Sunday, 23 April 2017

Sunday, 23 April 2017

Understanding fees (honoraires)

One of the most talked about subjects concerning house purchase in France, are the fees, both the size of the fee and who pays them.

If you are purchasing through an Estate Agency it is worth pointing out that whoever pays the commission, (seller or purchaser), the price of the property remains the same. The price is determined by the mandat de vente, and this specifies 3 figures, a price net to the vendor, the amount of the commission, and the price including the agency fees, or marketing price. This was formerly shown as FAI, but is now more correctly HAI (Honoraires d’Agence Inclus).

Some purchasers think that if the seller is paying the commission they are saving money, (if only), and some sellers think that it is a burden on them to them to pay the commission, (again not true). If the seller is to pay the commission then it because the mandat de vente is signed with an inclusive price and the commission will be deducted from the sale proceeds.

Many agents use a vendor paying the fee mandat to hide the amount of commission from their advertisements. Unless the sales details clearly state the amount or percentage of the fees, then it is likely that the property is being sold using a vendor fee mandat. The alternative is that the agency is not complying with the letter of the law. *

You might be fooled into thinking that it doesn’t matter about the wordings on the mandats, but you would be wrong! Below is an example that I have just shown a client, highlighting the difference between what a buyer would pay purchasing through us, against another agency also selling the property :

Allez-FrancaisOther Agency
Price to Vendor350000350000
Fees paid by Buyer21000
Fees paid by Seller24000
Price HAI *371000374000
Notary fees estimated2600027700
Total Price397000401700

In this case, our fees are slightly lower, but the important factor here is that because the other agency is using a “vendor mandate” then the Notary fees and stamp duty are calculated on a higher figure also, 374,000 in this case, rather than 350,000. Previously, it was common practice by some agents in the case of the purchaser paying the commission to get the buyer to sign a Mandat de Recherche with the Estate Agency. The aim of this practice was to reduce these legal costs. This practice is now illegal.

So, as you can see, a bit of knowledge is a powerful tool. Check the ads and make sure you understand who pays the fees – you could save several thousand Euros.

*Since 1st April 2017, agents have to show clearly on their website and in their offices, their “bareme” or scale of fees. Ours is on our home page. In addition, advertisements must specify the amount of fees payable where the buyer is paying the fee, but this does not apply where the vendor pays the fee.

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