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Investing well: 10 tips for buying a pied-a-terre apartment in Paris

Buying property in Paris can help fulfill numerous objectives:  Not only is it an ideal ‘bricks and mortar’ alternative hedge investment like gold, but it can offer rental returns, cultural experiences, and a lifetime of memories and family enjoyment.  Not a bad return on investment!  The key is to buy a truly desirable property at a good price.  Here’s how:

1. Clearly establish objectives for your ideal property in Paris.

Initially identify the specific amenities and features you seek in a property: the best view, great historical features, a garden or outdoor space, a location in a vibrant area, or in a more private, exclusive neighborhood.  These are all criteria the right property and location can fulfill.

Prestige properties in Paris are often a century old, or more. For apartments in period buildings, the highest ceilings are on the 2nd floor, and terraces are rare. River views are a big premium, particularly in the sought-after Saint Germain des Pres or the Ile Saint Louis. It’s important to understand what is rare and special in a  market so you can recognize a good thing when you see it and be ready to act.



2. If you are financing your purchase, be sure that you have your mortgage financing secured beforehand so that you can position your interest in a property correctly.

Mortgage lending in Paris, and France generally, has always adhered to strict loan-to-value ratios, which turned out to be a good thing for the country when the subprime mortgage crisis wiped out real estate value in most major Western cities. High net worth individuals are sometimes surprised to learn that their substantial investments, rental income and other equity are only partially counted in a French bank’s calculation of “income” for purposes of assessing the maximum loan available. What’s more, sellers of luxury property in Paris rarely agree to a loan contingency clause on the purchase. If a loan is important, buyers can best position their offer if they are willing to agree to a short contingency period, a substantial down payment, and have already gone through the evaluation process with a bank or mortgage broker and can present a preliminary loan approval if asked.



3. Embark on a comprehensive approach to the search process.

While the majority of Paris home-buyers start their search on the Internet, many high-end properties aren’t officially listed on major listing sites. The French are particularly protective when it comes to privacy and displays of wealth, and many luxury properties change hands – between private individuals or with exclusive agents – without ever being publicly listed. Internet listings may have few photos and only summary descriptions. So, be prepared to expand your search beyond traditional avenues to access some of the best, most exclusive properties. For properties of interest, a visit is a must. A few years ago Paris Property Group found a property for a client that was listed for-sale-by-owner at 100,000 euros less than it was priced with two local agencies.  Failing to do a comprehensive search can result in paying tens of thousands of euros more for the exact same property.


4. A buyer’s agent will save you both time and money.

There is no multiple listing service (MLS) or similar public database of listings in Paris. This is a big challenge to any buyer, who has to contact dozens of agents in order to get a comprehensive view of all the properties available. It also means that each listing agent has only their own listings available to show, and will have no access to properties listed with other agencies. What’s more, when the buyer is in direct contact with the listing agent, that agent essentially represents both parties in the deal, and thus does not advocate for the buyer as much as for the sale itself to go through.

In the luxury real estate market, many properties are represented by private intermediaries who work behind the scenes to find interested buyers, rather than through public advertising. These listing “agents” might be licensed real estate agents, but also attorneys, financial advisors, or simply well-connected people representing properties for friends and acquaintances. Their services, and their properties, cannot be found on the Internet or other public resources.

Premier real estate specialists work beyond the traditional approach, through an extensive network of contacts to access all the available properties for their client, and learn about upcoming luxury listings before they hit the open market. A buyer’s agent is your advocate, advisor, negotiator, and confidante throughout the buying process. Working with a smart, reliable and well-connected agent is key to a successful, comprehensive search.


5. Thoroughly evaluate each property.

Evaluating a luxury home is more complicated than a typical home, as elements such as the home’s distinctive features, historical significance and recent remodeling may play a larger role than in lower-end homes. For this reason, detailed property tours are a must, and don’t let a busy sales agent rush you through the process. Expect to take a couple of hours to see a larger property, to review things like construction methods and materials, architectural highlights and restrictions, neighborhood, security and other important features. It may also be desirable to enlist the services of specialized home inspectors.

International buyers are often surprised that property in Paris – at any price, luxury property included – may be presented with a poorly photocopied dossier or none at all, by an uninformed selling agent and with scant if any staging to make the property look its best. This makes it all the more important to have smart, objective advice and information on the property and the market so that you recognize the real diamond in the rough.



6. Don’t Rush the Decision Process.

For Paris apartments, the seller is required to provide the buyer with the last 3 years of co-ownership meeting minutes and the building regulations, as well as inspection reports on the electricity and gas installations, the presence of asbestos or lead, and the energy efficiency of the property. There is no requirement to repair, just to disclose. Additional inspection reports are not the norm in France, and while defects may become a point of negotiation they are rarely volunteered by the seller or stipulated by the buyer as a condition for the sale to go through.

Take the time necessary to review all the documents and order all the inspections necessary to feel comfortable with the purchase decision. At the same time, appreciate the historical differences and be ready to accept some “defects” – there is no “perfect condition” when homes are 100+ years old.


7. Examine comparable properties.

Understanding the value of the property and of the market is key to making an appropriate offer. In France, only limited information is available publicly about the value of properties sold based on the size, year of construction and location. Determining comparable value with only this data is exceedingly difficult, as there is no information on recent renovations, layout, historic or other features that play an important role in determining market price.

For this reason, it can be valuable to view and assess a number of comparable properties to better understand the value of the property under consideration.  Understandably, the seller’s agent will be reticent to arrange other showings, and to advocate exclusively on behalf of the buyer to get them all the information they need to make an informed decision. This is another area where having a buyer’s agent can add value.


8. Structure an attractive offer.

Luxury property owners take a lot of pride in their properties, whether they are old family estates or newly renovated by the current owner. If you are able to meet the seller and show your appreciation for the value of the property, they often recognize that shared connection and want you to “win” the property over other potential buyers.

Making the appropriate offer is not easy. In some cases, sellers aren’t highly motivated to sell and have the financial wherewithal to wait for the right price. Culturally, the French don’t like to haggle over price and set their asking prices at what they view as “reasonable”; a lowball offer can backfire and result in a seller who is unwilling to sell to you at any price. Even substantial price negotiation must be subtle, and allowing the owner to save face is the key to success.

Cash buyers should avoid misjudging their negotiating power by coming in with an insultingly low offer. The seller may decide to go with a competing buyer, even if their offer is financed, if they make a substantial down payment and reveal enough information to show they are serious and have solid financials.



9. Structure the purchase for wealth and inheritance considerations.

France has forced inheritance laws, a concept unknown to buyers from common law jurisdictions such as Canada, Australia and most of the United States (Louisiana is an exception). Recent changes to the law enable foreign buyers to stipulate that the inheritance laws of their own country should be applied to a property purchased.  Otherwise, disposition of property in a decedent’s estate is governed by the laws of the country in which the property is located. France allows for certain ownership structures, such as the popular Societe Civile Immobiliere (SCI), to give owners more flexibility when it comes to transferring wealth over time and more control in deciding who will inherit the property.

France imposes a wealth tax on non-resident property owners with assets in France exceeding  1,300,000. Having a mortgage on the property is one option available to reduce wealth tax owed.

During the usual 2-3 month closing period, it can be valuable to thoroughly review the available ownership structures and how they best fit your needs. Switching ownership structures or financing the property after the purchase can be costly. A good local real estate attorney can save you a lot of headaches.


10.  Keep the details in mind and minimize the unknown.

Purchasing a luxury home in France is a major investment, and can be difficult in a market that is unfamiliar and negotiated in a language that is not your own. Experts – preferably ones who speak your language – such as tax and financial planners, bankers and attorneys should be consulted up front and should be directly involved in the transaction as needed.

If you’ll be using an architect or decorator, establish that relationship early on so that they can advise what changes to the property are possible: many Paris buildings are “classé,” meaning historically listed, and certain features must be preserved. It will also help to prepare the groundwork on renovation so that the work can start as soon as the purchase is complete.

Beyond the purchase price, be prepared for closing costs, such as transfer taxes (included in the “notaire fees”) and property insurance. Find the best option for trading your currency into euros, and consider locking in exchange rates for mortgage payments to minimize the impact of currency fluctuations. Finally, most utilities in Paris are automatically deducted from French bank accounts; a good banking relationship will enable you to establish those contracts quickly.

 Paris Property Group can help you achieve your Paris investment objectives.  Whether it is a pied-a-terre for family, friends and personal use, a rental investment property, or a bit of both – we’ll help you find an amazing property, guide you through the process and connect you with all the resources you need along the way.


Contact Paris Property Group to learn more about buying or selling property in Paris.

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