Scrambling to Purchase…This Could Happen to You…

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It’s been a hectic week with an usual situation — that in many ways is not unusual at all. In fact, as a potential buyer of French property, this very same situation could happen to you, too.

An investor came to us to find him a nice two-bedroom apartment in Paris that would generate revenue and provide a good investment. We began the search prior to his planned arrival and came across a special opportunity via an inside source that we all agreed he shouldn’t pass up. It’s an apartment in a key location with lots of great attributes — what I call great “bones.”

The apartment is on the Ile de la Cité on the north ‘quai’ on the river (Quai aux Fleurs) on the third floor in a beautifully kept building with an elevator. The apartment faces large courtyards and has a partial view of Notre Dame. It was recently renovated and refurnished and is being sold in its entirety with all the furnishings, so there is nothing to do but walk in with suitcases in hand and the rental income begins the minute the new owner takes possession. The rental income is projected as substantial based on past history with this apartment and with another apartment we represent with similar attributes. It’s turn-key with no down time before generating revenues and that makes a big difference to a new owner.

The seller was showing the apartment to dozens of potential buyers. He had advertised it as “for sale by owner” as the agencies weren’t performing very well for him and this seemed to have a better result. One buyer came to him with a cash offer — meaning that there was no mortgage and no risk for the seller, but the offer was lower than his asking price.

Then, here came our client. Our client had half the price in cash and the rest he was hoping to mortgage, although the financing process hadn’t begun because it all happened too fast and hadn’t had the chance! He offered a higher price to the seller. The seller accepted the offer under two conditions: 1) that there would be no “clause suspensive” — a contingency that protects the buyer should he not be able to acquire a mortgage so that the property is returned to the seller and the buyer loses nothing, and 2) that the signing of the Promesse de Vente (pre-sale agreement) take place one week later, prior to March 15th as he was leaving town on the 16th and was anxious to get it sold.

These were heavy demands, but the property was well worth it — even sight-unseen for the buyer. The challenge was that the pieces of the puzzle had to fall into place so that both the buyer and seller were confident enough to sign the pre-sale agreement…and that is what we were able to accomplish. In fact, the signing takes place later today.

Here’s how it came together:

We immediately began the loan process. The buyer had to gather all of his financial documentation together to present to a lender who was willing to take on the last-minute demand in order to meet the tight deadline. The bank can only give ‘an approval in principle’ as a formal loan offer is never issued until after the pre-sale agreement is signed. Our lender felt that under the circumstances, they could give the approval as long as the loan was under a certain threshold so that it wouldn’t have to go to a loan committee — the head of the department could grant the loan without further authorization. As a result, the paperwork was flying! Our client reacted quickly and began sending the documents immediately.

The Notaires were contacted. They began the immediate task of gathering all of the documents and finding a meeting time that would suit everyone. If the buyer could not be present, then we could sign on his behalf with proxy, but even getting notarized proxy in the Notaire’s hands in time was a challenge, much less having the buyer arrange to come to Paris. The buyer decided he must see the property for himself and pay a visit to the lender in person, therefore he dropped every other plan he had to find a flight and arrive in Paris…which he did just yesterday in the midst of the inclement weather. The signing was set for today.

The buyer also arranged to have the 10% deposit transferred to the Notaire’s escrow account. We negotiated for only 5% to be held in escrow, instead, but of course, should the buyer default, he would be responsible for 10% of the price of the property to be paid to the seller. This is not a sum he would wish to lose — approximately $100,000!

To feel comfortable signing the Promesse de Vente, the buyer required certainty of the loan and a visit to the property. He also required to see comparable properties to confirm the purchase of this one. Therefore our search consultant scrambled to set up visits to other similar properties within a very short period of time. We also arranged for our designer, Martine di Mattéo, to visit the property to estimate any additional expense the buyer might have to bring the decor up to the standard of our other luxury apartments which rent very well.

Earlier this week, the lender reviewed the documents and determined that while our client is not a risk, his debt ratio exceeded the regulations of the bank and a definitive answer could not be given without a committee review. This creates a risk for the buyer. Therefore we encountered a new challenge — to convince the seller that if there was no “clause suspensive” in the pre-sale agreement to protect the buyer, he would not sign and the seller would lose this sale…or he allows the contingency and takes the risk that the buyer will acquire the loan with the committee’s approval.

That’s where we stand at this moment. In a few moments, the buyer will have seen the property. Midday the lender will determine the level of risk for the buyer to have the mortgage and by afternoon, the signing will take place or not!

One of our people called it sheer ‘drama!’ I agree…anything could happen. So, stay tuned!

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This weekend we’re filming our 13th House Hunters International episode! Nine have aired, three are ‘in the can’ and now we have this newest one in which to look forward.

This new story is about a young single woman from California who often comes to Paris for work and dreamed of owning her own “pied-à-terre” in the city she has come to love. Her mother helped her gather her finances and together they managed to acquire enough to purchase a small studio apartment. The search is a challenge given the budget, but as usual we come through (you see my big grin, right?) and find her something really livable in a great neighborhood!

I can’t give away more than that for now, but know that this is not the last of our episodes…as we’re already working on two more! And if you want to be the subject of a show, let us know! Email me at [email protected].

A bientôt,

Adrian Leeds

Editor, French Property Insider & Director of The Adrian Leeds Group, LLC

Email: [email protected]

P.S. The seller has another great property to sell on the Ile de la Cité — a two-bedroom rental apartment fully furnished that because it’s on the ground level, is considered commercial and is perfectly legal for short-term rental. It currently has 50,000€ worth of bookings of which the new owner would take advantage. If you are interested in learning more, please contact us as soon as possible at [email protected].

P.P.S. When you’re buying a holiday home or investment property overseas, trading your currency can be a crucial cost factor. To help ensure your money goes a lot further, you’ll want to deal with a currency specialist you can trust — try Moneycorp and World First. For more information visit Currency Exchange.