into the notary’s escrow account. You will also need to take out property insurance beforehand.
The buyer pays the notary fees (frais de notaire) for drawing up the compromis de vente, the acte de vente (the deed of delivery), the correct registration in the land register and the payment of taxes to the government. Notary fees vary between 7 and 8%. The largest part, between 5 and 6%, consists of transfer tax paid to the government by the notary. The remaining part is the fee for the notary. The estate agent will also receive his fee. Furthermore, the real estate tax is settled for the current year and the ‘plus-value tax’.
All property owners in France pay property tax. There are two types of property taxes. These are the ‘Tax foncière’ and the ‘Tax d’habitation’. The ‘Tax foncière’ is paid by the owner of the property. The ‘Tax d’habitation’ is the resident tax and is paid by the occupant of the property.
This is a tax that the seller of the property must pay to the government. It is a tax on the increase in value (costs of proven renovations to be deducted) during the period that the seller has owned the property. The tax is only applicable if it concerns a second home or a home that has been rented out. This tax is therefore not applicable if you live in it permanently. The rate is 36.2% on the depreciation and decreases on a graduated scale from the 6th year of ownership. Approximately 50% of this tax liability ceases to apply once you have owned the property for 22 years and the next 50% is no longer due after 30 years. In the meantime, the liability is reduced by a fixed percentage each year.