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Buying Property in Bordeaux

Discover the Bordeaux property buying process

Updated

So why Bordeaux? The countryside, the rivers, the idyllic views, a home from home, the chance to earn a good rental income and investment in a popular destination, are all great reasons to buy here.

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In Bordeaux there are many options when purchasing your property:

  • Private Sale
  • Using the services of a Solicitor ('Notaire')
  • Through a local Estate Agent
  • At auction

Private sale
Private sales are a direct way of purchasing your property in France. Estate agency fees are typically paid by the seller of a property and are reasonably significant, so in buying direct you will not have these charges and the savings can be shared. You may find websites that offer details on private sales but generally property will also be advertised in local free papers. It's not uncommon in France to see a hand written 'for sale' sign in the actual window of the property for sale.

Solicitors ('Notaire')
A small amount of property in Bordeaux is sold through the local Notary (Notaires), often in the case of an inheritance. A Notary is an impartial government official that acts for the state during the buying and selling process in all transactions and is usually chosen by the seller. Having a single notaire can make some British buyers feel uneasy about their property purchase, but as a buyer, you have the right to appoint a different notaire to act on your behalf.  This doesn't increase the fees, so it is a wise choice particularly if the purchase is complicated or off-plan. Some buyers have employed a UK-based solicitor to check the paperwork, but this is not generally advised as it will add to the fees and they are not familiar with the local market. 

Estate Agents (‘Agents Immobiliers’)
For those who don’t speak fluent French but still wish to buy property in Bordeaux, the option of using an estate agent is generally preferred . You may even find that popular areas of France you can find estate agents with English speaking services that will assist you.

‘Agents Immobiliers’ are French estate agents - bringing both buyers and sellers together. It is good to check all estate agents in the area you are buying as it’s not uncommon for a property to be on the market with a number of estate agencies, sometimes at a different price. All Estate Agents must be properly registered and carry the appropriate ‘Carte Professionnelle’ – professional card. Some will charge for this service, others will do it for no charge as they can share fees with the selling agent.

At Auction ('Ventes aux Enchères')
As a risky alternative those with a fluency in French could bag a real bargain at auction! French property auctions are quite common because of inheritance disputes, repossessions and debt defaults so often it’s a corporation hoping to salvage some form of financial return from the sale instead of a family looking to sell to the highest bidder. Auction properties usually come onto the market via 'notaires' but they can also be advertised on websites and in local papers. It is an interesting but complex process to purchasing a home in this way as bids are apparently placed as candles burn ('a la bougie')!

If you are interested in purchasing in France we heard about the ‘Coeur de France language school’ in the centre of Sancerre where a potential English speaking property hunter can enrol for a weeks intensive French course that will teach you sufficient French to see you through the acquisition, purchase and renovation of your dream French property!

Whichever of the routes you decide to take, you should still always make sure you understand all legal consequences of your actions and any documentation you are asked to sign.

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Leaseback property

Leaseback property is an ideal, hassle free option for the pure investor to purchase their property in France. Over the past few years there has been a significant increase in people opting to purchase their development in this manner. But what is leaseback?

The concept of ‘leaseback’ properties is mainly relevant to new developments. You purchase the property off plan on a freehold basis then immediately lease it back to the property developer for a specified number of years (e.g. 11 years). During your lease period, your property is rented out to holiday makers on your behalf where in return, you’ll receive a rental income. As the owner of the property, you are still able to make use of the property for a certain number of weeks during the year which will more than likely be specified by the developer.

The only costs you will need to pay are the local French taxes and a co-propriety charge for the building. As an additional bonus, those investing in a leaseback scheme can potentially also recover all VAT (or TVA as it’s called in France) paid on your property providing it is not classified as your primary residence. At present, the rate of TVA in France is 20% so it’s quite a significant proportion of your property price back and the contract could be for 20 years. Rental returns have fallen in recent years and if you sell your property before the end of the 20 year contract you will have to pay back some of the TVA. f you sell within 5 years you'll have to pay all of the TVA. Speak to a local Estate Agent to get more advice. 

Buying process

So, you've found the perfect property in France and now want to invest? Unsure of your next steps? The following process outlines the general buying process for your French property. You must:

  • sign an initial contract called the 'Compromise de vente'
  • pay the deposit for the property
  • complete the sale

The Compromis de Vente
The ‘compromis de vente' is signed by both parties and indicates the formal agreement to the sale of the property. Typically the document includes:

  • details of the purchase price
  • a brief description of the property
  • terms and conditions
  • conditions suspensives (a break clause specific to the French process), where applicable
  • the completion deadline

Although this is the preliminary contract, you should note that it is legally binding. Before signing, it is important to make sure:

  • you understand and agree with everything in the contract
  • the contract covers the full agreement of the house purchase
  • Any important conditions you have specified with the vendor are included within
  • you have sufficient funds available to pay the notaire the deposit for the house

The compromis de vente is the most common form of contract used when buying a property. Occasionally, sellers may elect to use the 'promesse de vente'. A promesse de vente contract offers you, as the buyer, slightly more flexibility as you then have an additional ‘option period' to complete the purchase of the property or you can withdraw your offer altogether, forfeiting your deposit.

In French property law, once your offer is formally accepted there are strict contractual regulations that mean you are legally bound to the property purchase. This eliminates the procedure of 'gazumping' and counter bidding which is common to the British property market. In France there is also a moral expectation that a buyer would not pull out of the deal once they have made their offer. If, after agreeing the sale price for the property, you have some questions about the sale you should make sure the signing of the compromis is subject to conditional clauses, known as ‘clauses suspensives'. Your questions may relate to the condition of the property, you may wish to find out whether you could obtain planning permission and/or you may simply wish to have a survey done. A clause suspensive will allow for the contract to be cancelled and your deposit refunded if any issues mentioned in the clause are uncovered during further investigations.

Before signing, check with your notaire what paperwork you are required to bring. In drawing up the compromis, the notaire may require you to provide official documentation such as your passport and marriage or divorce papers. It may also be useful to have relevant paperwork for a loan (mortgage) you may be using to purchase the property.

During the purchase process, the notaire is required to notify the Société d’Aménagement Foncier et d’Establissement Rural (SAFER). In certain circumstances, SAFER may intervene and reject the sale if they feel it is necessary to protect the land you are buying. In this instance, any deposit you have paid will be fully refunded. This type of incident is rare and generally only occurs where the property and land purchased are over 1 hectare (2.47 acres).

The Deposit
A non refundable deposit will be paid upon signing of the 'completion of sale' agreement. If you are not classified as a resident in France and are therefore not taxed in France, you will be required to put down a minimum of 20 per cent of the purchase price as your deposit. A lower deposit of 10 per cent is generally accepted for French residents. Included in both a compromis or promesse de vente sale contract is a seven day 'cooling-off' period; during which time the buyer may withdraw from the contract without significant financial penalty. However, if after the seven day clause you decide to pull out of the deal, your deposit is non refundable. Moreover, the deposit is held by the estate agent or Notaire until the final sale completion date.

Completion of Sale
After the signing of your compromis de vente, the notaire will begin the legal process for the sale of the property. Completion of the sale can take between two and three months as the notaire has to carry out various searches similar to those done by UK solicitors. The notaire is responsible for checking existing property ownership, any outstanding debts on the property and other such matters.

The final contract is known as the 'acte authentique de vente' (deed of sale). After signing the acte de vente possession of the property formally passes to the buyer. Before the official signing of the acte de vente, it is important you have transferred the full balance of the purchase price, plus any notary fees and taxes, to the notaire’s bank account. As with the deposit, the notaire will hold the funds until the acte de vente has been signed and completed. Where the balance of your property is being paid for by the bank (ie. using a mortgage), you need to ensure that your bank has paid the outstanding funds directly to the notaire in sufficient time to clear before the signing date. The sale will not be completed unless the money has cleared the notaire's bank account. Sadly money laundering laws mean that you can’t turn up with a briefcase full of dosh!

Once the deed of sale has been signed, the notaire will provide an ‘attestation d’achat’ or ‘attestation de propriété’ that proves ownership has been passed to you, until formal registration is complete. An exemplified copy of the purchase deed will follow some time later.

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Offer to completion process

During the buying process you will be required to sign official documentation and hand over the required cash to make the property legally yours. Buying property abroad can sometimes become a complicated process and you should note that in many countries, the process varies significantly from that of the UK. It is strongly advised that, before committing, you arm yourself with all the relevant purchasing information and complete all necessary financial and structural checks relating to your property. Before signing any official documentation you should make sure you fully understand the legal complexities involved in your purchase and, if possible, make sure you have a solicitor who is fluent in both English and French, so they can explain to you exactly what you are signing.

It is also worthwhile ensuring that your solicitor checks the debts against the property, as in some countires once the house sale has been registered you could become liable for any attached debts.

Property buying fees

When buying your dream property in France you should take into account the various fees and taxes. Here are some examples:

  • solicitor (or 'notaire') fees and commission
  • estate agent fees
  • property registration fees (droits d'enregistrement)
  • taxes - 'TVA' (French VAT)
  • foreign currency exchange costs (if applicable)
  • surveyors fees (if applicable)
  • mortrgage fees

Solicitor or 'notaire' fees
The notaire's fees (frais de notaire) are fixed at the outset and are payable by the purchaser. The deposit of the property is paid to the notaire upon signing the compromis de vente, however, additional notaire fees are payable in the form of local and national government taxes. Although they can vary slightly, fees are generally around 8% of the property price for older property and 4% if the property is less than 5 years old (frais réduits).

If you buy a property direct from the notaire you should still expect to pay a commission. This can be anything up to 5%.

Estate agent fees
It is not unusual for the property’s sale price to include the commission of the estate agent, often payable in France by the buyer. In fact, this is a question you should ask the estate agent at the beginning of your purchasing process. If you, the buyer, are then responsible for this element you should make sure that this is clearly stated within your contract particulars so that it is not added to the sale price on which the notaire's fees are based. Estate agents can charge anything from 4 to 12% of a property's selling price.

Property registration fees (droits d'enregistrement)
Land registry fees are similar to the UK's stamp duty and are are dependant on the price and age of your property. If you are buying a property that is more than 5 years old, you can expect to pay a 'droits d'enregistrement' of approximately 5%. Property less than 5 years old will be subject to fees of less than 1 per cent.

TVA
TVA is France’s equivalent of VAT. As at January 2014 the rate is 20% and will be charged on most fees and commissions.

Foreign currency – foreign exchange rate fluctuations
If you are planning to purchase your overseas property with equity released from the remortgage of a UK property or other cash funds, then you may need to convert your sterling cash into euros. This can be expensive and risky as you leave yourself open to currency exchange rate fluctuations. For example from the initial signing of the contract until the completion date, if you are using UK pounds then the amount required to buy the property in euros can change substantially. Yes, sometimes you can end up in pocket if the UK pound goes up against the euro. However, you can also end up significantly out of pocket should the euro rate move the other way. There are steps you can take to minimise these risks, such as using a company to effectively ‘lock’ your exchange rate months in advance. Today, there are a lot of companies that provide currency exchange risk solutions.

Surveys
In the UK buyers will generally have a survey done on a property. But unlike UK banks and building societies, French banks and building societies do not routinely ask for surveys to be completed on properties before issuing loans. Do not be discouraged by people who tell you there is no need to have a survey done.

It is advisable to have your survey conducted BEFORE you sign the compromis de vente. Although as a buyer you have your seven day cooling-off period, it’s not always possible to arrange a survey during that time. In other words you run the risk of forfeiting your deposit should you wish to pull out at a later date, after any survey results. However 'clauses suspensives' may give you recompense should you change your mind about going ahead with the sale after the survey.

The notaire is responsible for conducting all other searches on the property such as land boundaries, public rights of way, asbestos and termites. The seller is responsible for these costs.

Mortgages

Once you’ve established your interest in purchasing a property in France, the next stage is to arrange your finances and potentially a mortgage in order to purchase one. Since you're likely to be buying your property in euros, there's an argument to arranging your mortgage in euros too; meaning that you will be less volatile to currency fluctuations.

French banks such as Société Générale, Credit Agricole, Banque Populair des Alpes are just a few French banks that can offer good Bordeaux mortgage deals. In France, loans terms differ slightly as monthly repayments tend to be fixed at a set amount, with the length of the loan increasing or decreasing according to the base rate. Mortgages in France are usually between 7 and 15 years. As more British buy into the French market, banks are becoming more flexible and offering mortgages with a 25 year duration. In considering your costs with a French mortgage, you should be aware that French banks charge an ‘arrangement fee’ which usually amounts to about 1 per cent of the purchase price, and if you are taking out a French mortgage, you will be required to arrange a life assurance policy for security against the loan.

French mortgage providers are subject to strict rules imposed by the ‘Banque de France’ which limits the maximum amount that people can spend on their mortgage each month. Under French law, the mortgage lender must consider affordability and whether the individual borrower can actually afford their property purchase. As a general rule, your monthly mortgage payments (plus any additional existing financial commitments such as existing mortgage payments, credit cards, life assurance policy payments, personal loan repayments and other on going contractual commitments) should not exceed one third of your gross monthly income, or annually, approximately 33 per cent of your annual gross income. 

If you have insufficient funding for a French mortgage perhaps as a result of the strict French law, there is always the possibility that you could re-mortgage your principal residence and use the released equity to buy your property in full and in cash. If you proceed with buying in cash, make sure you don't leave yourself vulnerable to foreign currency fluctuations as the exchange rate could potentially move against you whilst are finalising your completion details.

Which ever option you choose, it’s important to make assess your finances accordingly, take professional advice where necessary to ensure you are fully aware of your limitations so that you are not subject to any nasty surprise costs.

General taxes

As a property owner in France, you will find yourself liable for a host of different taxes depending on your individual circumstances. As individual circumstances can vary immensely from one property owner to the next, it is recommended that you seek further specialist tax and financial planning advice from those in the know. Here is a summary of a few taxes which you may find relevant to your French property purchase:

Wealth Taxes
If you own property in France you may be liable for a wealth tax on your property. Wealth tax applies whether you are a resident or non-resident of France as it is dependent on your property value. If you are resident in France (ie. you spend more than 183 days a year there), the tax is levied on your worldwide assets. If you are a non-resident of France, the tax applies to your French assets only. France’s wealth tax is paid in June and is imposed on assets worth more than €760,000. 

Capital gains tax
If you come to the point where you want to sell your home in France and it is your principal residence, as long as you reinvest any profits made into another property you will not have to pay capital gains tax. If on the other hand your home is a second or a holiday home or even a commercial type property that you rent out and/or somehow generate an income from, you may be liable to pay tax on any gain you make from the resale of it. The amount you could be liable for is complicated to calculate and so you should take professional advice on this point.

Inheritance Tax
When purchasing your property in France, it is wise to give a little consideration to your personal circumstances and your longer term tax positions. There are 'rules of succession' in France which means that all property passes automatically to children of the deceased and under some instances of French law, you are not able to dispose of your estate as you see fit. Inheritance Tax in France is not cheap and is pretty complicated. Since we are not tax specialists, it is highly advisable that you take advice on both the French and UK legal systems before taking the plunge and signing the 'acte de vente'.

Local property taxes

In taking ownership of a property in France you should be aware of the various Bordeaux taxes which will apply to your property. Land tax (taxe foncière) and occupancy tax (taxe d’habitation) are used to pay for services including refuse collection, street cleaning, schools and other local community facilities. It is important to understand that these two taxes are payable even if your property is just a holiday home. The taxes are set by the local authorities and can vary considerably depending on the area. Tax foncière tends to be the more expensive of the two.

Taxe foncière
Paid by the owner of the property and is calculated using the likely rental value of your home.

Taxe d'habitation
Paid by the occupier of the property, ie. your tenants if you rent out the property. It can be paid in monthly instalments from a French bank account to make it a little easier to manage. You are potentially exempt from paying the taxe d'habitation if your property is completely empty and has no utilities (ie. water or electricity).

Foreign property taxes & legalities

Don't rely on your estate agent or seller to furnish you with all the facts, they are afterall after the sale and won't want you to be delaying that process completing.

When buying in a foreign country, you should always consider the tax implications of buying, selling and possibly renting out your property. Taxes rules and rates can vary immensely from location to location so make sure you have done your homework as unexpected taxes could be crippling for you further down the line. Your tax situation may well be affected as a result of your foreign property purchase so advice should be sought from a professional who can offer specific guidance on issues such as:

  • taxation in the UK
  • capital gains tax
  • succession laws and inheritance tax
  • foreign taxation
  • and
  • double taxation implications

For example, did you know that if you decide to rent out your property abroad you will need to declare this income to the taxman in the UK and potentially the country where you have bought the property, no matter how small the sums involved? And, did you know that most countries will apply some form of 'gain taxation' against the sale of a second home? You may therefore wish to set this off against the profit you make on your purchase when selling it at a later date. You should also be aware that some countries have different succession and inheritance taxes and laws that are very different to that in the UK which can lead to expensive traps for the uneducated.

These are just a few areas within the complex subject of property taxes which may, or may not be applicable to you when purchasing your property abroad. It's therefore vital that you seek solid tax and legal advice before taking the plunge on any type of foreign property.

Please note that foreign property taxation and legal issues are complex and difficult subjects with which you should seek independent advice indivdual to your requirements. Taxes and legal issues outlined here are merely general in nature and therefore no liability is accepted in connection with the information provided.