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France Real Estate Practices


In France, prices have increased by 88% in the last 6 years and the residential market is supported by very low interest rates. There are tremendous variations from one region to another with properties in Paris and seaside resorts being twice as expensive as other cities in France. For instance, in Paris a two bedroom flat would cost a minimum of $580 a square foot and usually closer to $680 a square foot with prices in certain districts such as Champs Elysées or Ile Saint Louis exceeding $1,353 a square foot.

All signs indicate that real estate prices will probably not continue to increase in 2006.

There are no overbearing restrictions on non-residents purchasing property in France and the share of foreign buyers is about 7% in Paris and exceeds 30% in some areas.

Real Estate Practices

In France, it is not compulsory to work with a real estate agent, but it is highly recommended for security purposes and to benefit from quality service and consultancy. All real estate agents must have a professional license. Real estate agents' share in the market is 50% and they are paid by commission.

To list a property, a real estate agent must draft a sales mandate with the seller including the selling price, its commission and the duration of the agreement. This contract may be exclusive or not.

There is no multiple listing service in France although some agents share properties between themselves through individual agreements.

The agent’s commission is based on the selling price and is usually paid by the buyer; it usually represents from 5 to 8% of the selling price. VAT is paid by the real estate agent from the commission.

In addition, the buyer will pay a transfer fee called “droits de mutation” collected by the notary for the state which represents from 6 to 8% of the selling price.

Loans or mortgages are available for foreign buyers, with usually terms of 15 years and rates are currently in the area of 3.6 to 3.9% annually.

The seller must pay for diagnostic certificates (around 500 Euros) concerning the absence of termites, asbestos-cement, and measurements. If the Seller has a mortgage, he will pay an additional mortgage tax representing 0.615 % of the selling price.

If the home is a primary residence, there is no tax for resale. If it is a secondary home, there is a tax for resale representing 27% of the net gain (after deduction of acquisition costs and mortgage tax). This tax decreases each year of ownership, and after 15 years, there is no more tax on net gain.

Each year there are two local taxes plus a tax on the “wealthy” ranging from 0.55 to 1.8 % of the property value, if after mortgage/loan deduction, its estimation exceeds 720,000 Euros.

The real estate agent is an intermediary between the seller and the buyer. He or she evaluates the property, carries out administrative and commercial procedures such as research on a buyer, advertising, drafting of agreements, etc.

A potential buyer must send a written offer to the real estate agent who will contact the seller. If this offer is below the sales mandate price, the seller is free to accept or refuse.

Once they agree on the price, the buyer and seller sign a preliminary sale contract. The buyer pays a 10% deposit fee which is transferred to a sequestrated account. The buyer has a legal delay of 7 days to confirm his purchasing intention. There are also suspensive terms such as obtaining a mortgage from the bank.

It takes usually 60 to 90 days for properties to go to settlement and, at that time, the buyer and seller sign the final contract which is then notarized. Most of the time, the buyer will pay on the solicitor's account the selling price plus the solicitor's fee which is from 6 to 7%. The buyer pays the commission directly to the agent.

Information courtesy of LAMY

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