How much should I pay for my French house?

Am I offering too high a price for the French house?

You can easily answer these two question with some basic research into current French property prices. Importantly, you must check before making an offer (compromis de vente) and applying for your French mortgage.

Here’s why it matters and how you can undertake your own research into French property prices.

The Mortgage Provider’s View.

Firstly let’s look at the subject from the French mortgage provider viewpoint.

We will ask you for a lot of information about your financial circumstances, but it’s common for a French mortgage broker to accept the negotiated sale price as a “valuation” for calculating your mortgage.

Sounds simple, but you’re building in a big risk. What happens if you’ve signed a purchase offer but the mortgage provider values the property at 75% of the agreed price? From the mortgage provider’s viewpoint its simple: You’ll get a mortgage offer based on their valuation not the price you have agreed to pay. From your point of view it’s far from simple. You will need to find the difference between the valuation and the agreed price without borrowing from other sources. Nasty!

It comes back to the fundamental question: How much should I pay for my French house?

To answer the question “How much should I pay for my French house” we need to look at how different valuations come about.

But first we need to remind ourselves of some basic economics – the concept of Value. Simply put, value is the negotiated figure between a buyer and a seller. There is no such thing as absolute value for a French property.

So, how does a property’s value get set in practice? The simple answer is not in your favour! The longer answer can best be explained using a short story.

The Seller’s View.

X decides that it is time to sell their French house. They ask themselves the question “what is it worth”. The answer is usually something like the following: Their purchase cost + all the money they have spent on the house + a profit (we all know that property prices always go up, don’t we).

They then go to talk to an Estate Agent and we make the next step.

The Estate Agent’s View.

Business is not good. There are too many estate agents in France, but it’s a restricted profession so agency fees have been allowed to rise to balance the oversupply of agents with the revenue they need to stay in business. In fact agency fees can be anywhere between 4% to 10% of the sale price.

The agent does not really expect to achieve the Seller’s price but, even more, the agent does not want to lose the Mandat. After all, once the agent has the Mandat de Vente they can try and sell it on to another agent and split the commission – try a Google search for inter-cabinet to find out how this works.

So what does the agent do? They’ll just accept the seller’s price, unless they think they can get even more due to local market conditions. In any event the price will be the highest that the seller and agent can convince themselves of, even if it may take years, yes years, to sell.

 The Buyer’s (Your) View.

There you have it, you’ve set your heart on the property and both the Agent and the Seller are telling you it would be a steal at twice the price.

Happy? You shouldn’t be!

Here’s what you should do in 6 steps, using easy to use online resources:

First, check if the property is on the market at different prices with other agents.

Second, check how long the property has been on the market. If it’s over a few months, wonder about the asking price.

Third, check if there have been previous failed sales. If there have, find out why they failed.

Fourth, check the average price per square metre under loi Carrez which is available for every postcode in France. If you are being asked to pay more than the average price, wonder why.

Fifth, check the price of recent sales around the property you hope to buy. This information is publicly available on Etalab.

Finally, find out the real reason the vendor is selling and how quickly they need to sell.

Examples Where Research Paid Off.

Well, you might be thinking to yourself “Can it be worth the trouble of doing the research”.

After all, the Estate Agent is virtually a friend and the vendor seems genuine so why not just trust them?

How about these two examples from many we have seen over the years:

Property 1 – a luxury villa on the Cote d’Azur, asking price €12m. After a little digging it turned out that the seller needed to sell very quickly to repay misappropriated funds to save themselves from a prison term in Scandinavia. Final negotiated price €8.5m. Saving €3.5m or around 29%.

Property 2 – a substantial property in a small town in central France, asking price €450,000. After a little digging it turned out that the property had failed to sell over a period of 4 years and the vendors were facing bankruptcy unless they repaid their borrowings. Final negotiated price €120,000. Saving €330,000 or around 26%

Your Property – Why not get researching before you make an offer?

Need Help Researching?

If you need help getting started just Contact Us or give us a call for initial advice on how to go about researching the REAL MARKET PRICE of your proposed French property.