Monday, November 16, 2009

Property searchers - who are they, can they help?

In recent years a new breed of individual has made an appearance on the French property market - the independent property searcher, in French the 'chasseur de biens'. Essentially, he is someone who will take over the hassle of locating properties that meet a client's specific brief and present a short-list of those he thinks are eventually worth visiting by his client, the potential buyer. The idea is to save time and money that can be wasted in fruitless visits, particularly by someone new to a region or who does not speak fluent French, and relies on the searcher's intimate knowledge of the local property market, and his contacts with estate agents, notaires and private individuals who may have suitable properties for sale.

What is the status of the property searcher and how is he remunerated? The French estate agency business is a 'controlled occupation' regulated by a law - the loi Hoguet - that dates back nearly 40 years to 1972. This fundamental law has however failed to keep abreast of changes in the way that properties are bought and sold, notably widespread use of the internet to search for and sell property, the appearance of specialist publications addressed to private buyers and sellers (responsible for half of all French property transactions), and the role of the property searcher.

Property searching has traditionally been seen as part of the job of the French estate agent, who must continually replenish the supply of properties he has for sale, and accordingly is subject to the loi Hoguet. The law requires among other things the possession of a 'carte professionnelle' issued by the local Prefecture, proof of experience or competence, and minimum financial guarantess covered by insurance. The licensed estate agent must also hold a valid mandate from the owner, authorising him to market and try and sell any property on his books. Many agencies now also describe themselves as 'property finders' and try to give the impression that this job can only be done by someone operating under the loi Hoguet. This is in fact not true.

Independent property searchers
The situation of the property searcher has changed dramatically following a relatively unknown ministerial statement of August 2008.

In an attempt to define the status of the independent property searcher, the French justice minister ('la garde des Sceaux'), in a ministerial reply, stated that:

'if the role of the property searcher is strictly limited to the service of finding a property, and it is paid for directly by his client ('mandant'), then this activity falls outside the restrictions of the loi Hoguet of 2 January 1970 which regulates the estate agency profession, and of the decree of 20 July 1972' (Réponse ministérielle, question no. 20525, Journal Officiel AN 12 August 2008, p. 6987).

This reply has since come in for some criticism, largely by bodies representing estate agents anxious to defend their protected status. And at least two of the bodies representing 'property searchers' have made possession of an estate agents licence a necessary pre-requisite for membership, citing the loi Hoguet.

What this does of course is to try and keep the role of property searching within the traditional estate agency structure, where opponents argue that the agent necessarily represents the interest of the vendor in a property transaction, while the truly independent property searcher works exclusively on behalf of his client, the buyer.

In practice, French estate agents seem to be creating a new role for themselves - at an additional cost to the client/buyer - when it is merely an extension of something they would normally do when presented with a potential buyer - someone who arrives at their premises and expresses his interest in a property offered for sale in the agent's catalogue. If the agent does not have a suitable property to offer, his next step is to contact colleagues (often within a formal network or grouping), and in the event of a sale, he will share a commission with the partner agency. This is not property searching, but standard estate agency business practice. I speak from experience.

The truly independent property searcher will argue that he has access to the same sources as the agent but his role is more closely defined - he works to a brief from the client/buyer and will often reject 50% or more of the properties proposed by the agent as not worth including on his client's short-list. His remuneration does not depend on a property sale.

A possible criticism of the ministerial reply noted above is that it did not define more clearly the role of 'negotiation' or 'intervention' (the French word is 'entremise') within the context of a property transaction, an activity that has traditionally been regarded as coming strictly within the ambit of the loi Hoguet. In practice it is difficult to rule out entirely the role of 'advice giving' by the property searcher - for example he may reject some properties during an initial search because he considers they are over-priced and will tell his client so. And if he receives part of the selling agent's commission, can he be truly regarded as independent and acting in the best interests of the buyer, as well as possibly breaking the law?

The 'agent commerial'
Despite the all-pervading influence of the loi Hoguet, the French estate agency business suffers from a number of inherent defects, particularly concerning the role of the 'agent commercial' - some of whom use this ambiguous status to act as property searchers. The 'agent commercial' depends for his legitimacy, under the loi Hoguet, on a loose association with an agency, for whom he acts as a sales representative, and once in possession of special 'carte professionnelle' can also mandate properties for sale (ie take them onto the agency's books).

Problems can arise where the 'agent commercial' operates unsupervised and more or less independently of the agency that has given him his 'carte professioonnelle'. Or in some instances when he is a member of a loose network of affiliated property agents/searchers, which relies on a licence granted by a remote Prefecture in another department of France.

Our position
Proponents of the protections offered by the loi Hoguet cite the competence of agents and their staff, and the presence of financial guarantees. However the latter can be as low as the minimum 30,000 euros currently required, even for a network that sub-licences its members. Many truly independent property searchers offer a superior level of competence (such as a law degree) and considerably higher levels of insurance cover (£250,000 cover + £100,000 legal costs is not uncommon).

In examining French law and deciding our own position, my firm has taken the view that in order to remain truly independent and fair to our clients, in the area of property searching we would operate strictly within the terms of the 2008 statement cited above - that is, being remunerated by our client and not accepting commissions from estate agencies, as explained in our terms of business. It was not an easy decision, particularly in view of the many 'free' property finding services currently offered by estate agents and others.

However, we see this as the only legitimate way to propose our independent professional services and reflect the true added value of the range of expertise that we bring to the French property buying process. I am pleased to note that one or two other independent property consulting/search firms have reached the same conclusion.