BUYING A HOME IN FRANCE
Are you planning to buy a property in France ? Find out everything you need to know concerning procedures, financing, construction and subsidies here before beginning your project. The seller may be a private individual of an existing property, a property developer or builder if you are buying a new home.
Parties involved in a real estate purchase
Sales between individuals
In France, it is common to purchase an apartment or house directly from the owner in order to eliminate real estate agency fees. You should, however, be observant when visiting the property and not hesitate to bring along a construction professional or architect. Real estate advertisements can be found online and in daily and weekly trade publications.
Real estate agencies
The services of a real estate agent can be useful. An agency can help you find your dream home and advise you on the quality and other aspects of the property. The agency will also guide you through the various procedures required to purchase a home. Agency fees are generally 5-10% of the property’s value and are paid by the purchaser.
The notaire (notary-public)
A notaire is a public officer appointed by the Ministry of Justice. Notaires have the authority to enact contracts between private individuals, and are responsible for maintaining contract and property registries.
Use of a notaire’s services is compulsory during a real estate sale. Signature of the final sales contract always takes place in the presence of this sworn government official. The notaire validates the sale, verifies the presence of all necessary documentation and ensures the absence of any irregularities. The notaire collects all duties related to the sale that are owed to the government, including his fees. Notaire fees amount to about 8% of the sales price for older properties and 3% for new homes.
Key steps in a real estate purchase
Purchasing a pre-owned home
Reserving a sale involves signing a promesse de vente (promise to sell) in a notaire’s office or real estate agency and providing a deposit of 5-10% of the sales price. This promise or pre-contract must stipulate the suspensive conditions under which you could withdraw from the contract (e.g., the existence of easements). If you are relying on loan financing, obtaining loan approval is a compulsory suspensive condition. If the loan is not obtained, the seller must reimburse any deposits made.
Financing research and loan applications are done through a bank. You will receive a loan offer by mail and must respect the 10-day “cooling off” period before accepting the loan.
Signature of the final sales contract takes place in the presence of the notaire approximately 3 months after the promise to sell. By that time, the notaire will have prepared all of the necessary documentation. The seller is required to provide an energy performance evaluation and, if applicable, inspect for asbestos and certify the absence of lead and termites.
Building a new home
The first step is finding your dream property and verifying that :
construction is possible,
it has access to utilities (e.g., water, electricity, sewage).
Next, request a building permit from La Mairie (the municipal authority). Your permit application must include house plans which, if the intended construction exceeds 170 m², must be drawn up by an architect. Once obtained, the building permit is valid for 2 years. The final step is signing a building contract with the contractor of your choice.
Purchasing a home for future completion
Purchasing a home that will be completed in the future (vente en l’état futur d’achèvement or VEFA) is highly regulated in France. In the case of a VEFA purchase, payment is progressive and depends on the advancement of construction efforts.
For complete information concerning housing, including regulations, access to property and advice, visit Le Ministère du logement et de la ville (Ministry of Housing and Urban Development at www.logement.gouv.fr and the L’Agence nationale pour l’information sur le logement (National Agency for Housing Information) at www.anil.org.
Financing your project
The financing plan should incorporate all costs, including the purchase price, agency fees (if applicable) and notaire fees. Be sure to include the cost of any repairs and renovations !
A down payment is the purchaser’s contribution to a real estate purchase, with the balance financed through a bank loan. The payment may come from savings or the sale of other property or assets and will ideally be at least 10% of the total cost of the project.
Bank loans are the most common type of financing. Banks offer various types of housing loans including :
a fixed-rate mortgage with a constant interest rate for the duration of the repayment period,
a variable-rate mortgage with a rate that is linked to an index,
a capped variable-rate mortgage with a rate that varies but cannot exceed a specified limit.
For your information : mortgages in France are typically repayable over 10-30 years. An individual’s total debt cannot exceed 30% of his revenues for a loan to be approved. Death/disability insurance is required with all mortgage applications.
A guarantee is essential and may include :
a mortgage security on the real estate asset being financed. Should you default on the loan, your bank could repossess and sell the asset to recover the amount owed.
a guarantee provided by a specialised organisation. Following payment of a commission and investment in a guarantee fund, the organisation will guarantee the loan. Should you default, it will pay the bank the amount owed.
Tax credit for the purchase of your primary residence
If you qualify as a resident of France for tax purposes, you can take advantage of a tax credit for interest paid on a mortgage to purchase or construct your primary residence. The credit is equal to 40% of the interest paid during the first year and 20% in the 4 subsequent years. The value of the credit is capped based on the composition of your household.
Comprehensive home insurance
French law requires tenants, but not owners, to purchase multi-risk home insurance. Home insurance protects your home and possessions against theft, damage, fire and natural disasters. Multi-risk home insurance also includes third party liability insurance, which covers any damages claimed by third parties under your responsibility.
Financing renovations in an existing dwelling
Different financing solutions are available for additions and renovations.
Enhancements or additions to your home (e.g., veranda, new bathroom, attic conversion) can be done with a personal loan from your bank.
If you are eligible for at least one family support service such as housing assistance or family allocations, the Caisse d’Allocation Familiales (www.caf.fr) can offer a home improvement loan for certain types of repairs, additions and sanitation projects. These loans offer preferential rates but are limited to small amounts.
If you are installing heating or insulation to decrease energy consumption, you can take advantage of loans dedicated to energy efficiency improvements.
“Green” tax credits
If you qualify as a resident of France for tax purposes and take actions to increase energy savings or the use of renewable energy, you may be eligible for a tax credit. The value of the credit is 15-50% of your expenses, depending on the type of work. For example, installation of a low-temperature boiler results in a tax credit of 15%, while installation of thermal insulation materials results in a tax credit of 25-40%.
To learn more, visit : www.impots.gouv.fr