Making straight the crooked paths
My mother would never have wanted me to become a real estate agent.
I never would have wanted it either.
I am not a real estate agent…at least that is not how I define myself.
I do indeed hold a real estate license in France, as it is a legal requirement for what I do.
Why such a critical view on the profession? Essentially because it is a profession that does not, from my point of view, champion truth and transparency. Nor is it a particularly well-respected profession in France. See my previous article called L’Honneur to understand the reason for this.
For sure, I know decent, honorable, and competent real estate agents in France and their effective collaboration is essential to the services I provide. It has taken time to create a reliable network. If you venture “out into the wild”, expect to be underwhelmed by local real estate agents, and you may have some pleasant surprises. The purpose of this article is most certainly not to disparage those who exercise the profession, rather it is to provide you, the buyer, with the necessary clarity to navigate the muddy waters. It is the entire profession, and not such and such agent, that has conspired and lobbied to limit transparency in their own interest.
1/ Here is a prime example that you are bound to encounter as a buyer. Say that your Seller invites you to a restaurant to celebrate your purchase. Seller invites, seller pays, right? Of course!
Now, what would you, as a buyer make of this statement: “the seller pays the agent commission”? In French, the precise expression is “commission charge vendeur”.
You would of course expect not to pay any commission. Let’s say you see a different property advertised that specifies “commission charge acquéreur” meaning that buyer pays the commission. You would expect to pay the commission, right? That’s what the ordinary language implies, and you would therefore be much more inclined to prefer the property where the seller pays the commission. That would allow you to save a whopping 4 to 5% of the purchase price, would it not?
No, it would not. The language is deliberately misleading. It is almost always in your financial interest as a buyer to purchase a property stated “commission charge acquéreur”.
When a commission is for the seller to pay, that commission is simply built into the total price you pay. So if your purchase price is 1M€, and the seller’s agent has a 50 000€ commission, that commission will be included in the 1M€. Based on that 1M€ you will need to pay a stamp tax (frais de notaire) of about 7.5%. Your total acquisition cost will be 1 075 000€.
If the same property is advertized “commission charge acquéreur”, the purchase price will be 950 000 Euros, to which you will need to add the 50 000€ commission. So far, it’s “even Steven” with the above. What changes is the amount of the stamp tax, not levied on 1M€ but rather on 950 000€. Your total acquisition cost adds up to 1 071 250€, for a savings of 3 750€. That makes for one fine case of champagne!
The above calculation assumes a constant rate of commission, regardless of whether the property is advertized as “charge vendeur” or “charge acquéreur”. In reality, properties that are advertized as “commission charge acquéreur” most offen offer a lower commission rate than those that are advertized as “commission charge vendeur”. There are no statistics to prove this, only observation. From my own experience:
1/ the majority of properties are advertized “charge vendeur” with a commission of 5% for properties priced over 500 000€ (higher commissions apply to lower price points)
2/ properties advertized as “charge acquéreur” most often show a commission rate between 3,5 and 4,8%.
The only case where it may be to your advantage to have the commission “charge vendeur” is when you are financing the property with a mortgage. The bank will finance the entire amount including the commission only if it is included in the price.
Do you think any real estate agent will tell you this, going into the transaction? No, because the agent made the decision to advertized the property with “commission charge vendeur”. Why do you think they might have done that? For one, it sounds much more enticing to the ignorant buyer. Secondly, the agent typically works in tandem with a notair who is paid a percentage of the 7,5% the stamp tax, and so has every reason to prefer “commission charge vendeur”.
That’s the reality of this nonsensical game I call “unreal estate”!
The financial advantage to you of “commission charge acquéreur” is not significant enough that you should limit yourself only to properties advertized as such. I am making this point so that you avoid thinking you are saving when you’re not. When you work with me as a search consultant, you don’t have to worry about such things. But even if you don’t, I’d like you to be aware.
Let’s now turn to another “unreal estate” practice. If you are accustomed to American real estate, you will assume that any good real estate agent will be able to find you the right property among all those available on the market. You will further assume that your agent will split a commission with the agent representing the property.
In the unreal Paris market, both of these assumptions prove false.
First of all, real estate brokers in France work only for the Seller, not for the Buyer (unless clearly specified otherwise). So if you “hire” brokers to help you find a property, they will only show you properties for which they are able to share commissions with the agent representing that property, or properties they represent directly. That is only a fraction of available properties.
That is why I advise a dedicated buyer agent that you actually pay to do the work for you. In this way, your dedicated search agent will gain access to all properties offered by brokers because they will not have to share their commission. In fact, they will likely be more than happy to show the properties because your dedicated buyer agent actually makes their job easier. They are likewise highly motivated to contact a dedicated buyer agent as soon as a property comes on the market, because it’s the most expedient way to sell. This is how I have been able to find the most rewarding properties for my clients in Paris: the ones that sell with finger-snapping speed. It all boils down to the relationship of trust I build and maintain with brokers. They know I bring qualified clients, and they know that working with me will not decrease their commission. With repeat business, they are increasingly willing to share
There are still a fair share of properties sold directly by owners, and these too are happy to work with a dedicated buyer’s agent (as long as the buyer bears the cost).
What I have stated about commission-sharing is true for Paris and other “hot” real estate markets in France. Elsewhere in the country, agents are more inclined to share commissions because it’s harder to find buyers. After a couple of successful transactions with an agent (repeat business) there is also more room for negotiation. Nevertheless, the job of a buyer’s agent is to find the property that BEST meets your criteria, regardless of who represents it and regardless of how commissions are shared (or not). Straight and narrow is the path, but this is the honest way to deal in REAL estate.