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Buying an Apartment in Paris the Right Decision for You?
I was recently
contacted by an American couple who were looking to buy an apartment in
Paris. They decided that it was time for them to have a ‘pied-à-terre’
in the most beautiful city in the world. They were approaching retirement
age, had a sizeable nest-egg ready to be invested, and were not happy with
the opportunities available in the New York real estate market (the city
where they live) and had planned to buy a second property that they would
rent now and give to their children later on. After reading numerous articles
about the good value available in the Parisian real estate market, they
decided to give it a try.
Real Estate
Values Compared to Other Major Cities
"Any decent
one bedroom in a nice building in New York would have to cost us at least
$500,000. With maintenance costs, taxes, renovation work etc., this would
end up being a more sizeable investment than what we were looking for and
apart from the expected rental income, we would have gotten no pleasure
out of the apartment for ourselves. |
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At
our age, we are looking to do things that will bring us some joy along
with the return on our investments." Then they thought about Paris.
This couple
had often traveled to Paris either on vacation, or as part of another European
trip, and they had fond memories of their Parisian visits. The idea that
they could own a piece of the city appealed to them. The fact that today
the costs of owning property in Paris are less than in New York, and that
with well managed rentals, this could result in a net zero cost to them,
made this choice extremely appealing. They asked me to give them some idea
about prices in the Paris real estate market, the taxes, costs, and all
associated fees. They also wanted some idea as to how much rental income
a well-located Paris rental property could earn.
Paris real
estate has been cheaper than New York real estate for a number of years
now. At present, this is clearly the case, due to the lower prices per
square meter in Paris compared to New York, and the extremely favorable
US dollar/French Franc exchange rate. In the better areas in Paris (4th,
5th, 6th, 7th, 8th, 16th, 17th arrondissements) you could find a one-bedroom
apartment in a fairly upscale nice building for $200,000. |
| In
local terms, at the present exchange rates of 7.8 francs/$US, this equates
to 1,560,000 francs. Recent advertisements have listed one-bedroom apartments
(about 40 square meters) in the better areas starting at about 1,200,000
francs. Prices are always negotiable, but if you see something that you
really like, with the current market being what it is, don’t negotiate
too much because you might lose the place that you really like. It is a
sellers' market today, so when you find the apartment that really suits
you, go for it. You will make up the additional cost over the many years
of enjoyment the apartment will provide you.
As in the United
States, the similar common sense rules apply, and this holds true for the
concept of 'Caveat Emptor,' or let the buyer beware. When purchasing property
in Paris, New York, or Oshkosh, always make sure to have somebody that
you trust, and who knows a bit about construction, have a look at your
potential purchase. This should serve to put your mind at rest about the
quality of the building, the work done to the apartment, and what future
work will be necessary. Have this done before giving any money to anybody
to avoid any surprises later on.
One additional
word of wisdom, learned after taking part in a number of real estate transactions
here in Paris, is that the buyer has the right to ask for the last several
co-op board meetings minutes, resolutions and any extraordinary meetings
that took place. You should ask the seller to give you the name of the
building management company’s (Le Syndic in French) phone number. Contact
them and explain simply that you are about to buy an apartment in the given
building and even mention the seller's name to them. Ask if there have
been any problems in the building. Their responses should confirm what
the seller has told you. If not, be wary.
The Role
of the Notary When Purchasing Property in France
In addition
to the seller’s price, there is also a government transfer tax, called
‘Les frais de notaires’ or notary fees. In France, real estate transactions
must be enacted by Notaries, often with no legal advisor for either party. |
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Notaries
play the role of legal advisor and both parties have the right to have
their own notary present, at no additional cost to either the buyer of
the seller. The first portion of the notary fees are simply government
taxes, and the remaining fees are split between the two parties’ Notaries
equally. The notary fees are sizeable and can amount to between 5% and
8% of the purchase price of the property. They are always paid by the buyer,
so keep this in mind when estimating the price of a property.
The role of
the notary is to verify that the seller is really the owner of the property
in question, to verify the state of the building and any government mandates
to take this building over by government control (only in rare cases when
the building is considered to block some important government project).
Recent laws require that the notary verify the actual size of the apartment
via an architect’s drawing, that the pipes in the building do not have
lead in them and that there are no termites in the building. Any of these
can be legal grounds to annul to sale if the buyer wishes to do so.
When the parties
meet at the notary’s office the first time, it is the moment when both
parties go to contract. |
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| The description
of the property is read, the history of the property, the necessary information
about both the buyer and the seller is disclosed and the contract is signed.
It is customary for the buyer to write a check for 10% of the purchase
price, which is held by the notary and not given to the seller until the
final sale date. There is usually a thre- month date set from the date
of contract, which will be the final closing date. This gives the buyer
sufficient time to get a mortgage for the property. At the time of contract,
in the contract, the mortgage criteria are listed (interest rate, mortgage
amount, etc) and if the buyer cannot find a mortgage that meets the criteria,
then this will annul the sale, and the buyer will recuperate his 10% down
payment.
Go
to page two of this article - click here - |
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