Real estate deals: who pays what?
Real estate transactions always come with associated fees. Some payable by the vendor, others by the purchaser, some are split between the two. Here’s a reminder of the rules.
A real estate transaction always generates its share of associated fees. Mandatory or optional, these expenses are necessary to get over the line to signing at the notary’s office and to make the property changing hands official. Who is responsible for their payment depends on the circumstances; it can be the vendor, the purchaser, or both parties.
*The Home Information Pack
The cost of carrying out the plethora of diagnostic tests on the property for sale is the responsibility of the seller. Collected together into a Home Information Pack (Dossier de diagnostic technique (DDT)), these documents provide information on the general state of the building and the property (electrics, surface area, any presence of lead piping, asbestos, or termites). If the purchaser wishes to make additional enquiries, their cost will come out of the purchaser’s pocket.
These fees are optional and are only paid if the sale is brokered by such a third party. The agent’s fees must be stated in their professional mandate, are around 4-8% of the property’s value, and are payable by the purchaser. Real estate agents are free to set their own rates and often they operate a sliding scale in accordance with the value of the property. For example, an agent will charge 8% on the sale of a studio or a parking spot. On the other hand, they might charge 4% on a higher value unit. You ought to be aware that the commission is often negotiable if it makes for a successful sale.
Notary’s fees are an unavoidable expense in a real estate transaction in France. They may not be reduced or negotiated and are paid by the seller on the day of signing of the contract of sale. For an old (previously owned) property, they are around 4-5% of the sale price, and are banked by the notary with over 80% being passed on to the State, to local authorities in the form of a variety of taxes such as registration fees, land registration tax, property transfer fees, departmental registration duties, and municipal taxes. Another portion of the fee is used to pay the “disbursements” necessary in order to prepare the dossier of sale (such as a mortgage verification, planning documents, stamp duties, etc.). As for the notary’s share (1.5-2%), this comes out of the same fee, is subject to national regulation, and is non-negotiable.
*Fixtures and fittings
Real estate transactions often include the acquisition of fixtures and fittings (fitted kitchen, built-in mezzanine level, bespoke shelving, and so on) by the buyer. Such acquisition is seen to be an additional spend by the purchaser on top of the value of the property itself and can afford the buyer a means of making a saving on the taxes associated with the sale. For example, for a property purchased at the price of €200,000, of which €8,000 is attributed to fixtures and fittings, the seller pays notary fees on a property value of €192,000 (€200,000 less €8,000) rather than €200,000. Such an opportunity is financially viable once the fixtures and fittings exceed a value of €2,000.
The payment of property and housing taxes is mandatory. The property tax being payable by the person that owned the property on 1 January of that tax year. The housing tax may be split between the buyer and the seller on a pro rata basis calculated according to how long each was resident in the property during the tax year.