Guest Notes for Episode 351: Tips for Buying a New Condo in France

Categories: France How To, Moving to France

Outline for Purchase of New Build Properties in France

Preliminary Search

1. Decide on location.
2. Search web for reputable English speaking estate agents or
developers.

2a. Nexity-www.nexity.fr
2b. Leggett Immobiliers- www.frenchestateagents.com.

3. Contact estate agent or company.
4. Inquire whether property is new build or renovated.
5. Ask for specifications on property; location; financing; developer; restrictions; etc. i.e. independent property; homeowners association; type of neighborhood; infrastructure of town; access to airport and train station. Ask for English language documents.
6. Most homes and apartments are located in private and sometimes gated communities. Buyer can select location of property within community and size of property. Also, buyer can select flooring, bathroom and kitchen materials from those offered by builder or request minor changes, like add an extra toilet, for a minimal charge.
7. Visit area if possible. (Usually, buyer will not be able to go into property while in construction but can visit site).

Legal Process

1. Open a bank account in France for payment of utility related
bills. 1a. Credit Agricole has department for international clientshttps://
international.groupecreditagricole.com/en.
2. Notaire is responsible for the preparation of documents.
3. Notaire’s fees are only 3% compared to 7% or 8% for older properties. No stamp tax.
4. Binding Contracts:
Vente en l’Etat Futur d’Achèvement or VEFA (Sale of Future Completion). VEFA will detail the amounts and dates of payments for the property:

Payments for Property are as follows

– 5% deposit when signing the Reservation Contract. There is a 7-day cooling off period to change your mind about the purchase. (Usual deposit on older property is 10%).
– Completion of foundations, 35% (including any deposit);
– Structural works finished, a further 35% – taking you up to 70%;
– Completion of works, further 25%% – taking you up to 95%;
– Balance payable when the property is handed over.
– The buyer will then be asked to sign a Contrat de Reservation (’Reservation Contract), where the buyer commits to buy the property described in the contract. This sets out the details of the property to be built, the estimated price, and the approximate delivery date. Pay particular attention to the details of the building—remember that it is what is listed in the contract and the
attached plan that the developer is legally required to follow and not the proposed images or sketches presented in the brochure.

The contractual description of the property is usually short; this is why the accuracy of the plan annexed to the contract is so important.
The final legal step in the purchase of your new build property is the signature of the Acte de Vente (the Deed of Sale). This can happen at different times for different purchases, so it is important to discuss this with the notaire before signing the initial contact. However, remember that while the legal completion of your purchase may take place a couple of months after the reservation contract is signed, handing over the keys will not take place before the building is finished, and that can take another year or so.
Before signing the Deed of Sale, you will have the opportunity to do a walk-through of the property to make certain no corrections need to be made.

Guarantees and Protections

1. When buying off-plan in France, it is the responsibility of the property developer to make the necessary checks that the property is structurally sound. As the buyer, you benefit from a range of legal guarantees including one that guarantees that the building will be finished in the event that
the developer goes bankrupt, and a 10-year guarantee on structural faults.
2. Your notaire will go over these at length before you sign the deed of sale and it is important to understand each one. You should also keep details of the developer’s insurer, the policy number, and the conditions in which a claim can be made.

Financing the Property

1. Mortgage on your main property Raising capital against your principal property (in another country) is usually the cheapest option. The mortgage funds are raised either by taking further borrowing on the current mortgage or by re-mortgaging to another lender. The fees involved are relatively small and the process is straightforward and familiar.
2. Taking a Mortgage on your French Property Raising a mortgage secured against the French property allows buyers to purchase a property without putting their principal home at risk. Although the costs are higher, it is an attractive option, with historically low interest rates. There can also be
tax advantages if you let out the property. This can be a bit tricky if you have no financial history in France, but the French banks are usually receptive to foreign investors. French Mortgage calculations vary between the lenders. Some banks have a higher minimum loan size or lower
maximum loan value. Banks generally consider loans from between 65 to 95% of the value of the property. Estate agents or developers may have banks or mortgage companies that assist with securing a mortgage.
3. Keep in mind that many French lenders are not willing to provide a mortgage to people 60 years old or older. There is a medical examination required before approval of mortgage as the bank will require and provide a life insurance for the mortgage holder.

Summary

New Build PROS

◦ No stamp duty to pay, so only approximately three per cent notaire’s fees (compared to the usual seven or eight per cent notaire’s fees payable on a resale purchase).
◦ Only five per cent deposit to pay on signing reservation contract (this amount can vary depending on the developer and property in question, but five per cent deposit for an off-plan home is the norm, compared to the ten per cent deposit usually required for a resale purchase).
◦ Staged payments over the period of construction (so you do not have to hand over the total purchase price at one time).
◦ Ten year guarantee on construction.
◦ Developer is guaranteed by a bank (so even if they go bankrupt or disappear, the development will still go ahead).
◦ Low maintenance as it is brand new.
◦ Low property insurance.
◦ Easy to resell on the French market (higher resale value).
◦ Communal facilities make new build homes easy to rent for short stays.
◦ Good investment potential (practically all new build homes will increase in value).
◦ Social aspect and security of living in a development.
◦ Homeowner’s Association maintains the development in good condition and handles any issues or problems within the communal space. They also assure that homeowners keep their properties well-maintained.

New Build CONS

◦ Purchase is made off-plan – you cannot see what you are buying, so you have to make a leap of faith and have a good imagination!
◦ Property will not be ready to you to use for some 12-18 months (unlike a resale home which you can normally take possession of within around three months of signing the initial sales contract)
◦ Some developments are sold as leaseback-only, which has certain constraints and is not right for everyone. This is a completely different purchase scheme and needs to be analyzed separately.
◦ If you want to spend a lot of time at your French home, leaseback will not be suitable for you, as you are only allowed a set number of weeks occupancy at designated times of the year
◦ Developments are not best suited for those who want to live in isolation.
◦ New build projects can look a little raw in the early days (months, years…). Check what plans there are for landscaping of communal spaces. Remember that trees and shrubs take a while to grow!
◦ On some developments, landscaping of individual garden spaces is an optional extra.

The Real Fun Begins

-Once your purchase is complete, you can begin to design and decorate your property.
-For design and build out of kitchens and bathroom, www.Mobalpa.fr offers a multitude of options. They work with you on design, build and install kitchens and bathroom at reasonable prices. The work is also guarantee
and it eliminates having to search for reputable designers and builders.
-There are a number of stores in France for purchase of appliances, furniture or decorative items, like www.Alinea.fr, www.Conforama,fr, www.But.fr, www.Ikea.fr, www.Habitat.fr, www.Darty.com,
www.LeroyMerlin,fr , www. Castorama,fr, and other local stores.

My Personal Experience

No regrets in purchase of two new build, off-plan, properties.
Both properties in great locations.
Both properties are well maintained by the co-owners and associations.
Both properties have increased in value.
Both properties are still in great condition.
The upkeep of both properties much cheaper than maintenance of my home in US.

What I Would Have Done Differently

Purchase larger properties but not within budgets at the time of purchase.

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Categories: France How To, Moving to France