Agency commissions

The argument about who pays the agency commission on sale of a French property is as old as the hills, whether it implies that the buyer pays more or the vendor receives less.

Properties sold by French estate agents are normally marked as 'F A I' - frais d'agence inclus (including agency fees) - and the figure expressed in Euros is the price at which the property is offered for sale. Arriving at a correct sale price is an inexact process, as it is invariably a combination of the owner/vendor's aspirations (the highest price possible!) and what the agent considers the property is worth, in relation to the local market and similar properties offered for sale. A price reduction may encourage a quick sale, if this is regarded as below the market price.

As property prices tend to fluctuate in reality by few percentage points, there is relatively little room for manoeuvre.  It is rarely possible for a house to sold at the market price plus agency commission on top, as this would exceed the market price by too large a percentage.

The picture becomes confused when there is talk of the 'nett vendor' price, a term widely (mis)used by owners about to sell, but employed by agents to indicate the amount the vendor will receive after deduction of the agency commission and any other costs, such as capital gains tax.

Buyers applying for a mortgage may find that their lenders may wish to exclude the agency commission (and other transaction costs such as Notaire's fees, taxes and land registration charges) from the loan they are prepared to offer. But this is like borrowing money to buy a car and being told the loan will only cover the manufacter's wholesale price to the garage and not the costs and profits associated with the showroom.

Buyers facing this problem with their lenders should insist that the price stated is the price at which the property is offered for sale and that is the price they are expected to pay.

Preparing your property for sale

Once again the French property programme on M6 Maison à vendre offered some useful advice for sellers, based on two case studies - a village house just outside Lille, and a fairly nondescript pavillon near Paris.

It was clear from the outset that the owners of the first property had an exaggerated idea of its worth - even in its deplorable state before the makeover team moved in. Talking originally of a sale price of 400,000 euros, which had apparently been confirmed by an 'expert', by the end of the programme they were looking at offers of just 250,000 euros, with no certainty of a buyer. Among the efforts needed to make the house presentable for sale was the removal of a veritable menagerie of animals, including rabbits, chinchillas, several geese, chickens, cats, a goat and two lively dogs, and repairing the damage they had caused over the years to furnishings and paintwork.

In contrast, the standard concrete bungalow attracted four offers, including one accepted at the full asking price, after minimal decoration and refurbishment - on the first day of being offered for sale.

French Property News - February, March 2011

In February's issue of French Property News I offer some suggestions on how to present your French house or apartment ready for sale, including some room by room recommendations about what improvements will add value and those that do not. Essentially, the property should be impeccably clean and tidy, and generally de-cluttered. Owners should attend to all those minor repairs and renewals they have kept putting-off and which are a certain deterrent for would-be purchasers.

Going back to basics, in the March issue just out, I offer some suggestions on how to hold onto your French second home, if you are tempted to cash-in your property asset in time of crisis. Surprisingly, the majority of French second homes are sold by their owners within 10 years of purchase, despite the disadvantages of capital gains taxes and sometimes the inability to recoup the high transaction costs (agenncy commissions on buying and selling, Notaire fees, land registration costs and taxes).

Instead I suggest ways to hold onto your property, through letting long or short-term, or if it is your main home and the situation is serious, returning to the UK to work for a while, and renting out your French property for a year or more. Harsh decisions may have to be made but selling-up is often not the best or only option.

French Property News is available in newsagents or see http://www.french-property-news.com/

(Picture shows lovely holiday studio at Argelès-Port recently sold by its owners within a few weeks of going onto the market).