SELLING A PROPERTY ON ILE DE RE
Want to sell your property but don’t have the time to deal with it? Perhaps you aren’t familiar with the latest legal obligations (ALUR law) or you simply need some help - a property professional can assist.
By working with an estate agent, you have a single contact who can give advice, value your property, market your product using the relevant media (advertisements, client mailshots, network of contacts…), organise visits of the property and inform you of your legal obligations and rights.
The sale of your property should be carefully planned and it is important to follow several steps if you wish to sell in a timely manner.
A correct valuation of the property allows for a timely sale and to limit the margin of negotiation for the buyer.
It is also important to have the right price to attract potential buyers to visit the property.
The estate agent will help you with the valuation as he knows the local property market but also has an impartial view on the property. The seller is not always able to have a realistic vision of the market value and can sometimes overestimate the attractive elements of the property overlooking its possible drawbacks.
The estate agent will carry out a comparative study of the market taking into account the good and bad aspects of the property. He can therefore give an objective valuation.
Putting together the dossier
To sell a property, you need more than just a price. You also need to be able to provide potential buyers with all the relevant information.
It is therefore highly recommended to set up the technical dossier for the property, i.e. to carry out all the required surveys using certified professionals (surveys regarding the presence of asbestos, lead, risk of natural disasters, subsidence, technological risks, survey of the electrical and gas installations etc) which are obligatory by law.
If you are selling a property that is within a condominium, the new property access and town planning law (ALUR) states that the seller must give certain pieces of information to the buyer: the condominium rules, the legal and financial status of the condominium, the number of dwellings, the annual charges, any court hearings and committee meetings, any ongoing legal affairs.
The contract to sell
If you use a professional estate agent, a contract will be drawn up between the two parties.
This is a two-sided agreement between the seller (the owner of the property), and an estate agent who will sell the property on their behalf.
There are two types of contract - exclusive and non-exclusive.
With an exclusive sale contract, the owner (property owner) entrusts the sale of the property to just one estate agent.
The document must contain the following elements:
- The identity of the seller(s) of the property,
- The references and contact details of the office in charge of the sale,
- The details of the property: the estate agent must confirm that the person who claims to be the owner is indeed the owner, via the property deeds,
- The price of the property,
- The sales fees,
- The duration of the contract: this is a limited period. Most contracts run for a minimum of 3 months with a tacit renewal thereafter, month by month. In all cases, at the end of a year the contract is terminated.
If the owner sells the property himself, he will not owe any money to the estate agencies with whom he has concluded the sale contract.
However, the seller must inform the estate agencies of the name of the buyer of the property, as it is possible that the agent may have done a viewing for the buyer in question.
Regarding the fees or commission, the amount is paid on the date that the sale is completed with the solicitor.
The "compromis de vente"
The ‘compromis de vente’ is the first legal document which seals the agreement of the relevant parties regarding the sale. We talk about it as a ‘pre-contract’ as it is the preparation for the legal completion of the sale.
The seller declares he wishes to sell the property to the buyer, who declares on his side his wish to buy it, according to the conditions set out. This goes beyond being just an agreement in principle, it is a legal document.
“The compromis de vente means a sale is agreed and the goods and price are set’ (art. 1589 of civil legislation). All parties are definitively committed, unless within the agreed timeframe any conditions that have been set for retraction should come into effect.
If one of the parties does not go on to sign the completion contract, the other parties have the right to take this to court to either force the sale or to demand monetary compensation and interest.
The ‘compromis de vente’ can have suspensive clauses in the event of the buyer requiring a loan to finance the purchase, and suspensive clauses can also apply in the event of any of the following scenarios: that the commune (local government) pre-empts the sale, an ongoing mortgage, an application for planning permission, potential objections to renovation works.
Certain documents must be part of the compromis: any condominium rules, the surveys, record of upkeep of the building.
A date is fixed for the reading and signing of the ‘compromis de vente’, with the estate agent, the solicitor, the seller and buyer. A copy is distributed to each party.
To show their commitment, the buyer is generally asked to pay a deposit (between 5 and 10 per cent of the sale price) which will be deducted from the sale price when the sale completes. This sum would be reimbursed to the buyer if a legal retraction ensues or if any of the suspensive clauses come into play within the agreed timescales.
This deposit can be transferred by bank transfer to the estate agent (if he is set up and possesses the necessary financial guarantees) or directly to the solicitor.
If a non-professional buyer wishes to retract from the sale, they are protected by the law and allowed to do so within 10 days, without giving a reason. The purchase must be for a property as a main residence, whether new or old.
They must however inform the relevant person as stated in the ‘compromis de vente’, of this decision within the time limit, in writing and by recorded delivery.
A retraction made within the time limit renders the compromis null and void and any sums paid by the buyer should be returned to them within 21 days after the date of the retraction.
Capital Gains Plus
Nowadays, due to the constant growth in the property market, many sellers find the sale price of their property is greater than the sum for which they bought it, which means they made a capital gain.
If this is a main residence, owners are not taxed on the capital gain. However, if the property is a second home or a rental property, tax must be paid on the net capital gain including social charges (at 15.5%) and income tax.
Since 1st September 2013, sellers are exempt of paying the income tax after 22 years of ownership and exempt of the social charges after 30 years of ownership.
The solicitor completes the declarations for the capital gains. However, if you wish to have an estimate of the capital gain that is due, you need to calculate the value of the overall gain in value of the property. To do this, adjust the purchase price of the property by adding the cost of any works carried out and the purchase fees.
These two additions can be done using the actual amounts or an owner can use the ‘forfaitaire’ method, which means increasing the purchase price by 15% for work carried out, and by 7.5% to account for purchase fees.
Finally, the sale price has to be adjusted with the charges and fees paid by the buyer and the fees paid by the seller.
The difference between the adjusted purchase price and the adjusted sale price allows the net capital gain to be calculated and this is the value which is taxable.
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