Buying a property at auction has long been both an exciting and rewarding way of acquiring cheap real estate. Whether its a foreclosure, repossession or simply someone wanting to off load their property quickly for whatever reason.
There are three types of French property auctions:
1.La vente judiciaire en cas de saisie immobilière A repossession auction held at the bar of the Tribunal de Grande Instance. A lawyer is required to submit the sealed bids.
2.La vente volontaire devant notaire A public auction conducted by a notaire on the instructions of the owner, e.g. when a property is left to a number of relatives.
3.La vente des domaines A public auction of state-owned property or property that is vacant, e.g. following a death where there are no named heirs.
Where can I find out about auctions?
Categories 2 and 3 are public sales, open to everybody and advertised by notaires, usually via small ads in the regional or national press, at the notaire’s office and on the internet (see www.paris.notaires.fr for the Marchê Immobilier des Notaires – MIN). Information usually includes the date and place of the sale and instructions on where you can consult the cahier des charges (property details).
For judicial auctions (Category 1), guidelines exist to ensure as widespread a visibility as possible. Such auctions are posted on boards at the property itself, at the Town Hall, the Court house, and advertisements are placed in the legal, local or national press. The whole schedule of upcoming auctions is available from the Tribunal de Grande Instance.
What is the format of a French auction?
For voluntary sales, properties are commonly sold ‘by the candle’ (à la bougie). The president of the session lights a small candle to start the bidding. This burns until the last bid is made, at which point another candle is lit. Both candles must then burn out without another bid being made, then the final bid is considered as accepted.
Why might a property to be sold at auction?
Common reasons include repossession to cover debts (une saisie immobilière), decision by the owners for a quick public sale, or state-owned property/vacant property being sold off.
Are there risks involved?
Buying at auction is always more risky than going through an immobilier, though the cahier des charges is there to help as much as possible. This is prepared by the notaire or tribunal and available for consultation well before the sale takes place. It lists the aspects of the property (dimensions, age etc.) as well as any constraints attached to it and property inspections. It will also list the starting price and the deposit required to participate, fees and conditions of sale.
Make sure that you consult it thoroughly to work out the potential amounts for which the property could go and how much you are likely to require to renovate the property if need be. Then factor in a safety margin to be on the safe side.
There is no substitute for visiting the property before purchasing it. Visits are often organised (times are indicated in the advertisements). You are strongly advised to get an expert such as a surveyor, architect or builder to go with you.
Be absolutely certain of what you are doing before you make your bid. Auctions are exempted from the French cooling-off law that normally applies in property transactions and you will not have the usual 7 day retraction period – you are buying ‘as seen’ and cannot change your mind.
Can I make the bid myself?
In the case of a vente judiciaire, you must use a lawyer as an intermediary for the submission of bids by sealed envelope on the fixed price. For public sales, it is advisable to be accompanied by a native speaker or seek the assistance of a native speaker who understands the procedures – such as a notaire. It is vital here, as ever when dealing with financial issues in France (or indeed any foreign country) never to sign anything you do not understand.
Are there any hidden charges or fees payable?
These are normally based on a percentage of the reserve price fixed on the property, so an understanding of this process is useful to be sure you’re comfortable with the amount you may end up paying:
In the case of vente judiciaire, the reserve is decided by the creditor (often the bank owed) which aims to recover the amount owed. However, the owner has the right to challenge the price set if he feels it is too far below the true value. The presiding magistrate will then make the final call on the price, having consulted experts to gauge the true value. The day before the auction, the bidder must deposit a certified cheque covering the costs of the sale, tax, lawyer’s fees, and at least 10% of your maximum bid.
In other cases, the reserve price is up to the seller. However the notaire must obtain an expert valuation which will often see the reserve drop to 60-80% of the market value (never more than 90%). Therefore be careful about how much you end up paying as bids could pass quickly over the market value.
To participate in a public auction, you are obliged to put down a deposit by bankers draft or certified cheque equivalent to a percentage of the reserve (5-20%) which will be returned to you if your bid is not successful.
In all cases, the sale is not final for a period of 10 days during which anyone else may make a further bid so long as it is 10% greater than the originally successful bid (a lawyer acts as intermediary in the case of a vente judiciaire). The successful bidder will then have to pay 1 per cent of the successful bid, the costs of preparing the cahier des charges, the fees for registering the sale, and the notaire’s fees. Normally, the purchaser will have a period of 45 days to settle the full balance due as well as these fees.