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An American in the French Languedoc

Real Estate Realities and Formalities

 

BY MARQUES VICKERS


      In France, all real estate transactions are processed by a Notary, who handles title transfer and escrow arrangements. Notaires are university educated, nationally licensed and operate as the recognized authority on real estate law.

      They are theoretically impartial, representing neither buyer nor seller in the sales agreement. The buyer pays for their services, a 6-7% commission based on the sales transaction price.  The French government establishes their compensation rate, so it is not open for negotiation.

      A Notary’s role is to insure all legal requirements are competently performed, formalities rigorously followed and appropriate taxes levied. They can be a wealth of clarification advice based on France’s complicated real estate, heredity and capital gains tax regulations. Some speak passable English, but this should never be presumed. Due to the influx of English-speaking property owners within the Languedoc, a Notary can furnish a translated version of all contracts and instructions if requested. It is not uncommon for a buyer and seller to furnish their own preferred Notary to a sales transaction with no additional expense involved.

      The participation of a Notary is mandatory in the real estate transaction process. The involvement of a real estate agent however is not. An agent’s role can become invaluable in sourcing properties, negotiating pricing and recruiting resale buyers. Their compensation (paid by the seller) is generous, often as high as 9% of the sales price. A conscientious agent is crucial to walking a first-time buyer through the sales process. A lazy, uninformed agent often stalls or handicaps a serious purchaser through their incompetence.

      Properties can and often are transacted without an agent’s involvement. The commission savings should contribute to a lower transaction price. I would advise only repeat buyers and sellers to consider this option.

      The initial step in the purchase process is a signed Compromis, a document contractually committing both parties to the sales transaction. A buyer has a seven-day cooling off period once they sign the document should they for any reason change their mind. They can terminate the agreement with no financial penalty. A seller is not afforded this identical protection. At the conclusion of the seven-day waiting period, the buyer must submit a deposit to the Notary’s trust account for approximately 5% of the sales price. Should they later fail to comply with the conditions of the sales agreement or terminate their option on the purchase, this deposit is forfeited to the seller.

      In exchange for this security, the buyer has the exclusive purchasing rights for the contracted property under the terms of the sales agreement (typically 60-90 days). A deadline is set for the buyer to secure financing and a final payment deadline established so that final title transfer papers can be signed.

      Once the Notary has received final payment from the buyer (or generally their bank), the final sales contract, signed by both parties concludes the transaction. This finishing formality enables the new buyer to officially take legal possession of the house, typically symbolized by a transfer of the front door keys. All parties need not be physically present at the two principle signature sessions. Power of attorney representation can be legally assigned.

      If both parties honor their commitments, the process should navigate smoothly to everyone’s satisfaction. Of course a smooth real estate transaction often becomes almost an oxymoron since elevated stress levels habitually prompt complications.

      Over this past year, I have purchased two houses through a real estate agency and conducted one sale directly to an English based buyer through my Notary. Within the same period, I’ve had one seller attempt to back out, one seller elevate the price the day before signing and one buyer threaten to retreat from his signed Compromis due to a perceived crooked floor. In each instance, my own interests prevailed, but not without the perception each fragile transaction could implode.

      I’ve had one sales transaction completed in exactly thirty days because the buyer paid cash, a loan offer nearly disintegrate and sale collapse because my bank neglected to send me proper loan application forms and this same institution offer me credit terms unimaginable in the United States (a 2.6% variable interest rate over ten years, based on a 25% deposit on the purchase price).

      A strong stomach, composed patience and assumption of few certainties will enable ultimate success in the French real estate market. Your best allies remain a trusted Notary and reliable banker. In the end, this essentially summarizes real estate speculation worldwide. 

 

 


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