I have been asked on several occasions by my private clients as well as by colleagues, if I could write a basic summary about the sales procedures where the purchase involves taking out a loan.
If you are interested, or are perhaps in the process of purchasing a real estate property in France, feel free to read on and consider the advice below. Even if you do not intend to take a loan, the process is very similar, and further on I will point out the main differences in the pre-sales agreement.
I am sure that you will come to the conclusion that as a purchaser you are far better protected with the French real estate laws then a seller is. This is particularly true if the “Compromis de Vente” (the pre-sales agreement) is drafted by a French registered Notary.
The first stage is to find a real estate agent / agency. It is important to ensure that the agency or the agent carries a valid licence called the “Carte Professionelle”. If they do not, my strong advice is to find someone who does.
Once you have made your choice of registered real estate agent it is time to start looking for your dream property. One small word of advice, please ask the agent to show only those properties for which he has a valid mandate. Very often agents will offer for sale properties where the owner has not committed to sell. There is no agreed sales price between the owner and agency and commission has not been negotiated. An owner who is not prepared to commit to signing a sales agreement is probably only interested in obtaining an accurate valuation of his property. If he is intending to sell, the price is going to be well above market value. The end result is that your time is being wasted.
With a good choice of registered agencies on the French Riviera, it should not be too difficult to find and work together with a serious agent. Finding the correct property is actually a finer art and is achieved more easily if the agent first spends 20 – 30 minutes taking detailed notes about your property requirements. Above all, avoid being rushed off to view the first ‘best house’ that comes into the mind of the agent.
The first question, once that dream house has been identified, is how much financing a French bank will authorise. The answer is not very straight forward, as each bank has their own terms and conditions. Typically, a French Bank will finance up to 70%-80% of their value of the property. This is calculated by the bank’s own specially appointed real estate appraiser and is not based upon the agreed purchase price. In that rare case where the purchase price is lower than the appraiser’s estimate, then this figure will be used to calculate the amount the bank is prepared to finance.
Once the French bank has issued their loan terms, it is time to formalise an agreement with the seller in respect of the purchase price by making a written offer. This offer should be drafted by your French licensed real estate agent.
Now that you have signed the offer and it has been counter signed by the seller, the seller is only partly committed to sell to you for the agreed amount. These offers are normally only valid for 2 weeks and at no time the purchaser is obliged to proceed to purchase. The main intention of an offer is to invite the seller to meet you at a Notary, who by that time should have drafted a strong agreement called “Compromis de Vente” within this period.
The “Compromis de Vente” (Pre sales agreement) preferably should be drafted by a French Notary and I suggest to alway to use a Notary that speaks fluent English, in case you are english speaking of course. A few Notaries will make free translations of the documents, not obliging you to have a certified translator present at the signatures. Saving you some money!
It is very important that you mention to your Notary if you wish to have financing, as he will need to add the amount of financing, the length of the loan and maximum interest rate you are prepared to pay into the pre-sales agreement.
If you decided to take a loan, you and if you wish with the help of the Real Estate agent, will need to contact a few banks and request for their best rates and conditions. The banks will ask for a copy of the signed Compromis de Vente (CdV) because without it they will not even start the loan application.
As a buyer you have several privileges:
1) The seven days cooling off period: You will be asked by the Notary after you have signed the CdV to make an initial deposit of generally 5-10% of the sales price. The purchaser has 7 days cooling off period counted from the day both parties have signed the document. Within this period you have the right to cancel the CdV, with a simple letter by registered post addressed to your Notary saying you no longer wish to purchase the property! In this case the Notary has to return the initial deposit in full to the purchaser.
2) In the “Compromis de Vente” there is a clause where all purchasers have the right to cancel the contract and get a full refund of the initial deposit should the bank(s) not approve upon your loan application. In this case the purchase will be canceled!
With the signed Compromis de Vente the Notary will make several verifications to certify that the purchase is 100% legal. They will lift / clear any mortgages, check with the land register to verify that the property you are buying is from the rightful owner. The community holds the first right of purchase, also called (DIA) needs to be cleared. This procedure is the longest and can take up to 8 weeks.
The signing of the Acte Authentique (Bill of Sale) should be quick and easy, a little like the icing on the cake, as all the issues should be cleared before the signing of this document. At this moment you get access to your new home including all the keys with your name on them.
The agent should have organized an insurance company to create a home insurance valid from the day you sign the “Acte Authentique”. It is also the day when the real estate agent gets paid and will present his invoice to the Notary. With regards to all the utility bills as electricity, water and telephone the transfer to the new owner is provided as a service by the real estate agent.
Short summary for the standard procedure to purchase a property in France is:
1) A written offer sent by the purchaser to the seller where the price is agreed upon. (Needs to be signed by both, seller and purchaser)
2) A Notary needs to be appointed! Each party has the right to seek their own Notary! One Notary for the seller and one Notary for the buyer. But you could also use the same Notary as the seller, or the other way round to speed up the process.
3) A Compromis de vente (Pre sales agreement) will be drafted by the Notary / Notaries where all specific clauses and agreements need to be stated, as well as all legal French rules needs to be explained and informed to both, purchaser and seller.
4) 5-10% deposit paid by the buyer into the Notary’s account and held by the Notary until the final bill of Sales is signed (2-3 months after the signature of the Compromis de Vente).
5) You can now go to different French banks with the signed Compromis de Vente and negotiate for the best financing.
6) The Notary / Notaries will obtain all legal documents for the “Acte Authentique” (Bill of Sale)
7) Ca. 3 months after signing the Compromis de Vente it is time to sign the Acte Authentique (Bill of Sale) and hopefully you have got an approved financing and the sale can be completed. Should you not have received the approved loan from your bank the initial deposit will be returned and the sale canceled!
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