All about the right way to price a Paris property
You just bought a bunch of bananas at the street market. The price seemed about right. Four merchants later, you come across the same-looking bananas for 40% less.
“This is nuts!” you tell your aggravated self.
On another day you’re wandering around in that endless maze called the Marché de Puces de Saint-Ouen, the world’s largest flea market at the edge of Paris. You come across a merchant selling a vast selection of antique marble fireplace frames.
“Amazing” you think, “there’s greater choice here than on Amazon!”
The prices range from 5000€ to 10000€. You ponder that they were all crafted over 120 years ago, and whoever crafted them was not paid anything equivalent to what they are now selling for, but also how much more it would cost to have one made today, given that the craft has all but disappeared.
Now you're shopping for real estate in Paris. Will it be more like bananas or antique fireplaces? It seems to resemble a giant flea market, with some astonishing price differences that don’t seem to make much sense. It’s one thing to pay 40% more than you need to for a bunch of bananas, but quite another thing to pay 10% more than you need to for an apartment! But how can you really know if the price is right? More specifically, how can you know whether you should accept the asking price or offer less? How much less?
As a dedicated buyer’s agent, I’m often faced with this question at breakfast. Now, even though there is plenty of psychology and situational analysis involved, the keys I’d like to share in this article are data-driven only. I aim to clear up some of the interpretive errors and reduce the overall level of arbitrary decision-making. The real estate market in Paris is far less transparent than it could be if all the players (agents in particular) would stick to standard price references.
The most widely used metric for comparing prices is the price per square meter. As a buyer, you need to be aware of its caveats. You may be surprised to learn about ambiguity both in the numerator (price) and the denominator (square meters).
The proper price to be used for comparison is the net seller price, meaning the price less any commissions. This is the price used in the official database of real estate transactions and is also the basis for statistics you'll find regarding the average prices/m2 in Paris or a specific arrondissement of Paris. Despite this fact, the price/m2 as displayed on the most widely-used French real estate portals (such as SeLoger or BienIci) is the full price including commissions. Worse, the amount of the commissions “charge vendeur” is often concealed, making it impossible to calculate the real price/m2. To better understand the realtor antics around “who pays the realtor commission”, see my article “Unreal Estate”.
Included in my work as a buyer agent, I will make the necessary phone calls to get all the information and lay it out in a spreadsheet for you, as illustrated below.
What about the notion of square meters? Does it refer to the total floor space?
Only if you are purchasing an independent house. If you are purchasing property in a shared building (une co-propriété), the measure of square meters refers to the habitable floorspace, the details of which are defined by a code called “loi Carrez”. This will exclude any surface area with insufficient ceiling height (less than 1,8m). So let’s say you purchase a top-floor loft with a mansard roof. Only about three-quarters of the space will qualify as habitable space, but surely the remaining quarter is worth something? You’ll have to indeed decide what it’s worth for you, but you can expect it will be factored into the price. Those “non-habitable” square meters will often be estimated at a third of the normal price/m2. The same rule will apply to an outdoor terrace, often valued at a quarter of the normal price/m2.
Comparing price/m2 is not always a sensible way to evaluate the price of a property. Consider an apartment where every centimeter of floor space has been optimized.
You can, and should, expect to pay a premium. What counts is not the amount of space itself, but the overall feel and functionality of a home, as well as its potential resale value. If an apartment includes wasted space, this may not be factored into the asking price, in which case the apartment may be a harder sell and ripe for negotiation.
Before you play the negotiation game, you’re better off knowing what a sensible price should be, based on available information. The French government has now opened access to data on the most recent transactions having taken place at a specific address and within a defined radius of that address. It used to be that could only obtain such data via a notaire. Using this data is more accurate than comparing current listings, because it tracks the real net seller price. Unfortunately, the descriptive data for each transaction are limited to the address, the number of habitable square meters, the number of rooms, the floor level (and total number of floors in the building), the building’s date of construction, and whether or not it contains an elevator. The data are recent, but not real-time.
Filtering out any quirky outliers, we can use a median value of net seller prices in a given neighborhood as a starting point to assess a given apartment. We’ll need to make the following adjustments:
Exact location adjustments (a building with a noisy bar downstairs should be devalued compared to a more peaceful one on the same street);
State of the building (facade, entry, courtyard, stairwells, roof, quality of construction)
The apartment’s unalterable characteristics (orientation, windows, views, ceiling height, configuration, reconfiguration potential, adjacent apartments, outdoor space)
The apartment’s current condition (anything that can potentially be changed).
Using these criteria, we can either upgrade or downgrade an apartment’s fair price. For example, if a 4th-floor apartment was sold in the building next door last month for 12500€/m2, and you are interested in a 1st-floor apartment, you can downgrade the price by 9,5% on that criterion. It's no exact science, but the scale below can serve as guidance. The list of criteria is not exhaustive. It does not include criteria regarding the building itself, for example.
Ground floor | - 15% |
1st floor | -7% |
1st floor atop café open late at night | -20% |
3rd to 6th floor with elevator | 2,50% per floor |
View on dim courtyard | -10% |
Terrace | 5% |
Garden | 15% |
East and west-facing windows | 3% |
Exceptional view | 5 à 20% |
Noise or heavy traffic | -5 à 20% |
Newly renovated - impeccable | 5 à 20% |
Needs refreshing | -5 à 10% |
Requires renovation | -10 à 20% |
Energy rating lower than D | Up to -15% |
These criteria should already be factored into the asking price. The positive ones always are, but not the negative ones.
Once you determine a sensible data-driven net seller price, you’ll need to compare current listings to corroborate and refine that price. Getting a proper sample of current listings is no quick trick, given the absence of an MLS. A dedicated search agent should have access to a wider scope of properties for sale.
Make sure you subtract the realtor's commission from the price before comparing. If the amount of the realtor commission is not visible, estimate 4%.
Let’s say your assessment amounts to a total price of 1.1M€. The asking price is 1.2M€. You can now use your 1.1M€ as a baseline for making an offer with confidence. In the current buyer’s market, an offer at 8% beneath the asking price will usually be considered, even if it results in a counteroffer.
What if your own estimated price equals the asking price? Should you try to negotiate? Only if there is a clear downward price trend and other contextual factors give you a stronger suit to play than the seller. Cash offers, for example, do command a lower price, at least in a buyer’s market. In a seller’s market, the cash offer will only make the difference between you and another buyer, both willing to pay the asking price.
Having a data-driven counter price is only one aspect of negotiation. Sellers are not often data-driven, so the trust and rapport you can foster with a seller and/or their agent are key to success. If you are not fluent in French, French culture, and French negotiation subtleties, you’re best off benefiting from the expertise of someone who is.