A recent American class-action lawsuit shakes up the real estate industry…but what about France?
The all-powerful National Association of Realtors (NAR) has been side-swapped by a class-action lawsuit from ordinary Americans. As a result, sellers will now negotiate a commission with their agent whereas buyers will directly remunerate their own agents. Previously, the seller’s agent would impose a 5-6% commission that would be split with the buyer’s agent. That, at least, was the way it worked in the USA.
In France, things were different…and are likely to remain the same! Without an MLS to facilitate deal-making between agents, the idea of a buyer agent never got much traction. Real estate agents were, and still are, de facto seller’s agents. They focus on selling the properties for which they have a mandate. An agent with a buyer often makes an ad hoc deal with a seller’s agent, except in Paris where buyers have, until recently, been lining up on the street corner.
Without a dedicated agent, buyers are left to their own devices, spending a huge amount of their time window-shopping different real estate agencies and websites. Ask anyone who has purchased property in France on their own.
This is why dedicated search agents like Exquisite France emerged, notably to serve the needs of non-French buyers who would otherwise need to take a sabbatical just to find the right home and navigate the purchase process!
As the US court now seems to agree, it is more fair and transparent for a buyer to pay an agent directly. At first sight, this seems like a bad idea for the buyer, but in reality, it offers many advantages:
The search agent can focus completely on finding the property in the best interest of the buyer, rather than presenting (or pushing) only those properties that allow for a commission split.
The search agent can more forcefully negotiate the price on behalf of the buyer, given that the negotiation itself is part of the service for which the buyer is paying.
The seller’s agents no longer have any reason to prefer a buyer with no agent, given that their commission will remain the same. On the contrary, they will tend to prefer a buyer working with an agent, because a potential buyer who has agreed to pay a search commission is qualified and serious.
Keep in mind that regardless of who technically pays commissions, they increase the cost of the transaction. A “seller commission” is simply built into the price, and paid by the buyer.
What to expect in terms of commissions for your purchase in France.
A seller agent commission can vary between 3 and 6% of the net seller price, depending on the value of the property and its location. This commission is set before the property hits the market. It can be labeled as charged to the seller or the buyer. See my previous article "Unreal Estate."
A standard search agent commission is 3% of the net seller price; however, agents don’t always follow the standard calculation. Some take 3% of the total price (including seller agent commissions) and others use the net seller price.
Some have a set 3% commission, while others lower the commission as the property price increases.
At Exquisite France, we charge 3% (before VAT) of the net seller price as a base (excluding seller agent commissions) because this is reasonable and fair. We also progressively lower the commission rate for properties over 1M€.
Spending to save sounds counter-intuitive, but hiring the right search agent will ensure not only that you save, but also succeed. You’ll save your own time (lots of it), enjoy broader market access, increase your likelihood of securing an offer (and the best one possible), and will mitigate or avoid potentially costly risks along the way.
In Paris, as prices are falling, now if ever is the time to save!