Considering purchasing a property in France can be an exciting venture, but understanding the financial aspects, particularly the deposit required, is crucial. Here, we delve into the specifics of how much security deposit you need to buy a house in France, offering valuable insights for expats embarking on their real estate journey.Â
Table of contents
Determining the security deposit: What amount?
The deposit amount is a pivotal aspect negotiated between the buyer and the seller. Typically, there are two methods to establish the deposit:
- Percentage of sale price: Often, the deposit is calculated as a percentage of the final sale price, typically ranging between ten and fifteen percents.Â
- Lump sum amount: Alternatively, the buyer and seller may agree on a fixed lump sum amount as the deposit.Â
For sellers, it’s prudent to set a deposit amount high enough to deter potential buyers from withdrawing from the sales agreement. Conversely, buyers aim to negotiate the lowest deposit amount possible, particularly if they lack a substantial down payment for their mortgage. Providing a significant deposit, such as 10 or 15% of the property’s sale price, can significantly impact the buyer’s financial standing.Â
Example:
- For an apartment value at 200,000 €, a 15% deposit would amount to 30,000 €.
- For a house priced at 500,000 €, a 10% deposit equates to 50,000 €.Â
To mitigate the deposit amount, buyers can demonstrate their seriousness to the seller by presenting evidence of their interactions with credit institutions regarding financing for their real estate project.Â
> You might be interested in this article: Getting a mortgage in France
When should the security deposit be paid to the notary?
The deposit is typically paid at the signing of the sales agreement before a notary or through a real estate agent. It’s important to note that the deposit is not directly paid to the seller but transferred to the notary by bank transfer and held in escrow until the final sale. The sum is then deducted from the final payment to the seller upon conclusion of the sale.Â
When it comes to the payment of the security deposit in a real estate transaction in France, timing and procedure are key considerations. Here’s a detailed explanation of when and how the security deposit is typically paid to the notary:
- Signing of the sales agreement: The security deposit is usually paid at the time of signing the sales agreement, which occurs before a notary or through a real estate agent. This agreement, known as the “compromis de vente” or “promesse de vente”, formalises the terms and conditions of the property sale between the buyer and seller.
- Payment to the notary: Importantly, the deposit is not directly handed over to the seller. Instead, the buyer transfers the deposit amount to the notary handling the transaction. This transfer is typically executed via bank transfer to ensure secure and traceable payment.
Escrow holding: Upon receipt, the notary holds the deposit amount in escrow until the finalisation of the sale. Escrow refers to the practice of placing funds in the custody of a neutral third party (the notary, in this case) until certain conditions are met. Holding the deposit in escrow provides assurance to both the buyer and seller that the funds are safeguarded until the transaction is completed.
Deduction from final payment: At the conclusion of the sale, the deposit amount is deducted from the final payment made by the buyer to the seller. This deduction is reflected in the overall settlement of the property transaction. The remaining balance, after deducting the deposit, is paid by the buyer to the seller through the notary’s office.
Final notes
Understanding the deposit requirements when buying a house in France is essential for expats navigating the real estate market. By negotiating the deposit amount wisely and adhering to legal protocols, buyers can proceed with confidence, knowing they are making informed financial decisions on their property purchase journey. Find more information about buying a house in France on the French government website.Â
