Each property market in the world has its own specifics, including a standard transaction procedure that ensures the majority of potential risks are mitigated and all local and/or state regulations are duly met.
The French property market is no exception and for those new to this market, we briefly outline the procedure, including costs, parties involved and expected timeframe.
Once you select the particular property, submit your offer to the seller and receive a confirmation from the seller that your offer has been accepted, the transaction process begins.
1. The process starts with a selection of a notary (notaire), who is a state appointed legal specialist for property transactions, governed by Ministry of Justice that ensures that all legal requirements are duly met.
Notary costs:
In case of existing property c. 7-10% of the purchase price (this excludes agency fees that are usually included in the purchase price);
In case of new developments c. 2% of the purchase price for transfer and registration tax + VAT of 20% (not applicable if transaction is between two individuals). This also excludes property agency fees.
Note: Notary receives 1% of the purchase price; the rest goes to the local and/or state government (stamp duty and registration tax). Notary costs are to be considered in the overall cost of the transaction (on top of the purchase price).
2. Once both parties agree on the notary, they sign a preliminary contract called “Compromis de Vente” (contract to sell) or in some cases, mostly in the northern France “Promesse de Vente” (promise to sell).
The Compromis de Vente is an agreement between the buyer and the seller to finalize the transaction while complying with the terms and conditions described in this legal document. It is drafted by the notary upon receipt of all necessary paperwork from the seller (title, legal regulations, technical specification, etc). It shall include all the specific conditions of the deal (besides price and time of closure, also a need to obtain loan by the buyer, planning permits for required structural changes, refusal due to pre-empt rights, etc).
3. Immediately after the signature of the Compromis de Vente, the buyer is obliged to pay the pre-agreed deposit (c. 5-10% of the purchase price). Funds are to be kept with the notary on the escrow account until the final transaction.
4. Following the payment of the deposit, the buyer is given 10 days cooling off period. This gives the buyer a chance to thoroughly sleep on it and in case he/she decides (for whatever reason) not to proceed with the transaction, he/she gets full refund of the deposit and the transaction is nulled. The seller does not benefit from this period as it only protects the buyer.
After the 10-day period is over, the buyer’s withdrawal from the transaction is subject to loosing his/her deposit in favour of the seller as a form of compensation.
5. In the next step, the purchaser arranges all funds necessary to close the transaction. During this period, even the transaction structure can be adjusted (individual acquiring the property or via company).
Please note that the process of securing a loan in France from a French bank, can take up to 4 months (if applicable at all).
6. Once all of the above is completed and all the remaining purchase funds are prepared by the buyer; the final deed called “Acte Authentique de Vente” is drawn up.
Please note that the period between the signature of “Compromis de Vente” and “Acte Authentique de Vente” is usually 2-4 months.
7. Upon signature of the final deed, the buyer transfers the remaining part of the purchase price and associated costs (as stated in point 1. above, c. 7% on top of the purchase price) to the escrow account managed by the notary.
8. Within a few weeks after the receipt of the payment from the buyer, the notary releases the funds to the seller (less the notary’s fee, stamp duty and registration tax). Finally, the property can be formally handed over to the new owner.
Note: in case the seller is due to pay a capital gains tax on the property (applicable especially to second homes) the notary will deduct even this amount from the sale price and submit it to the appropriate tax office on behalf of the seller.
For all the properties listed on our website, we will gladly recommend you well-established legal professionals with sound reputation on the corresponding property market.
