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Selling Your Home

Posted by ProvenceDays on May 27, 2014
| 1

How to sell your house in France

Everything you need to know about selling your house in France, from Provence Days Homes.

 

The language barrier

Any legal process like selling a house in France is complicated, and if you do not speak fluent French it can be extra stressful. To get around this, appoint a real estate agent who is fluent in both French and English. If an agent just speaks a little English, as is common in France, it can be more dangerous than none at all, because the broad strokes will be understood but not the detail of what you want to communicate. At Provence Days we are all bi-lingual in French and English, we will help you every step of the way, and we think the most important part of our job is… to listen.

 

Real estate agents in France

Real estate agencies (agences immobilières, or immobiliers for short) in France are strictly regulated, and while that does not necessarily guarantee good service, it does mean agents are properly trained, insured and financially guaranteed to do the job they do.

Note that it is the buyer who pays the agency’s commission, so you do not lose anything by employing one.

How do you know if an immobilier is really an immobilier? Ask to see their carte professionelle (professional card). This card must mention ‘Transactions’, this means the agent is allowed to sell property.

It is normal for the head of an agency to have the carte professionelle, and for his/her colleagues to work under that card. It is the card-holder who must process the sale contract though.

The contract of sale you enter into with an immobilier is called the mandat de vente, and this is an obligatory document, it’s no good just having a verbal agreement.

You can either have an exclusive contract with one agency (mandat exclusif) or a non-exclusive contract with more than one agency (mandat simple). An exclusive contract, which generally lasts 3 months, means the agency will dedicate more time and effort to you since they know that they have 3 months to sell and only they can sell for that period of time.

This contract of sale is in French, and if you would like a translation, at Provence Days we can of course provide you with one.

After signing a mandat de vente, you still have 7 days in which to change your mind. In this case you will need to notify the immobilier by recorded delivery (lettre recommandée avec accusé de réception).

France has particular rules about contracts expiring and renewing. A mandat de vente can’t be for an unlimited time period, and an exclusive mandat de vente (where you choose only one agency to sell your property) is for a maximum of 3 months. A contract can be set to renew automatically on a rolling basis if neither party notifies the other that they want the contract to end. However, there will be a minimum notice period before the contract’s expiration date, typically for a mandat de vente you need to give 2 weeks’ notice if you want to terminate at the next available opportunity. Again this needs to be done in writing by recorded delivery.

 

Legal documents

You have to supply your selling agency with some documents to prove your identity and your ownership and right to sell the property: title deeds, plan cadastre showing the plot of land you own, proof of ID, and your most recent taxe foncière (property tax) bill. It would also be preferable to supply floor plans or architect’s drawings if available. The more information the better, so that a potential buyer’s questions can be answered quickly. A popular question is how much the house costs to run in terms of taxes, heating and utilities, so it is good to have this information to hand.

 

The asking price

Owners often want an inflated asking price for their home, because, well, it’s their home, they have loved it and it’s special and not like all the others available… But the asking price is not about what the house is worth to you, it is about what the market will pay for it. It is better to trust in the judgment of a professional immobilier at the start than risk a house sitting unvisited and unsold.

 

Property descriptions

French immobiliers you will notice give only very brief information on a house, such as surface area and number of rooms, and usually don’t even name the nearest village. The reason they do this is twofold: they don’t want buyers to find a house on their own; and they don’t want other immobiliers knocking on the door and making unrefusable offers. At Provence Days we are trying to buck this trend by describing a house’s location, showing every room, and writing about it descriptively (even lovingly!) from the buyer’s perspective.

 

Agency commission

The mandat de vente will also state the amount of commission due to the selling agent. The commission an agency charges must be displayed on the agency’s website and in their office. This scale of rates is called a barème. It ranges from roughly 4% to 10%, depending on the sale price in question. The more expensive the house, the lower the commission should be.

Although it is usually the seller who pays the agency commission, and this is deducted from the final payment for a sale, you can also look at it as being the buyer who pays. Because you would agree on a price ‘to you’ with the agency, and then they add their commission on top for the published asking price.

If all the conditions in the contract of sale are met but the sale does not go through, the immobilier can still be owed the commission. If a seller chooses to sell direct to a buyer who has been introduced to them by the immobilier, so as to avoid paying the immobilier‘s commission, this will not work. The immobilier will be due damages and interests, either by the seller or both seller and buyer, depending on how the court rules.

 

Making the most of your home

When it comes to selling your house you should do what you can do to make it as appealing as possible, not just from an aesthetic point of view, but also in terms of the maintenance of a property. A buyer wants the reassurance of buying a house that gives the impression of having been well looked after.

However, you should not expect the fact that you have invested in a new central heating or roof repairs to be reflected in the asking price, because a buyer would expect things to be in good order anyway.

Be careful about painting and redecorating, as the more personal you make something, the more reasons people have to take against it. It is best to decorate in a neutral manner, use white paint, and remove clutter, to let the imagination of the buyer see the possibilities. Clutter and personal touches makes it harder for the buyer to see themselves living in your house.

Cleanliness and tidiness are obviously key when showing a property. Bad smells must be taken care of too. Dogs are best removed from the property when there is a viewing – out in the garden or even in the garage or car for a short while!

The most simple and effective thing you can do to make someone fall for your house is to make a good first impression – even before they enter the house. So re-paint your front door or gate, and put some potted plants around the entrance. If there is gravel around the entrance, bring in a fresh load. This makes a real difference for little work. Cleaning the windows before a viewing makes a house look clean and appealing.

If your house is in need of more important repair work, it is usually better to get this work done because this will cost you less than the amount a buyer will seek to discount the asking price to account for the repairs. Or at least you should get 3 quotes for the repair work from registered builders/tradesmen, so you can show these to a buyer.

 

Viewings

It is best to let the immobilier show the house on their own. It is really off-putting for a potential buyer to be followed round by the owner from room to room. You want the buyer to feel comfortable and be able to speak frankly to the immobilier.

 

Diagnostic surveys – Dossier de Diagnostic Technique

When selling a house in France you have to provide a number of surveys on your property, covering energy efficiency (DPE), lead in paint, electrical wiring, gas, asbestos, termites, natural or industrial risks, septic tank, and presence of pool security and smoke alarms. These surveys can mostly be done by one person, a diagnostic immobilier, and we can recommend someone reliable you can use. The person taking these surveys must of course have the right accreditation, called a COFRAC or Comité d’accréditation francais.

The exception is the septic tank that must be checked (controle assainissement) and the first step is to ask your local mairie how to go about this – this one can take some time and so you need to initiate it as soon as you decide to sell.

Together these surveys are called the Dossier de Diagnostic Technique or DDT, and these have to be available when a buyer visits, not later on in the process. It would make a poor impression on a buyer if these surveys are not available, as it looks like either you are not serious about selling (and therefore don’t want to spend money on getting them done) or you are hiding something terribly wrong with the property.

If problems do come up, for example if your electrical installation is antiquated, you can show your electrician the details and have them fixed before putting the house on the market.

 

Disclosures

As a seller you are required by law to disclose various relevant details about your house to your buyer. If you don’t this could mean the buyer can pull out of the sale and seek damages.

Vice caché (hidden defects)

This is defined as something serious enough that the buyer would have not made an offer, or made a lower offer, if they had known about it. So any negative aspects of the condition of the property should be declared to the buyer, and a clause added to the sale contract to the effect that the buyer is aware of the defect. This rule does not apply to a new-build property, as these have a 10-year guarantee against any defects.

Surface area

If you are selling an apartment that is part of a copropriété, the surface area of the inside must be correctly stated. If it is wrong by more than 5%, that is grounds for the buyer to cancel the sale. This can be done professionally by a surveyor and we can help with that.

Servitudes (easements)

A servitude or easement means a restriction on the use of a property, for example if there is a right of way through the land. A servitude applies to the property, not the owner, so it is passed on when ownership changes. The notaire will look into any servitudes that apply, but as seller you also need to declare any that you know of.

Tenancies/licences

As seller you have to declare any legal interests over your property, for example if a farmer has a tenancy to use part of your land.

Planning

The seller has to reveal any information they have relating to planning permissions or disputes.

 

Accepting an offer

When you accept an offer you sign a sale/purchase contract with the buyer, and the buyer has a 10-day cooling-off period, but the seller does not

 

The sale contract

This is called the compromis de vente (or promesse de vente). You should make sure it contains what has been agreed with the buyer, especially any conditional clauses (conditions suspensives) – most commonly a contract would be conditional on the buyer securing a mortgage, or planning permission. The contract must have a set duration, so you are not stuck if for example the buyer is struggling to get a mortgage or planning permission.

The sale contract can be prepared by an immobilier or a notaire. At Provence Days we use a notaire as this is their area of expertise and a notaire is an impartial government official. Buyer and seller will normally use the same notaire, although there is no reason why they should not each have their own notaire. The notaire‘s fees are paid by the buyer, and if two notaires are used the fee is the same but split between them, and still paid by the buyer.

 

The deposit

Along with signing of the sale/purchase contract, the buyer pays a deposit of up to 10% of the agreed sale price. In practice it is usually 10%, but can be lower. This money is paid to the notaire and held in an escrow account. If the buyer defaults the deposit is paid to the seller (subject to any conditional clauses in the contract).

It should be mentioned here that you should be sure you really want to sell. In other countries you can change your mind right up to the last minute and it is the buyer who loses out. In France once you sign the compromis de vente there is no cooling off period for the seller and you are committed to the sale.

 

Searches

When the sale agreement is signed, the notaire then takes about 2 months doing local searches. The main one being to establish you are entitled to sell the property. Your local mairie and, if the house has land, the agricultural land agency also have the right to pre-empt the purchase at this stage, at the same price you have agreed with the buyer.

 

Completion

It takes at least 3 months in France to get to completion of a sale. The sale contract will have had a completion date inserted but this is an estimate and not binding, as it is not known how long the notaire will need to complete his work. This is not the same thing as a date you may have agreed for the buyer to satisfy any conditional clauses (e.g. secure a mortgage). These dates are binding and if not satisfied allow the seller to withdraw from the sale. In the event that the buyer does not want to go ahead and the terms of the contract have been met, you will have to take legal action and the sale will be forced through by the courts (or damages awarded to you).

The actual completion consists of the notaire reading out the deed of sale to both parties prior to signatures. While it is not necessary for either party to be there, as you can appoint a representative with power of attorney, you should make sure you have read the deed of sale and confirmed the details are the same as agreed in the sale contract.

The notaire will have received cleared funds for the purchase prior to this moment, and these funds are held in a dedicated government account. The money can only be transferred into your bank account, it cannot go to a currency exchange company. The amount you receive will be minus any capital gains tax due.

 

Capital gains tax

Plus-values immobilières or capital gains tax (CGT) is a tax applied to the profit or gain you have made from a house – the difference between what you paid for it and what you sell it for.

The good news is there is no CGT in France on your primary residence. This can be true even if you owned the house for years without living in it, as long as it is your main home when you sell. And if you leave before the house is sold, as long as you put it on the market when you lived in it, the CGT exemption can apply for another 12 months. This is assuming that you are registered in France for tax purposes.

There is also an exemption if you receive a state pension or are registered disabled and meet certain low-income criteria. Or if you did not own your main home for the 4 years prior to the sale, and you use the proceeds of a sale to invest in a main home. (As ever with French tax, it’s complicated, the situation changes regularly, and expert advice should be sought. We can point you in the right direction).

Other than these exemptions there is CGT to pay on the sale of a property. You can deduct the cost of the sale and any renovation/rebuilding/improvement work that you can show receipts for from a registered builder. (If you can’t provide receipts then a 15% flat rate is permitted). Maintenance and repairs cannot be deducted, and obviously there is something of a grey area as to what constitutes a repair as opposed to an improvement. It is the notaire who decides what is an allowable building cost or not, and you can always discuss this with a notaire beforehand.

The capital gains tax tapers over time, so it reduces for every year you owned the property, and it is made up of 2 parts, to complicate things: tax and social contributions. At time of writing the tax part starts at 19% and the social contributions at 15.5%, for a total of 34.5%. This amount starts to taper after the 6th year of ownership, so if you have owned a house for less than 6 years your CGT will simply be the full 34.5% of the change in value of the property. The tax element tapers off from the 6th year of ownership to the 22nd year when it disappears completely. The social contributions element is harder to get rid of. This starts to taper at year 6 but does not get to zero until the 30th year of ownership. The tax situation in France changes regularly so when you read this it may well be slightly different.

Capital gains tax is paid by you at the moment of sale, in the notaire‘s office, it is deducted from the amount paid to you for the sale of the house by the notaire.

Capital Gains Tax calculation example: you bought your house 12 years ago for 400,000 euros and you sell it for 600,000 euros. The gain is 200,000 euros. For the first 5 years of ownership there is no reduction in CGT. For the other 7 years of ownership you get a reduction of 6% per year on the tax element, so the tax element will be reduced to 11.02% instead of 19%. As to the social charges element, the reduction is 7 x 1.65% for years 6-12. That means the social charges comes down from the base of 15.5% to 13.71%.

Now you apply those numbers to the gain of 200,000 euros.

Tax: 11.02% of 200,000 is 22,040

Social charges: 13.71% of 200,000 is 27,420

Total: 22,040 + 27,420 = 49,460 euros of CGT will be deducted, so you will receive 550,540 euros instead of 600,000.

In this example we have not taken account of any allowable deductions from the 600,000 sale price, such as purchase and sale costs, or cost of renovation/rebuilding/improvement work.

 

Surtax

And because France loves its taxes, there is even an additional tax for what are considered large gains, as follows:

From 50,000 euros to 100,000 euros:  2%

100,000 to 150,000:  3%

150,000 to 200,000:  4%

200,000 to 250,000:  5%

More than 250,000:  6%

 

But this also is liable to change from year to year, or disappear completely depending on the administration in charge.

Note that if a property has two joint owners, you split this surtax between owners. So if the gain in value of a house is 90,000 euros, that is split between the two owners – each has a gain of 45,000 euros, which is less than the minimum threshold of 50,000, so neither pays this tax.

If there are any complicating circumstances to a sale, for example a surviving spouse and children jointly inheriting a house, advice must be sought from a notaire or lawyer before any big decisions are made. It is possible for instance for inheritors to end up paying more in CGT than they would have paid in inheritance tax, because when you inherit a house it doesn’t matter how long it has been in the family, for CGT purposes an inherited property is treated like a sale and you start again at year 1 of ownership.

 

Fiscal representative

If you are selling a property in France, and you are not an EU/EEA resident, you need to appoint a fiscal representative from the SARF (Société Accréditée de Représentation Fiscale). This person, while acting for you, is basically checking you pay all the tax due from the sale. Provence Days can help you if this applies to you.

One thought on “Selling Your Home

  • on April 29, 2019

    It works really well for me

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