Ask Miranda: Finders Fees and Licensed Real Estate Agents, What’s the Difference?
Posted on June 6, 2012 by Miranda Junowicz Bothe
Question: Hi Miranda, 1) Another American I know has an organization that helps American’s find apartments for a “finder’s fee” of 2.5 %, saying she is not a real estate agent. How do you differ?
Answer: The law in France requires that any person or company that finds or sells property is required to hold a Carte de Transaction, or broker license. Licensed real estate agencies that search for property for clients are forbidden from taking upfront fees for the search, or from receiving their commission before the property purchase is finalized with an acte de vente. Real estate agents are closely regulated in Paris: besides the required license, they hold malpractice insurance and are bound by strict ethical rules regarding their representations about the property and their conduct with their clients.
Any company that holds itself out as a Paris “property finder” without a Paris broker license is simply acting outside the law. They will often have their clients sign contracts with a US or UK company, take thousands of euros in upfront fees, and require additional payment at the signing of the initial purchase agreement (promesse de vente) – all practices that are illegal. Because they are not real estate agents, their search process usually entails working with a handful of agents that they know (who pay them an additional fee on top of the “finder fee” that their clients pay), or showing their clients only private-sale properties. Either way, instead of a comprehensive view of the market, the buyer is seeing property that is often overpriced and in any case only a slice of the real market of available properties.
Another key reason to use a licensed real estate broker in Paris over a “finder” service is that our fees are deductible from your capital gains tax owed when you sell your property. The fees paid to an unlicensed service are not recoverable. Furthermore, licensed firms carry insurance against mishaps with your transaction. There is no recourse against an illegal service provider.
As an American in this business, I am aware of a couple of American-led outfits that practice this way in Paris, whose client base is often made up of easy targets: fellow Americans new to the market, unfamiliar with the language and customs, and glad to find someone they think they can trust. We have worked with a handful of clients who came to us frustrated from one of these property “finders”, having paid handsomely for menial service and with no recourse either to get back their money or to demand the service they thought they were contracting for. Buying real estate in Parisis a serious endeavor and a challenge under the best of circumstances, and deserves better than entrusting that process to an illegal service provider.
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