Wednesday, October 21, 2009
Cooling-off period when buying French property
One of the many protective measures built into the French property buying process is the right of the buyer to withdraw from the transaction within seven days of receiving or signing the initial purchase contract or 'compromis de vente'. All the prospective buyer has to do is notify the vendor or the agent of his intention not to proceed. When buying through a French agent or Notaire, the seven-day period starts from the day after reception by registered post, at the buyer's home address, of the 'compromis de vente'.
If an initial deposit has been paid to the agent or French Notaire handling the transaction, this must be returned within a maximum of 21 days.
The 'compromis de vente' can include a number of conditional clauses - known as 'clauses suspensives' - agreed between vendor and purchaser. If the purchaser intends to buy the French property by means of a loan or mortgage, he is allowed a further six weeks right of withdrawal ('delai de rétractation') to allow time to search for, consider and accept the formal offer of a loan or mortgage.
During this period, the transaction is virtually on hold, and the property is withdrawn from the market. During the six week period, the prospective buyer must demonstrate due diligence in seeking a loan or mortgage, and must keep the parties informed of progress. He cannot sit back and do nothing, and then announce his intention to withdraw, without risking financial penalties.
Financial penalties can include forfeiture of any deposit paid (usually 10% of the sale price), payment of the estate agent's commission and/or a payment in compensation to the vendor. Difficulties can arise where the buyer is dilatory in obtaining the mortgage and does not inform the parties of what is going on.
Faced with competing offers from, say, a buyer offering cash and one seeking to purchase by means of a mortgage, a vendor may prefer the cash buyer, because of the potential consequences of the six-week delay before the transaction can proceed - or not - to completion. 'Cash' in this context refers to funds in place that will be transfered by the buyer's bank to the Notaire's special sequestered account prior to completion.
Potential buyers are advised to have an outline offer in place when seeking to purchase French property and will improve their chances of negotiating a good price if they can provide a letter of confirmation from their bank or mortgage provider.