If you’ve decided to stay in Paris long term, you may become interested in owning rather than renting. In Part One of this two-part series, I outlined how to find your ideal property. 

Now, as you follow your dream of owning a piece of Paris, the next step is to start thinking about financing your new home as well as how to legally sign for it.

Step One: Choose Your Bank

Check out different banks as to their lending rates. You will want to look at their TAEG (Taux annuel effectif global) which includes various fees above and beyond the interest rate and spread over the time of the loan. Sometimes banks announce a low lending rate but then the fees bring up the cost and the TAEG. Have them print out a proposal for a repayment schedule (échéance de prêt) and simply compare the monthly mortgage offers. Remember, only a couple of tens of euros per month can bring up the total cost of the loan into the thousands.

Also, see how comfortable you are working with a particular bank. The bank will ask you to open an account with them and transfer all your banking needs to that account, i.e., income and all regular transfers. For my last acquisition, I was looking into three banks, including BanquePostale. BanquePostale had the best rate. But, when they became very picayunish as to more document demands, I decided I did not want to spend fifteen years of my financial life with them. However, I was able to use their offer to more strongly negotiate with another bank and then got a good deal from a bank I have been happy to work with since then.

Get a potential agreement from a bank(s) to know where they stand on your real-estate project. They will not sign for a loan until you come to them with a notarized pre-sales agreement. However once that is done, you will only have a short time to get the loan processed. The final negotiations with these banks, and your choice of bank, will take place typically within a month after this agreement is in hand.

Banks can be difficult in awarding loans. The budget question concerns not only how much money you already possess, but how much the banks will be willing to lend. There is a law to protect people against accumulating too much debt (loi surendettement). They must check whether you might be overextending yourself and make sure that you do not. If they do not carry out this role, they can become responsible for your loan. The rule of thumb is that the banks will only lend an amount whereby the monthly payments will not go over 30% of your income, preferably salary.

They do not want to lend to those whose incomes are unsure. They are particularly happy to loan to civil servants, as the latter cannot lose their jobs and therefore can necessarily pay off their loan as planned. They also offer loans to those who have a CDI (Contrat de duréee indeterminée, long-term, unending contract), as such a contract means the person is most likely not to lose their job. On the other hand, if you are neither a civil servant nor have a CDI, but only have a CDD (Contrat à durée déterminée, a fixed term contract) or even worse, you have a freelance job, they may not want to lend to you as they fear you might lose your job and then default. These eventualities must be worked out with the bank.

As a case in point, after three years of legal work to get permission to enlarge my house, I lost my job. Among the answers I got to queries for a bank loan, was the memorable, “Madame, come back to us when you find a job.”

Banks get cold feet and do not want to bother with repossessing your property, no matter its worth, no matter the collateral you offer. They would much rather you just pay and not make waves. It might be mentioned, too, that the law of repossession here is different from in the US. If you walk away from a loan, the bank will sell off your property. If they sell it for more than you owe, they will give you the difference. If, on the other hand, they sell it for less, you remain liable for the difference.

Another French banking difficulty is age. I have just learned that banks will only lend up to the time you are 75 years of age. This means, for example, if you need to borrow 100 000€ at age 65, you must be able to pay back the loan within ten years. Considering interest, insurance, bank fees, mortgage fees… etc. I will ballpark a figure of being capable of paying 1000€/month, and this with an income of a minimum of 3000€/month.

The bank will also try to force you into having your loan insured by them, typically at a rather high cost. Legally you can look for other insurance companies to insure your loan. If you feel the bank will refuse the loan if you do not accept their insurance policy, you might want to accept it just to be able to close, and then change your policy after a year. The law protects this right, but the banks do whatever they can to make it difficult.

Step Two: Make Sure The Bank Likes Foreigners

For Americans who might be buying with money being brought over from the United States, it would be good to discuss the question with a financial advisor, both in the US and France. By law, banks report all cash transactions that exceed $10,000 — the international money transfer reporting limit set by the IRS. This means you need to report any large sum you are bringing over both to the IRS and to the French finance ministry.

The question of foreign transfers gets even thornier in the case where the down payment might be a gift from a US parent. For example, a mother might want to gift her only son $100,000. Under US law she is allowed to gift him $15,000 tax-free per year. After that, a tax applies. 

Under French law, she can gift her son up to 100 000 € every fifteen years. In this case, although he must report this gift to the French Finance Ministry, or his tax office, there should be no French tax on the amount. Before transferring any large amount of money from one country to another be sure to get advice from a professional.

If you want a list of banks that like dealing with Americans, the comments section on this article we wrote is constantly being updated with names of banks.

Step Three: Work With a Notaire to Sign Your Real Estate Sales Acquisition

A real-estate sales acquisition must necessarily take place through the services of a notaire (real estate-inheritance lawyer). You must calculate in your budget the sum over and above the price of the property that must be paid in government taxes and notaire’s fees which are commonly combined and called frais de notaire. A good rule of thumb is to count ten percent, although it usually comes to a bit less.

Once you and the seller have agreed to the sale, the first step is to go to a notaire to sign a promesse de vente (pre-sales agreement). Once the purchase is concluded, the buyer becomes tied to the notaire until the property is no longer theirs. For this reason, it is the buyer who chooses the notaire. Get a recommendation; some do their work better than others and there is relatively little difference in the price. Remember this is a relationship that will last for better or for worse until you sell the property or your children inherit.

This agreement will include the agreed-upon price as well as the time-lapse (typically a month) that is allowed for the purchaser to get (or not) a bank loan. It will also state when the sale is to be signed. Make sure there is a clause that states that if no bank offers a loan, the sale is off at no cost to the purchaser. 

When signing the sales agreement the purchaser will leave a down payment for the seller, but the sum will stay in the hands of the notaire until the final sale is signed. The notaire will also issue you a special document to use whereby should you change your mind within seven days, you will not lose your down payment.

Step Four: Finalize The Negotiations

It is now that you will finalize the negotiations with all those banks you had talked with and make your final decision as to whom you will sign with. On my last purchase, I signed the agreement on a Friday, saw one bank that evening, another the next morning, and left for Chicago on Monday. The rest of the negotiations took place by phone (whereby I got one bright, cheerful call at 3am Chicago time!) and email. I made my final decision on my return three weeks later.

While you are getting your loan in order, the seller will be getting a diagnosis of the property including an ecological report, the final number of square meters and a geological report including whether there is/was a quarry under your building or an underground river bed, whether there are termites, various types of pollution, energy efficiency…

Other things to keep in mind as you prepare to buy: 

• Are you buying alone? 
• If there are two of you, are you both signing 50/50 or will the condo belong to only one of you? 
• Who is paying, or are you both paying? 
• What is the percentage each one is contributing to the purchase? Remember, in case of any separation the condo will be divided according to each person’s contribution as stated in the deed.

It is possible to make the purchase as an inheritance hedge. For example, you can buy in the form of what is called indivision whereby one person, typically a parent or spouse, will have exclusive use of the property (usufruit) and the other will have ownership. In this case, when the usufruitier passes away, the heir will have untaxed, complete ownership of the property.

Finally, with the bank’s agreement, you can set an appointment and return to the notaire’s for the final signature. The notaire will read aloud every bit of information they have gathered including the date of birth of the previous owner, their profession, how they got the condo, e.g. who they bought from, inherited from, or their loan. On my last acquisition, I was stupefied to learn that the owner had only had a seven-year loan to pay for the property. Those were the days!

Step Five: Pay Attention

Be sure you listen attentively to every word, as boring as it might be. There will be the yearly real estate taxes to be divided up. Now that the living tax (taxe d’habitation) has been more or less phased out, there remains taxe foncier. Normally this will be divided on a pro-rata basis, that each owner will pay the percentage of the part of that year that they owned the property. 

At my last signature, in a second week of September, the owner gracefully said she would fully pay for the taxe d’habitation of that year. I accepted the taxe foncier as of the first week of September, although we only signed on the second week, allowing for a simple division of three quarters and one quarter. It was a very pleasant signature process. The surprised notaire told us the story whereby the buyer and seller negotiated the taxes down to exact pennies.

Make sure everything that was said to be included is indeed included in the deed. For example, my ground-floor neighbor in the main building of my condo gets full use of the garden attached to the building up to the fence where my garden begins. Her exclusive use of the garden was not included in what the notaire read out, and she refused to sign until it was added. In another case, there was a mix-up of storage lockers, and the notaire held back 10 000 € until the right locker was emptied and ready for use for the new owners. Know what you are getting into. You can still refuse to sign if there is a problem that you had not been made aware of.

And now, assuming all has gone well and all the parties concerned have signed all the documents, you will simply leave the notaire’s office, keys in hand, the happy owner of a Paris property. And the rest of the story is yours.

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If you’ve made the decision to stay for the long haul in Paris, you should be thinking about purchasing your primary residence. As a friend once said to me, paying rent is money thrown away. In spite of rent control, rents do keep increasing. And your landlord/lady can always ask you to leave should they want to sell the condo, house a family member, or move into the condo themselves.

Of course, finding and buying real estate in Paris is easier said than done.

Step One: Determine Your Budget

The first step of your search-and-purchase is setting a budget and deciding on an area. The latter often depends on the former, which implies possible trade-offs in comfort and size for location and price.

The size of the condo will be expressed in square meters (mètres carrés), rather than by its number of bedrooms, all rooms being considered equal. You can thus find a single-room studio condo of 30 square meters, (for a ballpark figure, I tend to multiply by ten to get the number of square feet, thus 300 square feet more or less) just as the same size condo can be divided into 2 rooms. Various sites will inform you of the average price of a square meter in the twenty arrondissements of Paris. You can start by looking here and here.

How these square meters are calculated has been regulated by the loi Carrez which was passed in 1996. It legally defines the living area (surface habitable) of a condominium apartment and must appear in the deed of sale (acte de vente). 

However, the “real” living area may be greater than the living area as defined by the loi Carrez, as it does not include any floor space under 1m80. This means, for example, any sloping roof area in a top-floor apartment, does not count until it reaches 1m80, nor does the area under a staircase until it reaches a height of 1m80. Balconies are not included in this calculation, although they do bring up the price (per square meter) as they make the property more attractive. Also, as another example, my finished basement cannot be considered in the calculation of my house’s liveable surface as the ceiling is at 1m78.

You will thus find announcements that give both loi Carrez (official) living space size and general floor space which might differ, especially for condos on the top floor. The advantage in purchasing a property with such differences is that you can find a nice condo on a top floor, for example, at a lower cost per square meter as it has a sloping ceiling. 

A friend of mine has a wonderful, bright, single-room studio with few square meters according to the loi Carrez, but in fact, has a second floor with a sloping ceiling which serves as a bedroom and bathroom making it into a quasi two-room apartment.

There are, of course, disadvantages. If you ever want to rent out the condo, it is only the square meters according to the loi Carrez that can be taken into account for the Paris rent-control price. Also, you cannot rent out a condo that is smaller than nine square meters according to the loi Carrez, no matter how much floor space there is.

It is to be noted, too, that normally a surveyor has calculated the exact number of square meters in a given condo and this number will be transcribed in the sales deed. You can, once you move in, call in your own surveyor if you believe there is an error in the calculation. If it is found that the condo is more than five percent smaller than the declared surface on the sales deed, you can ask to get a refund for the difference.

Step Two: Determine Where You Want To Live

Check out the average price/square meter in the area you are looking to know in advance if your budget is realistic for the size of the apartment you are looking for. If not, which is more important, location or size? A two-room apartment (i.e. one-bedroom) in the center of Paris, or a three-room apartment in the much less trendy east? Who inhabits the area? Will you be comfortable there? 

An area can differ from one street to another. I was looking for a studio in the 2nd arrondissement and got a call from an agency. He asked if I knew the rue Blondel. No, I didn’t. “There are prostitutes plying their trade there; is that OK with you?” “No thanks, I won’t visit,” even though the price was right. I’m not particularly bothered by prostitutes, but the johns and pimps that accompany them make me uncomfortable.

Visit all the real estate agencies in the area. Get on their lists to be called when something that responds to your criteria comes in. Check online. Agencies advertise on SeLoger, Logic-Immo, and others.

Particulier à Particulier is a site where owners put up their real estate for sale without going through an agency. This is how I found my last purchase, un perle rare (a rare pearl), a French expression for something exceptional: a large studio at a price much lower than the average market price per square meter for the area located in the 100-meter long street that I’d fallen in love with. I badgered the poor seller every evening to get her to let me visit as soon as possible and got myself first in line. After a year of real-estate hunting (the average search time), I knew the prices, knew what I wanted, and neither hesitated nor negotiated and said I’d take it!

Step Three: Get Specific

To save time in your search, when you visit an agency or get a call, ask basic questions beyond the price: 

• How many square meters is the apartment? Divide the price by the number of square meters and you will get the price/square meter. 
• What floor is it on? 

• Is there a lift? 

• What’s the height of the ceiling? Some ceilings are particularly low; others might be comfortably high. The average is about 2m50. 
• Is the toilet electric or not? Non-electric toilets are called sani-broyeur. Some toilets have been added to apartments where there are no special toilet pipes and therefore whatever goes in must be ground down. Such a toilet is fragile and always needs changing sooner or later and becomes costly in the long run.

There are various differences in condos to keep in mind. The idea of a “penthouse” is inexistent in Paris. The étage noble (the grand floor, the most opulent of old buildings) is usually the first floor (the one above the ground floor, the second floor in the US) with higher ceilings than the rest of the building, but also more expensive. Top floors, in fact, can be very hot in summer and cold in winter, and usually have sloping ceilings. Ground floors are easy for robbers to get into, tend to be noisier and dirtier from the street, but again, cheaper.

Lift or no lift? It depends on how high your floor is. 5th-floor walk-ups are not uncommon, but less expensive than other floors or apartments that have an elevator. No matter what floor you live on, later you will pay co-owners dues on the lift if there is one.

It is always recommended to ask to see the minutes of the last meeting of the co-owners association (procès-verbal d’assemblée générale) and a copy of the last year’s fees (appels de fonds et de charges). The latter documents will inform you of the approximate yearly cost you will have to pay once you acquire the property. The former will inform you if there are any difficulties within the co-owners association, whether the co-owner selling the property is up to date on their dues, and whether there are any works that have been voted on that you will have to pay for once the property is yours. 

Not looking over these documents may mean you are in for some bad surprises, e.g., animosities among the co-owners making it difficult to get important works done and then paying for them. After moving in I found a wall of my house was separating from the rest of the construction and I had to take both the co-owners association and the contractors next door to court (a two-year process which I won and got everything fixed and all has been well ever since). 

Friends have found an electricity bill that was never paid whereby the new owners cannot get electricity until they can come to an agreement with the utility company. Check, too, the cost of yearly real-estate tax, (taxe fonciere) which you will probably find surprisingly low as compared to US real estate taxes. As a comparison, I pay about 10% of the real estate tax for a similar property in the Chicago area. In fact, Paris real estate taxes tend to be lower than those in other parts of France, as companies pay a good proportion of Paris’ real estate tax. However, our present mayor, Anne Hidalgo has been overspending and this reflects in a yearly rise in the Paris tax bill.

On the other hand, if you find what you believe is your dream property that many others are clamoring for, it can be worth taking the chance (cf. above, my last acquisition) of not looking into these financial questions. I have friends who had seen a condo, checked all the papers, negotiated the price and just before signing the pre-sales agreement, the owner found another purchaser. They finally did buy another condo, but continued to regret the one that got away.

“Seek and Ye Shall Find”

Searching for just the right place to call your own can be exciting, frustrating, long, and time-consuming. But think of it as an adventure as you learn about all the unbelievably different types of living spaces that can be found in Paris. And until you find THE one, consider it a way of learning about this city that you have elected to become home.

In the next article we’ll discuss the financial paperwork necessary to close your real estate deal.

Photo by Isaiah Bekkers on Unsplash

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