Who is involved in your real estate purchase?
A seller has a good to sell at a price determined by the market and a buyer who seeks a good to buy according to price and criteria. But how do you choose a selling price?
Purchasing through a mortgage, banks will check the real value of the property by ordering a valuation (sometimes to be paid by the buyer). The loan to value will be based on the valuation price rather than the purchase price so it will directly affect the mortgage amount sought after by the buyer.
If the difference between the selling price and the valuation is too important, the buyer will certainly lose his trust in the seller and the transaction could be cancelled.
Another duty of the seller is having the Energy Performance Diagnostics run. The law enforces any owner to carry out real estate diagnostics before any transaction and publicity. They are here to protect the people, property and the environment.
The controls and measurements of the diagnostics check the presence of asbestos, lead, anti-parasite…
Real estate agents
The real estate agent is a licensed professional who realizes real estate transactions as an intermediary between two or more parties during a purchase: the buyer (his actual client), the seller and the solicitor.
After visiting the property, occasionally negotiating and closing the sale, the real estate agent accompanies the buyers in every administrative steps to finalize the real estate transaction. Know that between the promise of sale and the final delivery of the keys of your property, it can take up to 4 months. The real estate agent often introduce the client to a mortgage broker to manage the financial plan.
How much does it cost you?
In France, the estate agent commission may be paid by either the buyer or the seller: it’s something to establish as early as possible in a negotiation. It could vary from around 5% to 10% of the purchase price, and most probably decrease on higher-value properties.
The notaire is not only a key player in the transaction process, they are a legal requirement. As a representative of the state, they are unbiased and their duty is to the transaction. Think of them as the referee. They are simply there to make sure that the transaction complies with French property law and ensure that any taxes are collected.
In France, the sales contract is signed at the beginning of the process once an offer has been accepted by the seller. Technically, you do not need to have a notaire at this stage, but it is a good idea to have one as they can help with legal and financial matters such as mortgage clauses.
Between signing the sales contract and final deed, the notaire will carry out carrying out conveyancing which can take up to three months.
The money from the mortgage and any personal funds never enter the notaire’s hands, they are sent to an escrow account instead. The money will be transferred to the seller after the deed (called an “acte de vente’’) is signed. Once this is completed, the notaire will give the buyer a certificate of ownership.
How much does it cost?
Notary fees do not depend on the notaire you choose, but rather on the value and the condition of the property (newbuild or existing). For a new-build property, the fees are around 2-3% of the property price whilst existing properties have a higher rate of higher fee of 7-8%.
Though they are called “notary fees’’, 85% is paid to the state and the notaire receives the remaining 15% as payment.
Mortgage brokers (that’s us!)
The choice of whether or not to go through a broker depends primarily on the client’s profile. If the client does not have the option to go around the banks to find the best deal (which is generally the case for most of non-residents), using a broker will certainly be worth it!
- – A broker can find better deals by using his negotiation power. The business volumes of a broker can give key account status with many lenders, with preferred rates and conditions as well as access to Senior management when the need arises.
- – Just like the real estate agent in regards to the property, the mortgage broker will bring his expertise to ensure the success of your application. Not every file is straightforward with banks.
- – Broker fees can be reduced regarding the relation of the broker with the lender. At French Private Finance, we don’t charge a fee if the application falls through.
Life insurance cover for the mortgage, building and content insurance for the property are mandatories (life insurance can be waived with particular lenders but this is very rare).
The lender generally offer a deal for the various insurance covers but going to an insurance broker can often get you better premiums. Just like a mortgage broker, they have access to a whole of market options.
For Off-Plan properties, the content and building insurance covers are not required during the construction but are necessary to exchange the keys.
For existing properties, the content and building insurance covers must be set up before the signature of deed of sale with the notary in order to get the keys.
Regarding the Life insurance cover, it must be set up in order to have the mortgage offer so much earlier in the process. Depending on the medical questionnaire’s answers or the mortgage amount, medical tests can be required.