Real estate investor in France? You’ve got to read this before buying your next property on the Côte d’Azur | Real estate
# Real estate # French Riviera
Investing in your future has a great deal with buying real estate in prime locations – such as the French Riviera.
As the chic of the Côte d’Azur attracts more and more investors globally, there is a lot to learn before making the first step towards your next real estate investment.
In this article Eyal Oram, a seasoned real estate transaction specialiste from Nice, will guide you through the essential steps of acquiring an apartment on this marvelous region, starting with the city of Nice.
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Basic introduction to real estate terms in France
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Before getting to the different sectors of Nice, here are some key terms for any kind of transaction in France:
The “Carrez Law” (“Loi Carrez”): France has a clear law regarding measurements of any habitable surfaces in apartments and houses that affects the value, insurance costs and taxes.
This law refers to the interior parties of a property (excluding closed terraces, “verandas”) and states a follows:
– Surface is calculated on leveled floor, excluding “galleries” (“mezzanines” in French).
– Measurements can take place for a space under a ceiling of at least 1.8m.
– A space under 9 sqm in volume cannot be legally considered as a room.
– Exterior balconies and surfaces do not count in the Carrez count.
Purchasing an apartment: step by step
Conditions of sale prior to the act
Diagnostics: to have an apartment ready for sale, a series of checks, aka “diagnostics”, has to take place by the seller in order to insure the state of the apartments.
This includes checks by a professional institute such as detection of PVC, humidity, electricity norms, surface calculation and verification, termites, energy consumption etc.
A diagnostics company has a margin of error respected by the law of up to 5%. If proven to be greater than 5% by a third party, this margin grants the buyer the ability to reclaim a reimbursement from the company based on the relative cost of lost sqm in the calculation or call off the deal before or within 1 year from the signature.
Notary: every real estate acquisition has to be signed at a notarial office by law in France, binding the buyer to pay around 8% of the property’s value (this rate declines as values grow). The notary can be chosen by the seller, the buyer or via a real estate agency.
After the papers are signed it takes between 1-3 months (depending on the payment method) for him to prepare all the necessary documents.
Note: city halls have the right to oppose a deal after a ‘compromis’ is signed whenever it shows interest in the property, as long as it makes an offer on it.
This happens usually when the city considers the apartment as a potential state supplied residence for social cases.
Initial sale agreement (“Compromis“)
The first documented act is the “compromis”, which is a pre-sale contract between two parties, stating the offer made for a property.
Normally, the notary creates it, but many real estate agencies are making their own. It should contain the offer the buyer made to the seller and his financing.
Once the seller agrees to the offer, the buyer has 10 days (including weekends) to cancel the deal. If the buyer shows his regret to buy after this period, he may pay a penalty of around 20k Euros (may vary) to the seller.
Bonus fact: the notary may ask you a first down payment after the signature of the ‘compromis’ but it is not required by law. It is only an act of reassuring the seller your seriousness.
Financing
Financing serves a big role in purchasing a property affecting the security and rapidity of the buying process. It is a smart choice to make, especially when interests are as low as 1% (2021).
It is not easy to get a mortgage in France: one needs to show his tax statements as well as his incomes in the last 3 years and a long-term contract in France or stable income as a company.
Checking your mortgage eligibility with a bank in France is made 2 times in this case: firstly when asking it, and secondly when they approve it.
Buying the asset with your own means saves time and is more reassuring to the seller as it may serve as leverage in negotiation against other buyers.
When buying without financing, the deal is irrevocable once the 10 days pass.
On the other hand, when taking a mortgage, the journey is not over yet: even after the 10 retraction days, the bank can refuse your finance and then the whole deal could go bust without any charges. You are only safe after the second request for finance after the “compromis” AND the 10 days!
Final buying act
This is the final contract in which the buyer immediately becomes the new owner of the property.
This document states the usage of the property regarding taxes and buyers’ residency status.
1. Know your surroundings
Before any search, you have to define a budget and a goal of your transaction. The difference between a renting investment and residency is vast, especially in terms of finances.
After defining these, we may look at the rewards of each sector of Nice.
The average price of a square meter in Nice (~4,300 €) hides a lot of information and various levels of pricing.
In some sectors, i.e. in Nice Nord (northern district), you can find prices as low as 2,900€/sqm, whereas just a short drive away prices increase well over 10,000€/sqm.
In general, the rule of thumb is that the further east you go on the coast line (towards ‘Villefranche-sur-mer’ all the way to Monaco), the more expensive it gets. Predictably, the further you are farther away from the coastline you are, you will pay less Euros per square meter.
Quarters and their characteristics
When talking about real estate investments – location is key.
A small apartment in a good position on the map will get rented in a blink of an eye, whereas a much more spacious but distant condominium could be left empty for longer.
In Nice this is particularly noticeable: the quality of living and population can change within a foot step.
For example: the Musiciens quarter has two ends. One near the central train station and the other near Victor Hugo Boulevard, bordering the Carré d’Or quarter, which is the most central, desired quarter district in town.
The differences between the two ends is so significant that price differences can double; so is the quality of living, despite being meters away from each other.
To understand this better, here is a division of quarters in Nice by their desirability:
1. Carré d’Or
Undisputedly the most attractive and central quarter in town.
Bordering Gambetta boulevard, Victor Hugo, Place Massena and the coast line, it is very sought after for rental or resale investments, as prices keep on rising consistently. Apartments in good condition will rise in value slowly, but those that need renovations could bring a good ROI.
This quarter benefits from immediate access to trams, trains and the free shuttle across the center, which makes perfect sense on why it is so attractive.
Average prices per sqm: ~7,300€.
2. Musiciens
Bordering the Carré d’Or from the north, Musiciens quarter brings a mixed bag of qualities. Below (south) Rossini street you will mostly enjoy tranquility despite being in the heart of things (the population here is mostly old).
Up north Rossini, often called Thiers quarter, the atmosphere changes and you will meet a different side of this area with louder neighbors and less maintained buildings as it is closer to the main train station.
Despite the differences, this area is still attractive thanks to the accessibility of public transport, beaches and supermarkets.
Average prices per sqm: ~5,130€.
3. The old town (Vieux Nice)
Bordering Castle Hill, the coastline and Promenade du Paillon, this quarter catches the attention of every visitor with its ancient charm.
Every passage and alley brings magic to the eyes and the reasonable prices are attracting both investors and habitants.
With that said, the adorable views and niches come with some disadvantages.
The buildings are very old and often demand some maintenance and finding a clear view out is rare. As you may expect, elevators are hard to find in these historic residences but on the other hand monthly bills are often low.
Average prices per sqm: ~5,600€.
4.The Port
The port quarter of Nice has a unique glitter that comes with a price.
The mix of being a bit away from the busy center with the feeling of a small fishers village buys it a status of its own. Buildings here are old as well but more of them have an elevator as this quarter is being consistantly renewed.
Average prices per sqm: ~6,600€.
Real estate agencies: what you must know
The real estate market in France relies heavily on agencies, which often propose a free estimation of your apartment before listing it for sale.
Each agency has the right to determine its commission (paid after the final selling act), which normally varies between 5-7% of the property’s value.
True to 2021, the real estate sector does not require academic education from its agents, most of which are paid by commission – not a fixed salary.
This begs the question: how confidence can you get from an agent whose sole interest is to sell in order to make a living?
We would suggest to having a background check if you choose to go with an agency by asking what experience does the agent posses and what type of contract he is offering etc., which leads us to the next chapter.
Remember: an unexperienced agent can underestimate the value of your apartment.
Sellers: avoid the trap
All real estate agencies propose 2 different contracts to their sellers: exclusive and non-exclusive.
Exclusive contract
The first gives exclusivity to the agency to advertise the apartment on every platform it likes, with no option to sell the apartment by the owner or by any third party for a minimal period of 3 months.
This approach gives the agency access to the MLS platform, reserved solely to other agencies, which could split the commission between them. This could give more visibility rather than publish it on free websites by a single agency.
While this option makes the ad more visible to other agents, from our experience it reduces the motivation to actively look for buyers since the commission could split, relying on MLS to find a way to the buyer.
We would say to not go on that road especially if you are new to real estate transactions in France.
Non-exclusive contract
This option gives the agency the right to publish ads of the apartment for 3 months while leaving the owner the right to sell it on his own, while other agencies can sign non-exclusive contracts with the seller simultaneously.
We would recommend this option to the extent of signing with 1 or 2 agencies at most, in order to avoid confusion and oddity among buyers.
Seeing the same apartment listed on many websites can seem suspicious and desperate, therefore drive people away.
Agencies could mix these contract types to make things more appealing but keep this in mind: always leave yourself the choice to sell on your own or go with another middle-man!
Our tip: it is safe to say that whatever happened with an agency in the first 4-6 months of advertising an apartment is pretty much all you’re going to get from it.
Beyond that time you are risking “burning” the sale by showing that it hasn’t been sold – which brings doubt to market followers, not mentioning the decreasing motivation to sell your apartment by the agency.
Buying & selling: the websites
When you are get familiar with the process of buying or selling a property on the French Riviera or France, you must know where to publish and where to look for to get the most out of your ad. We will not get into the big agencies’ websites, but we will mention most influential websites to sell an apartment in France.
1. SeLoger
SeLoger.com is the 2nd largest real estate transaction sale in the country. It is open to publish apartments for sale exclusively by agencies via a paid subscription. Buyers who are looking to buy via an agency will look mainly here before anywhere else.
2. Leboncoin
Leboncoin.fr is the largest website for real estate and used goods in France.
The typical users here are bargain searchers. Anyone can publish a property for sale here, including agencies, and a lot of transactions are held without mediation. Users of this site will probably negotiate more and the risk of encountering scams and fake profiles is higher as any profile is approved.
3. PAP (Particulier à particulier)
Pap.fr is the most renowned site to buy and sell between private individuals as agencies are excluded. Publishing an visible ad is free but in order to be able to message and call back to interested buyers you need to pay a monthly subscription of 50 Euros.
This article was written by an experienced real estate transaction specialist.