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France: Negotiating the Price

Overview

When buying a property, it usually pays to haggle over the price, even if you think it’s a bargain. Prices in the south of France are usually more negotiable than in the north, but they’re also higher. Don’t be put off by a high asking price, as most sellers are willing to negotiate. In fact, sellers generally presume buyers will bargain and rarely expect to receive the asking price for a property (although some vendors ask an unrealistic price and won’t budge a centime!). In popular areas (e.g. Paris and Provence), asking prices may be unrealistically high (up to double the real market price), particularly to snare the unsuspecting and ignorant foreign buyer.

Although there has been evidence of dual pricing in the past, the practice of quoting higher prices to foreigners is rare. The prices advertised abroad are usually identical to those advertised in France. Nevertheless, the French drive a much harder bargain than most foreigners when buying a property, particularly an old one. French owners are sometimes astonished at the prices foreign buyers are prepared to pay for nondescript homes in uninspiring areas (although they never complain about foreigners pushing up prices when they’re on the receiving end!). In recent years, many properties have sold for much less than their original asking prices, particularly properties priced at over €100,000.

It’s a good idea for your peace of mind to obtain an independent valuation (appraisal) to determine a property’s market value. If you’re using an agent, it’s worth asking him what to offer, although he may not tell you, as he’s acting for the seller. If a property has been realistically priced, you shouldn’t expect to obtain more than a 5 or 10 per cent reduction.

Timing is of the essence in the bargaining process. Generally the longer a property has been for sale and the more desperate the vendor is to sell, the more likely a lower offer will be accepted. Some people will tell you outright that they must sell by a certain date and that they will accept any reasonable offer. You may be able to find out from neighbours why someone is selling, which may help you decide whether an offer would be accepted. If a property has been on the market for a long time, e.g. longer than six months in a popular area, it may be overpriced (unless it has obvious defects). If there are many desirable properties for sale in a particular area or developments that have been on the market a long time, you should find out why, there may be a new road, railway or airport planned.

Before making an offer, you should find out as much as possible about a property, such as the following:

• When it was built.

• Whether it has been used as a permanent or a holiday home.

• How long the owners have lived there.

• Why they’re selling (they may not tell you outright, but may offer clues).

• How keen they are to sell.

• How long it has been on the market.

• The condition of the property.

• The neighbours and neighbourhood.

• Local property tax rates.

• Whether the asking price is realistic.

For your part, you must ensure that you keep any sensitive information from a seller and give the impression that you have all the time in the world (even if you must buy immediately). All this ‘cloak and dagger’ stuff may seem unethical, but you can be assured that if you were selling and a prospective buyer knew you were desperate and would accept a low offer, he certainly wouldn’t be in a hurry to pay you any more!

If you make an offer that’s too low you can always raise it, but it’s impossible to lower an offer once it has been accepted (if your first offer is accepted without haggling, you will never know how low you could have gone!). If an offer is rejected, it may be worth waiting a week or two before making a higher offer, depending on the market and how keen you are to buy a particular property.

If you make a low offer, it’s wise to indicate to the owner a few negative points (without being too critical) that merit a reduction in price. Note, however, that if you make a very low offer, an owner may feel insulted and refuse to do business with you!

If you want to buy a property at the best possible price as an investment, shopping around and buying a ‘distress sale’ from an owner who simply must sell is likely to result in the best deal. Obviously you will be in a better position if you’re a cash buyer and able to close quickly. Cash buyers in some areas may be able to negotiate a considerable price reduction for a quick sale, depending on the state of the local property market and how urgent the sale is. However, if you’re seeking an investment property it’s wise to buy in an area that’s in high demand, preferably with both buyers and renters. For the best resale prospects, it’s usually best to buy in an area or community (and style) that’s attractive to French buyers.

An offer should be made in writing, as it’s likely to be taken more seriously than a verbal offer.

Declared Value

Don’t be tempted by the French ‘custom’ of tax evasion, where the sale price declared to the tax authorities (prix déclaré) is reduced by an ‘under the table’ (sous la table) cash payment. It’s possible when buying a property direct from the vendor that he may suggest this, particularly if he’s selling a second home and must pay capital gains tax on the profit. Obviously if the vendor can show a smaller profit, he pays less tax. You will also save money on taxes and fees, but will have a higher capital gains tax bill when you sell if it’s a second home.

You should steer well clear of this practice, which is strictly illegal (although widespread). If you under-declare the price, the authorities can revalue the property and demand that you pay the shortfall in tax plus interest and fines. They can even prosecute you for fraud, in which case you can receive a prison sentence! The authorities can also decide to buy a property at the under-declared price plus 10 per cent within three months of the date of purchase. If you’re selling a property, you should bear in mind that, if the buyer refuses to make the under-the-table payment after the contract has been signed, there’s nothing you can do about it (legally!).

© Survival Books Limited 2005

“Buying a Home in France 2006” 6th Edition, David Hampshire.

Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in France 2006” 6th edition, by David Hampshire.

For extensive, annually updated information about buying a property in France, you can purchase this book at www.survivalbooks.net

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