Selling property in France
Pre-owned real estate in France is not just popular with buyers — it is gaining traction. According to the Notaries of France (Notaires de France), 2019 closed out a record year for the existing homes market with more than 1,000,000 transactions. The average housing prices gained 3.7% by the end of 2019. Read about how to sell property in France in the secondary market and what legal requirements are imposed on the seller and the buyer.
Nine key criteria for choosing a real estate agent
When looking for and selecting an appropriate real estate agent, it is worthwhile considering the following:
- the agent’s fee,
- the buyer’s French fluency,
- the agency’s proximity to the real property,
- availability of the agent for information requests,
- the agent’s experience and reputation,
- the agent’s marketing strategy,
- the appraised value of the real estate determined by the agency,
- the agency’s reputation,
- the agency’s website outreach to the audience,
- expertise and additional services proposed by the agency.
Selling property in France on your own
Some transactions of selling property in France in the secondary market are closed without engagement of the agent. However, an unassisted sale does not suit every owner and is typically of choice for the transactions with smaller properties or city apartments that are in demand.
Before making the final decision on whether or not to sell real estate on your own, weigh the pros and cons of such step. The owner that opts out of using the services of the agency should be ready to give the buyer representations and warranties pertaining to closing a transaction of the selected type since French law imposes the respective obligations on the real estate agent in case of an assisted sale.
An advantage of a peer-to-peer real estate sale between individuals is the opportunity for the seller and the buyer to establish direct contact, which is more attractive for the buyer, whereas the seller can set a price above the market. Besides, there is no need to pay a commission fee to an intermediary.
However, a seller should separately budget for the promotion costs to advertise the property and would have to spend its private time to look for buyers. Note that the owner would have to schedule visits of potential buyers on its own. There is a risk of spending too much time looking for an ideal counterparty or not selling the property at all. Last but not least, note that drafting a sale and purchase agreement would be a responsibility of the seller in this case.
A public sale through an auction is another option for an individual to sell property in France. Real properties are most often put on auction on the initiative of the owner. Auctions are a means to resort to in certain cases, such as division of property (e.g., resulting from a divorce settlement). This is an effective way of exiting from real estate co-ownership in an expedited manner.
A notary should appraise real property before an auction is held. As agreed with the owner, the notary sets the floor price that will be subject to a discount of at least 30% in order to get greater attention of potential buyers. Then, the notary makes an exhaustive list of expenses that include, i.a., the service fees, the cost of effecting the ownership split between the co-owners, and the expenses to be borne by the buyer. All the bidders may have a look at this list.
The auction is usually conducted in a chamber of notaries, city hall, or on-site. Before the auction is scheduled in the calendar of public sales, the sale is advertised in the press and on the Internet. The notary arranges viewings for all comers.
On the day of the auction, the bidders submit deposit cheques to the notary for an amount covering the floor price of the real property. An award is granted to the highest bidder at the close of the lot.
The law provides for a ten-day cooling-off period before the final decision to sell the real property is made. During this second-thought grace period, the bidders may make a sale price increment by 10% and set the result as the floor price for the repeated auction. If such new opening baseline bid is not proposed ten days after the end of the initial auction, the pronounced winner has 45 days to pay up the acquisition.
Note that almost half of owners prefer to use the services of a real estate agency and believe it is the most convenient way for them to sell real estate in France.
The services rendered by a real estate agent selling property in France include real estate appraisal, recommendations for choosing the sale price, drafting an advertisement, selecting most reliable buyers out of the potential pool, and arranging viewings with prior scheduling with the owner.
Making a contract with the agent
A written contract (mandat de vente) is made with the real estate agent. The realtor would not be entitled to the commission fee without such contract. The contract may be simple (mandat de vente simple) or exclusive (mandat de vente exclusif). The exclusive contract is made only with one agent that will be entitled to the commission fee even if the real property is sold in an unassisted way after the contract is executed. There are also mixed contracts (mandat de vente semi-exclusif) where the owner grants the exclusive authority to one real estate agent while reserving the right to sell the real property on its own. Nevertheless, if the real property is sold in an unassisted way to the buyer introduced by the agent, the agent will be entitled to the commission fee.
What the contract with the agent specifies?
- The personal details of the seller,
- The official details and contact information of the real estate agency responsible for the sale
- Proof of ownership for the real estate,
- The price of real property,
- The agent's fee,
- The validity term of the contract.
Unlike non-exclusive contracts that may renew automatically, exclusive contracts should be extended every three months. A 15-day notice is given by mail at least 15 days prior to termination.
The contract differs from a simple visit record used by the agent to confirm that the real property was shown to the potential buyer (bon de visite). This confirmation per se will not entitle the agent to any commission fee.
If the contract is signed outside of the agent’s office (hors établissement), the owner may withdraw from the contract during the following 14 days, using the respective retraction right (délai de rétractation). The terms and conditions for retraction are specified in the contract.
There are cases when the agent acts concurrently on behalf of both the owner and the buyer. Under such dual contract, both parties pay the commission fee to the real estate agent.
Qualification requirements for the agent
The national law requires that a realtor rendering professional services connected with selling property in France must have a professional card (carte professionnelle) or a certificate in that it is a representative of a registered agent. Professional cards certify the qualification of the agent, are issued for three years and can be of two types: for sales of real estate (transactions sur immeubles et fonds de commerce) or for rentals (gestion immobilière).
Self-employed agents (mandataires immobiliers) do not hold a professional card and operate through a realtor who does hold a card. Such agents may not enter into sale and purchase agreements or open deposit accounts, which will be done by the professional card holder on whose behalf they operate.
The commission fee of the agent
The commission fee (honoraires) is a covenant that must be fixed in the contract with the agent. The contract also establishes the party — the seller or the buyer — that will remunerate the agent. If the buyer pays the fee, there are two prices in the sale advertisement: one is given inclusive of the agent’s fee and taxes, and the other excludes both charges. If the seller pays the agent’s fee, the advertisement might state only the price of the real property. If the buyer and the seller share the cost of the commission fee, the advertisement specifies the conditions for payment of the agent’s fee.
Meanwhile, payment of the commission fee by the buyer in a sale of real property in France may be legally guaranteed only if the buyer makes the respective decision at its discretion. The same is written in the contract between the seller and the agent. Such arrangement is advantageous to the buyer as the fee payable to the agent is deducted from the sale price that is also subject to the stamp duty and the notary’s fee (both payable by the buyer).
The seller negotiates the amount of the fee with the agent. Commission fees range from 4 to 10% of the sale price. The lower the price of the real property is, the more expensive the realtor’s services are. The average commission fee in selling property in France in 2018 was about 5%.
The agent’s fee is paid after the transaction is closed with the buyer introduced by the agent. If the conditions of the contract are observed but the transaction is not be closed, depending on the circumstances of the transaction failure the agent will be entitled to a compensation fee or expense reimbursement.
Description of real property
French law does not establish strict standards for description of real estate. According to the rules for selling the property in buildings (Loi ALUR) in joint ownership, a sale advertisement must contain general information about the property, such as a property type, condition, layout, floor area, and energy rating (étiquette énergie). It makes sense for the agents, who are usually not granted exclusive rights in selling property in France, to give a brief description of the real property.
Pre-sale technical diagnostics of real estate
Technical diagnostics to review the condition of the building and establish a unique technical diagnostic file (Dossier de Diagnostic Technique or DDT) is a mandatory component of pre-sale preparation. The findings of the diagnostics are enclosed to the sale and purchase agreement. The costs of diagnostics are incurred by the seller. Failure to conduct the diagnostics might drive down the sale price or make the buyer walk away from the deal. The seller should ensure that the energy performance rating after the respective assessment is included in the sale advertisement. However, comprehensive diagnostics at an early stage might be impractical as many reports should be no more than six months old at the moment of sale and are otherwise inadmissible. The seller should also ensure that the real estate appraiser is accredited with the French accreditation committee (Comité français d'accréditation or COFRAC). The experts at the Notaires de France advise applying to several appraisers concurrently.
The seller is to provide some documents:
- A report of an inspection for the presence of asbestos-containing materials. Such inspection is conducted in any real property built under a construction permit that was obtained before 1 July 1997. The validity term of the report is not limited.
- The findings of an inspection of the painted surfaces for the lead content. All the real properties built before 1949 must undergo such inspection. The findings in the report are valid for one year.
- The findings of a termite and pest inspection. This inspection is conducted with the approval from the local administration only in some regions of France. The inspection report is valid for six months.
- The energy performance certificate (Diagnostic de Performance Energétique or DPE). This certificate is for information only and may not be used by the buyer as the grounds to terminate the agreement. The energy performance certificate is valid for ten years.
- The report on the state of risks and pollution to which the real property is exposed. The ERP report is required for the areas of France subject the Plan of Prevention of Natural Risks (Plan de prévention des risques naturels). The ERP report is also accompanied by information about the past insurance instances that arose due to disasters. The seller must state separately any insurance coverages claimed before. The ERP report is valid for six months.
- The diagnostic certificate for an interior gas installation. An interior gas installation is inspected if the gas equipment is more than 15 years old. The certificate is valid for three years.
- The diagnostic certificate for the interior electrical installations. This certificate is required if the electrical installations are more than 15 years old and is valid for three years.
- A septic tank survey report. The septic tank is surveyed if it is installed in the real property instead of connection to the mains sewage line. If the septic tank is found at variance with the requirements, any necessary action is to be taken within a year.
Starting from 1 July 2018, the reports about the condition of French property for sale should include the information about radon exposure risks in the premises.
Drafting and executing a sale and purchase agreement
The negotiations between the buyer and the seller result in execution of a preliminary agreement. A preliminary agreement is signed before the notary certifies the sale and purchase agreement, the transaction is closed, and the keys are handed over to the new owner. A preliminary agreement for sale of French real estate may be of two types: a unilateral commitment or promise to sell (promesse unilatérale de vente) and a mutually binding promise to sell or compromise (compromis de vente).
Under the unilateral promise to sell, the seller undertakes to reserve the real estate for the particular buyer, whereas the buyer should deposit 5 to 10% of the real estate price demonstrating its commitment. The buyer enjoys more freedom with the pre-agreement of this type and may walk away from real property acquisition without losing the deposit within ten days after receiving a unilateral promise to sell.
If the buyer renounces to buy the real property after expiry of the 10-day period, the seller withholds the deposit as compensation. The deposit is held in an escrow account (e.g., with a notary). The unilateral promise to sell must be notarised. Execution of this pre-agreement is obligatory if the transaction is made without an intermediary.
A mutually binding promise to sell or compromise (compromis de vente) is a pre-agreement more preferable for the seller as its conditions are binding on both contracting parties, which assures safety for the seller. The compromise keeps more with the letter and spirit of the sale and purchase agreement.
Similarly to the final sale and purchase agreement, the compromise might contain one or more conditions precedent or suspensive (conditions suspensives), such as obtaining a mortgage loan, a construction permit, acquisition of the adjoining land plots, etc. The compromise may not be terminated if the buyer renounces to acquire the real estate within a 10-day period or fails to fulfil the conditions precedent.
A sale and purchase agreement is drafted by the agent or the notary. If the seller also engages its own notary to draft the documents formalising the transaction, the fee amount will not be twice as much and one notarial fee will be split between the two notaries.
The law prohibits non-disclosure of important information to the buyer in selling property in France. A violation of the non-disclosure prohibition may render the transaction null and void and require indemnification of the buyer. The key disclosures required are the following:
- Latent defects (vice caché). This concept is not assigned an exact legal definition in French law. According to the interpretations in court cases, latent defects are deemed to be major faults that the seller was aware of during the sale and that, if disclosed by the seller before the transaction, would be the reason for the buyer not to make the transaction or insist on price reduction.
- Floor area. The Carrez law (Loi Carrez) requires that the seller of a co-owned apartment should specify the exact total floor area in the sale and purchase agreement. If the actual floor area proves to be overstated by more than 5%, the transaction may be rendered null and void. The seller may measure the floor area on its own or engage a professional. The seller is also obliged to disclose any material information concerning the planning permissions.
- Easements (restrictions on the use). An easement is attached to the real property rather than a particular owner, yet it is usually binding on the future owners. The seller should also inform the buyer about the existing mortgages or charges.
- The seller selling land for development must provide the buyer with the exact information about the site boundaries and the town planning rules applicable to the site.
The process of selling property in France has its unique intricacies.
The international real estate broker Tranio will help to sell real estate in France and will give you advice on the matters you are interested in.