Tuesday, December 15, 2009

Outlook for estate agents in France

According to the French government statistical office INSEE, there are currently some 40,000 estate agencies operating in France - more than three times the number in Britain. About half of them belong to one of the principal professional bodies FNAIM (12,500 members) or SNPI (9,500), although all are obliged to be licensed by the departmental Préfecture and must hold a 'carte professionnelle' covering either transactions (T) and/or property management ('gestion') (T & G).

French estate agencies are highly regulated under the 'loi Hoguet' of 1970/72 and must for example hold adequate professional insurance, with additional guarantess required if they hold client funds, such as the usual 10% deposit payable when you sign the pre-contract ('compromis de vente') to buy a French property. Some agents choose not to hold client monies which then become payable direct to the Notaire handling the transaction and are lodged in a special government controlled account.

Every property offered for sale by an estate agency must be the subject of a mandate - a written contract between the owner/vendor and the estate agency, authorising it to market and sell the property. A vendor may sign non-exclusive mandates with a number of agencies or prefer to sign an exclusive mandate with a single firm.

Agencies are free to set their rates of commission which must be displayed at their premises, and which can range from as little as 2% to 10% depending on the value of the transaction. The rates are higher than those normally encountered in Britain.

Despite the proliferation of estate agency groups such as LaForet, Orpi, Guy Hoquet and Century21, around 90% of French estate agencies remain independent. Each of the major groupings has between 300 and 800 franchised local offices.

FNAIM estimate that 60% of transactions annually pass through an estate agent (70% of these through independent firms), 35% are private sales from one individual to another, and the remaining 5% are handled by Notaires and others authorised to transact property sales.

Figures from Britain indicate that more than 1,000 of the estimated 13,000 agencies have closed in recent months, with an average loss of employment of four staff per office. The staffing situation is more fluid in France (one of the sector's weaknesses), with many staff employed as 'agent commercial' by the agency - a loose arrangement whereby the commercial agent relies on the agency for his/her professional card, but remains independent and responsible for paying his own tax and social security and operating costs. Remuneration is by commission only and in difficult times, many do not survive as a result of lack of income from sales.

While anecdotal evidence indicates that many French agencies have been forced to close offices, including some operated by the major groupings, the actual loss of employment is more difficult to estimate as a result of the widespread use of commercial agents, which often results in high turnover of staff and lack of continuity for clients.

In my own region, one of the largest firms with four branch offices has remained independent since its foundation 50 years ago, and until last year was managed by the original owner. A second old established firm has alas been bought by a subsidiary of Banque Populaire.

Takeovers are not always popular among potential vendors and existing clients of a locally established agency, as was the case in Britain some years ago when banks and insurance companies moved into the estate agency sector, lost money and frequently sold back the agencies to their previous owners at a heavy discount. It will be interesting to see how the situation evolves in France.