Closing fees: Closing fees - called notaire fees - run approximately 6.5 percent to 7.5 percent of the sales price, including agent commission. Fees will be closer to 2 percent for properties built within the last five years.

Closing fees are set by law, are all-inclusive and may be calculated in advance within a few hundred euros. They include real estate transfer taxes, legal fees for both the buyer and seller (unless there are unusual circumstances), filing fees and all other closing costs except proration of utility and tax accounts as of the day of closing.

The process: In essence the buying process in France differs little from that in the US. A buyer visits properties, selects a property to buy, and makes an offer on a simple written form. The final purchase price is negotiated between buyer and seller, a formal agreement of sale is drafted and signed by both parties, and a closing date set for transfer of the property.

Below are details on specific steps in the acquisition process.

Compromis de Vente. Once a price is negotiated, a lawyer specially trained in real estate law (called a notaire) draws up a Compromis de Vente (sometimes called the Promesse de Vente), which is a formal agreement of sale. The notaire who draws up the Compromis de Vente is usually selected by the seller. The buyer may retain his or her own real estate lawyer. Barring unusual circumstances that may require extra legal work, the entire fee of the buyer's notaire is included in the notaire fees mentioned above. Thus the buyer can have separate representation at no extra cost, obviating the need to retain a lawyer for the transaction.

Special conditions of sale. The Compromis de Vente will contain any special conditions of sale, such as a satisfactory report from a qualified property inspector, or the buyer's being able to obtain a mortgage at a rate not to exceed a certain percent.

Deposit. The buyer and seller sign the Compromis de Vente, and the buyer makes a deposit, generally 10 percent of the selling price. This money is held in escrow by the seller's notaire.

Seven-day retraction period. Following the signing of the Compromis de Vente by both parties, there is a period of seven calendar days in which the buyer (and only the buyer) may decide not to go through with the purchase. The buyer may retract without explanation and for any reason whatsoever, and receive a full and prompt return of the deposit. Once this period passes the buyer may still rescind, but the 10% deposit will be forfeited.

Closing. Final settlement generally takes place 75 to 90 days after the Compromis de Vente is signed. During this period the buyer may apply for financing. Generally the buyer has up to 45 days to obtain approval, but this time may be extended with the seller's consent.

Homeowner's insurance and utility accounts. During the period between signing the Compromis de Vente and settlement, the buyer, assisted by the notaire and sales agent, will take steps to obtain homeowner's insurance (required in order to complete purchase of the property) and have utility accounts transferred to the buyer's name. Obtaining a homeowner's policy and transferring utilities are both easily accomplished.

Final amount due at closing. About 10-14 days before closing the buyer's notaire will provide a final figure for the full amount due at closing. This amount will include the remaining 90 percent of the purchase price (some of which may be paid by a mortgage), notaire fees, expected costs of prorating taxes and utilities, and any miscellaneous fees (rare) such as a translator. This amount may be paid by certified check at closing, although generally buyers send this sum by wire transfer to the notaire's escrow account a day or two in advance.

Procedure at closing. As in normal in real estate transactions, settlement involves the signing of numerous documents, generally fewer in France than in the US. Settlement takes 45 minutes to an hour, and concludes with the buyer receiving keys to the property. The notaire will file documents memorializing the sale with the local city hall, and within two or three months the buyer will receive a copy of the deed by mail.

FOUR COMMENTS ON THE ACQUISITION PROCESS IN FRANCE

1. Confidence in the integrity of the notaire. One assuring aspect of the French system is that by law every real estate transaction, without exception, must be managed by a notaire.

As noted above, the notaire is a lawyer specifically trained in French real estate law. The legal requirements for preparation of the Compromis de Vente are quite specific, and the notaire is professionally liable for mistakes in the process. Consequently notaires proceed with great care, and if there is any fault common to the profession, it is a tendency to be overly punctilious in their work.

A notaire's scrupulous attention to detail can be frustrating. The advantage, however, is that the notaire's professionalism assures that once a transaction is completed, the buyer has confidence that the transfer has been correctly executed and title is virtually beyond challenge from any source. And if there is a viable challenge, the notaire is personally responsible.

2. Confidence in disclosure of all matters affecting the property, and freedom from subsequent claims. In the US, once a sales price has been agreed upon it is not uncommon to sign a simple agreement of sale and defer consideration of major points until closing. In France the contrary is true: the notaire works out well in advance all the legal aspects of the transaction, so that when the buyer is asked to sign an agreement of sale, the buyer is aware of all matters pertaining to the purchase and subsequent enjoyment of the property, down to the smallest detail.

Thus all elements large and small that are relevant to the transfer of property are incorporated into the Compromis de Vente (agreement of sale). The Compromis sets the acquisition process formally in motion, and is the document that must be signed by both parties before the buyer incurs any legal obligation whatsoever to purchase the property. Some of the details included in the Compromis, in addition to mortgage or property inspection conditions, are:

 
• Whether there are any easements on the property in favor of neighbors or local authorities.

 

• The presence of any special water rights, such as irrigation rights from a nearby canal or spring.

 

• The right (or absence thereof) of the buyer to construct additional structures on the property.

 

• The results of official tests (paid for the seller) certifying the absence of asbestos and lead poisoning (in certain regions, a termite inspection may also be required). Additionally, the seller is required to furnish certifications by licensed companies as to quality of water and whether there is a risk of flood, earthquake or other natural conditions that would constitute a serious threat to the property. Another consideration often mentioned in the Compromis is the right (or absence thereof) of neighbors to build on adjoining parcels.

3. Confidence in return of the 10 percent deposit if the buyer rescinds during the seven-day retraction period. One cannot blame a non-French buyer for being skeptical about the ease of securing the return of the initial 10 percent deposit if the buyer rescinds during the seven-day retraction period. In the US, it is not uncommon to hear stories of litigation or bitter disputes surrounding efforts to get a deposit back.

When it comes to France, however, we urge you to set such concerns aside, and not to spend a moment further on this subject. The buyer's right to rescind within the seven-day period after both parties sign the Compromis de Vente is absolute, unquestioned and enforceable without litigation.

The buyer's initial deposit goes into the notaire's escrow account, and French law rigorously prohibits any distribution of that money until the retraction period is over. We have seen buyers exercise their retraction rights, and in every instance the deposit has been returned promptly and in full, without any questions asked. We recall one instance where in the closing hours of the seven-day period, the buyers retracted because they had found a property they liked better. We also recall a story related to us by a seller of a large property in Provence: a buyer signed a Compromis de Vente to buy the property, put down a 10 percent deposit, and that night had a dream that the house was haunted. The next morning the buyer exercised his right to rescind. He had his money back the next day. We wonder in what other countries such circumstances - finding a more pleasing property, or having a bad dream - would justify rescission of a signed agreement of sale.

4. Confidence in paying lower real estate taxes. While paying notaire fees in the vicinity of 6.5-7.5 percent may be a shock to the overseas buyer, the good news is that after this initial setback, property taxes in France are a fraction of what owners pay in the US and UK. Taxes on a € 1,000,000 property in the French countryside, for example, are normally less than € 2,800 a year (taxes foncière and d'habitation combined). Paris is not significantly higher. The cost of homeowner's insurance is also well below premiums for properties of similar value in the US.