Friday, January 29, 2010

Estimation versus expert valuation

There is often a lot of confusion on property forums about the different terms used when it comes to arriving at an idea of what price your French home might fetch on the open market - or if you are wondering whether the property you are thinking of buying is really worth the asking price.

Estate agents have to arrive at some kind of estimate of the 'value' (potential sale price) of a property they wish to take onto their books. They will take into consideration the age and condition of the property, the local vicinity (proximity or not to shops, schools, transport), and the asking price of similar kinds of properties currently on the market. The methodology is essentially crude and largely based on the agent's experience and familiarity with the local market. The result will be an estimate ('estimation' in French) with which the owner/vendor may or may not be happy.

A formal valuation - for example, for probate or as the basis for a bank loan - is normally undertaken by a specially qualified 'expert immobilier' who will produce a lengthy and detailed report, and for which he will charge a fee. You need to allow around 1000 euros for this - less than the cost of a square metre of average French real estate!

Anecdotal evidence indicates that owners consistently over-value their property, despite informal and expert assessment. Expectations may be unrealistic or vendors may be seeking a target sum they wish to achieve, in order to cover the cost of renovations carried out or to fund another purchase. If a property is for sale privately, potential buyers need to be aware of this tendency and to take particular care that a property is not being offered for more than it is worth.

Thursday, January 28, 2010

French property market compared to USA, UK

Articles in today's 'Le Figaro' (France) and Daily Telegraph (UK) highlight the differences between the French property market and the situation in USA and UK.

After two stagnant months immediately prior to Christmas, figures indicate that the total number of US new-property transactions reached only 342,000 for the entire year, not far from the figures for France, a country one-fifth of the size of the USA. There is now an estimated eight months supply of unsold new-build properties on the US market.

Sales of older properties are down by nearly 17 per cent on previous years. Price falls averaged over 5 per cent in November and 7.3 per cent in October. Other signs of decline include new-starts and the number of planning applications for new residential properties.

According to the Telegraph, Britain's main problem continues to be the cost of mortgages, including arranging fix-rate deals (usually over a short term) and the shocks that await those who will emerge from a period of fixed rate interest in the coming months and face adjustments to their monthly mortgage repayments.

In a short report on French consumer spending habits during the recession, Le Figaro notes that among the products that have suffered worst are ready-prepared meals, sticky sweets, chewing gum and hair colorants; while consumption of hard liquor, coffee doses for machines, fruit cordials and canned energy drinks such as Red Bull  (38% up!) all rose during 2009.

Sources: Daily Telegraph (incl photo), Le Figaro 28 January 2009.

Tuesday, January 19, 2010

575,000 new French enterprises created in 2009

The year 2009 has witnessed a record number of new business creations in France - 575,000 against 327,000 in 2008. The figure is due in large part to the introduction of the new simplified self-employed status of 'auto-entrepreneur', which accounts for 320,000 of the newly created businesses.

Interestingly the majority of new business created are within the services sector (235,491), followed by 193,373 in the commercial sector. Construction and industry account for 73,417 and 24,118 new business respectively.

The most spectacular inceases - 135% according to APCE - are within arts and entertainment, education and personal services.

Specific areas that are seen to be growing include advisors on energy efficiency, and alternative medicine and relaxation (massage, saunas etc), responding to the needs of France's ageing population. Fast food outlets are also increasing and many new businesses are relying on the internet (rather than opening an office or boutique) to sell goods and services, reflecting the growing trend in purchasing on-line.

Source: Le Figaro, 18 January 2009. APCE - Agence pour la Création d'Emploi.

Sunday, January 17, 2010

Paying the agent's commission

A subject that sometimes comes up on the French property forums is that of agency commissions - and what happens if a buyer attempts to byepass the agent and deal direct with the vendor.

First, when taking a property onto his books, the French estate agent enters into a legally binding contract, known as a 'mandat', with the owner/vendor. The 'mandat' authorises the agent to market and try and sell the property on behalf of the owner, against an agreed commission, payable to the agent and based on a percentage of the property sale price.

Most 'mandats' are for an initial three or six month period, that is renewable, but can be valid for up to two years, binding the vendor to payment of the commission in the event that a buyer originally introduced by the agent buys the property - either passing through the agent or dealing direct with the vendor.

Second, in order to protect the agent against an unscrupulous vendor attempting to deal direct with the buyer, buyers are required to sign a 'bon de visite' when visiting a property with the agent, as evidence that they were introduced to the vendor by the agent.

There is considerable French statute (notably Code civile art: 1165) and case law (eg Cour de Cassation 9 November 1999, no. 292) where the courts have obliged a vendor to pay the agent's commission, in situations where buyer and seller have got together and agreed a sale, and attempted to defraud the agent of his commission. It is also possible for the sale to be blocked by the courts until this issue is resolved, thereby causing lengthy delays for both vendor and purchaser, and locking both parties into a transaction they cannot complete.

Thursday, January 14, 2010

Selling your property - an agent's advice

An interesting article in the Daily Telegraph (UK) chronicles the opinions of a group of British estate agents about which improvements can help sell your property - and those that don't.

Among their black-list of improvements to avoid are extravagant fixtures and fittings inside an otherwise ordinary property - they cite gold bath taps in a standard two-bedroom semi; home gyms, hot tubs, and installing a new kitchen or bathroom. These latter are seen as personal spaces that many incoming owners prefer to design and install themselves. Any extremes of personal taste in decorating style are also regarded as well known turn-offs.

The number of bedrooms can also be an important factor, and owners who have perhaps knocked two bedrooms into one may find the property looking expensive compared to its neighbours. 'For example, you can end up trying to sell a three-bedroom house for the price of an equivalent property with four bedrooms' says one agent.

When it comes to the outdoors, mistakes to avoid include over-cared-for gardens, seen as a maintenance nightmare by many would-be buyers; and over-large swimming pools that are costly to run and take up too much garden space.

The agents interviewed also warn buyers against turning parts of the property into letting accommodation. 'One guest unit is fine, more than that and the property starts to look like a business' is one agent's view.

Source: Graham Norwoord, Daily Telegraph, 13 January 2010.

Monday, January 11, 2010

Buyer caution when purchasing French property

A recent thread on one of the popular French discussion forums describes a case in which buyers are talking of suing the English vendors (now back living in the UK) regarding alleged defects in some of the work previously done to the property.

This raises the question of what recourse - if any - has a buyer of French property in a situation such as this. The answer is, very little. All standard sales contracts (the 'compromis de vente' and the final sales act) include a clause in which it is stated that the buyer 'takes on the property in the state in which he finds it on the day of acquisition and entry, with no guarantee by the vendor nor any right to an indemnity or reduction in price, in respect of the condition of the ground or building, faults or defects of any nature apparent or concealed or any defect of workmanship'.

The only possible exception can be work undertaken by professional, registered artisans and carrying a 10-year guarantee, in which case a claim might be possible against the artisan's insurers.

It is clear that the onus is firmly on the purchaser to ensure that he/she is happy with the property being sold. In another thread, the question has been raised about the contractual accuracy of estate agents' property descriptions. It should be noted that these are invariably stated as 'non contractual' and cannot be used as the basis for subsequent complaint or litigation.

In this context, I am reminded of reports that, during the recent French buy-to-let boom which promised generous tax advantages, 50% of investors failed to visit and check out their property (usually bought off-plan) before buying; only to discover subsequently that many of these properties had been built in out-of-the-way places without public transport (where land was cheap), and have since become unlettable and in many cases unsaleable.

Tuesday, January 5, 2010

Auto-entrepreneur update

In a recent announcement, APCE (the French business creation service) have clarified the situation for auto-entrepreneurs who have yet to declare any income from their new start-up business, and consequently have so far paid no tax or social contributions.

APCE state that your registration as an auto-entrepreneur can last for 36 months (or twelve 3-monthly consecutive periods) without any declaration of income - an increase from the normal 12 months applicable to micro-social regimes.

Good news for those struggling to get their new business up and running, and worried about possibly losing their auto-entrepreneur status due to lack of income.