Things to Consider Before Buying a Villa
It’s surprisingly easy to get swept up in the excitement of buying a villa. But before your get your heart too invested in the idea, make sure to be realistic about what you want and the less-pleasant realities that come with owning property.
Questions to Ask Yourself
Here are some questions to consider to help you determine whether a property you’re considering is your best option:
Are you forcing the numbers to work?
Being able to “afford a house” goes far beyond whether you can hypothetically secure the funds for a down payment and get a mortgage. It also includes mortgage fees, notaire fees, and all the repairs, taxes, maintenance fees, utilities, and who knows what else that pops up over time. Make sure you take all of that into consideration and be realistic about what you can afford without adding financial stress to your life.
Does the home excite you?
Not everyone is in a place where they’re able to hold out for a home that “excites” them, but if you are, why spend that much money on something you’re not that into? It’s better to wait for a villa that you can picture yourself loving for decades, than end up moving again, and likely losing a lot of money.
Does the home meet everyone’s needs?
If you live on your own, this isn’t an issue, but if you live with a partner and/or family, or plan to have guests, make sure the house is a good fit for everyone—not just you. Does it have enough parking for guests? Is it walking distance to your kids schools?
Are you ignoring the findings of the inspection reports?
If so, this may not be the place for you. If the inspection and diagnostics reports come back with red flags trying to tell you this isn’t the house for you, listen to them.
Are you up to the task of making all the repairs the home requires?
Please be aware that home improvement shows only show a tiny part of the entire renovation process. It is so much work. And also expensive. If you don’t have the skills to do it yourself, or the money to hire people to make the repairs, it’s time to pass.
Are you emotionally attached?
Don’t get too attached to a property. Once we begin picturing ourselves in a home or visualizing ourselves raising kids in a home, it’s really hard to avoid overpaying and walk away.
Your Actual Costs
Before buying a villa, you need to realize that the sale price is not the only money you’ll be on the hook for. There are a lot of sunk-costs. In addition to maintenance, fixing things you didn’t expect to need to fix, etc. you’ll also need to factor in these sunk costs:
Costs of Studies
Before you purchase a villa, you should get your own studies done. This costs about €1,000 for an average-sized home, rising to €2,500 for larger properties.
There’s no guarantee that the studies done by the seller’s contractors are correct. In fact, many inspectors are incompetent, and in a government audit, they found huge inconsistencies. For example, one inspector rated a property as being B on the scale, meaning it was energy efficient, while another rated it E, which is poor.
Notary Cost & Tax
To close the deal, the notary collects 7% to 8% (for their fee plus government taxes).
There’s also a one-time sunk cost to set up a mortgage, which is usually 1.5% (1% mortgage registration, plus 0.5% underwriting fee) of the villa’s sale price, plus around €2000 to €3000 to do a ‘valuation’. And if you hired a mortgage broker, they charge a one-time % fee on top of that too. Add to that the yearly costs of mandatory mortgage insurance (which costs about 0.5% of the villa’s value each year), and the mortgage’s interest. Here’s a mortgage calculator so you can calculate your interest and monthly payments.
Yearly Sunk Costs
Don’t forget to factor in your new insurance costs (contents insurance and, if needed, red-zone insurance for natural disasters). Plus, some villas have a mandatory fee for community things like a guard, gardeners, etc. You’ll also need to budget for things like repairs and maintenance.
Taxes, Taxes, & More Taxes!
Every villa owner is also subject to several additional taxes, paid every year. For a €1 million villa, expect to pay around €4000 per year (but this varies). The easiest way to know what yours will be, aside from the wealth tax, is to ask for the tax statements from the current villa owner. Here are the taxes you should account for in your budget:
IFI / Wealth Tax
The IFI / wealth tax is between 0.5% and 1.5% annually, and is payable by both residents and non-residents in France with real estate assets worth over €1.3 million (at the current valuation). For example, if you own a villa worth €2.4 million, you’d pay more than €10,000 per year in IFI tax.
You can get out of this by having a mortgage (so make sure you get approved before signing the final contract), which lowers your actual equity in the property, but you’ll need to keep re-financing to keep your equity below €1.3 million.
The property tax (taxe foncière) rate for a primary home is around 1%, and 3% for secondary homes, and increasing. The bill for the taxe foncière arrives in the last quarter of the year and the amount is based on the estimated annual rental value of the property multiplied by a percentage set by the commune (ask for more information at your local mairie).
The amount of the residence tax (taxe d’habitation) will vary depending on the decisions of each commune and the size and condition of each property. Holiday homes in areas of housing shortage (like the French Riviera) are liable to face a surcharge on their taxe d’habitation. Local councils have discretion to apply a surcharge of between 5% to 60%. Most councils apply a 20% rate, but some have adopted the maximum rate of 60%, so it’s good to find this out before you buy.
Even More Taxes!
There are a bunch of other taxes you’ll also need to pay, like a waste removal tax, television tax, etc.
If you reside outside France (and outside the European Economic Area) and own property in France, the tax authorities may also ask you to appoint a representative in France to receive correspondence concerning wealth tax assessment, collection, and disputed claims.
And BTW — when you want to sell, there are even more sunk costs. The French capital gains tax has greatly increased over the last few years. Combined with the required “social charges”, depending on the seller’s residence, it can add up to 34.5% for EU residents or 48.83% for non EU residents, not including the required income tax. Yikes!
Buying as an Investment?
The unfortunate truth is that the French Riviera is not a good place to buy real estate for an investment. Prices have been flat-lined for more than a decade and all signs point to prices decreasing in the future.
Additionally, the French government is actively trying to make real estate less expensive by adding cumbersome yearly taxes for second homes and thinking up ways to disincentivize house-flipping, investment purchases, AirBnb rentals, and vacation homes. You can 100% expect more of this in the future.
Even the CGEDD had this to say (on January 10, 2022): “From an investor’s point of view, the net rental yield (rent net of charges divided by sale price [not including other costs]) is very low. Investment in housing is therefore competitive with investment in long-term public debt, at a level of expected return that is admittedly very low in both cases… the resale value of which is not certain at any time.”
And, when you sell, you need to pay an overwhelming amount of taxes which can add up to 49%. All that is in addition to the real estate agency fees and fiscal representative fees, leaving you with less than half of any total gain in the end — if you make a gain at all.
Buying a ‘Newly Renovated’ (or New) Villa
On the French Riviera, there are many, many (did I say MANY?!) developers. They have special relationships with agents where they buy villas at a low price (beware if you’re a seller, as you may get the losing end of this) and then do cheap renovations and try to flip it, using the same agent, at a ridiculously inflated price. You might be able to catch this by checking the map showing the villa sales (with exact location, size, pricing) from the past 5 years.
Naturally, these developers want to maximize profits and minimize expenses. It is, after all, a business. They do this by cutting all sorts of corners on the stuff you can’t see. They hire the absolute cheapest (and often unqualified) construction people, electricians, plumbers, etc. and tell those people to do the job as cheaply and quickly as possible.
They reassure buyers by giving them a warranty (under French civil law all building work is guaranteed for up to 10 years), but insurance pays the repair costs — not them — and you still have to deal with all the problems that pop up. Plus, the insurance won’t cover major problems, like needing the entire plumbing to be re-done because the pipes used were old and put together the wrong way. And you can expect repeated repairs of the same issue because cheap materials keep getting used — after all, the repair company gets paid each time.
This means the developer has zero incentives to do anything other than the cheapest job possible because, once you buy it, it’s your problem, not theirs. It also means BIG headaches for you, down the line, when you move in an realize that your air conditioning doesn’t work properly, the electrical and plumbing need to be re-done, underfloor or insulation was not added, etc.
Just because it looks nice on the outside doesn’t mean it’s well-done. You’re better off finding a villa that was renovated years ago by the owners — renovate for them, not for resale.
The laws in France protect the poor and the criminal, and the police rarely make arrests for break-ins. So it’s not surprising that break-ins are a big (and growing) problem on the French Riviera. Villa owners in this area routinely get gassed and robbed while sleeping, or held up at gunpoint while entering their villa. It’s, sadly, an inevitable part of owning a villa on the French Riviera.
You’ll need to get familiar with the laws so you don’t end up in jail for defending yourself during a break-in. In short, you can’t defend yourself with more force (or even the threat of more force) than the criminals are using *at that exact moment* (so if they have a gun and they turn away from you, you can’t shoot them in the back), or you’ll go to jail.
Squatter’s rights are a big problem for homeowners on the French Riviera (which is one of only 4 areas in France that account for 79% of all squats).
From French gypsies who live the “squatter’s lifestyle” (with the help of many websites, online instructions, and other squatters) to foreigners seeking asylum to criminal networks (mostly from Romania and Bulgaria), there are many people out there who know the laws and abuse the French system, which seems designed to protect criminals.
Squatters can break into your home while you’re out getting groceries, and (unlike in the USA, where you can get out your gun and forcibly remove them, or shoot them) you suddenly become at the mercy of the prefect and the squatters. If you enter your own property to attempt to get them to leave, you can go to jail for 3 years and get a €30,000 fine! The law says that if you’re not physically home when they break in, then you need to go through the proper channels to get rid of them — even if you have pets that are at risk!
Because of online squatter communities, many squatters invite multiple other families to live in your home with them so that someone is always home, to intimidate the homeowners, and to make eviction more complicated and time-consuming.
Most homeowners end up with tens of thousands of euros in property damage, sometimes hundreds of thousands of euros in utility bills, expensive legal fees, and their valuables stolen. Meanwhile, the squatters not only aren’t punished, but the authorities are obligated to help the squatters by rehoming them locally (for free) and helping get their kids enrolled in a local school!
The laws have recently improved, so you could possibly get the squatters out within 3 days (but they will almost certainly steal and vandalize in the meantime) — if you’re lucky. Unfortunately, there’s a nasty loophole where if your local préfet sides with the squatters (and many do!), you will then be required to hire an expensive lawyer and go to court, in which case it can take many months or, more commonly, years to get an eviction notice.
This process can turn owning a property into a nightmare, and invalidate your insurance coverage. Many prefects decline to evict because it means more work for them, as the prefect has to be sure alternative accommodation is available, and check the veracity of any claims made by the squatters, before evicting them. There are many, many stories of homeowners being forced to live in a motorhome or hostel because the local authorities are too lazy to take action.
Because of this, many squatters demand cash and luxury hotel stays to get them to leave earlier — and some home owners comply, with varying results (there’s no guarantee that the squatters will leave after you’ve given them money — they may just keep demanding more).
Not surprisingly, this broken system incentivizes squatting and criminal behavior. A professional squatter who had extorted more than €10,000 per squat (not including items he stole) from more than 50 homeowners in the last year alone told the BBC: “It’s so much easier than robbing a bank. He told us he was a former cocaine dealer and bank robber. But now his main illegal activity is extortion [via squatting].“
Meanwhile, if squatters leave trash on your property (as they often do), which includes burnt-out caravans, cars, and other large trash, then legally, you must wait two months before the abandoned objects can be removed — at your cost. Insane, right?!
Tip: Make copies of your acte de vente définitif (by scanning it or taking good-quality photos) and store it digitally and in hard copy separate from the house. You’ll need this document to make a claim against the squatters.
From February 2022, the government has ruled that you can now employ a legal clerk, known as a huissier de justice, to help you with the procedure, which can be complicated if you don’t speak French. Fees for such a service vary. You can find your closest clerk here.
Here’s a FAQ about squatters that is helpful.
Buying a villa? Make sure to read all of our guides!
Our guide to where the market is headed includes: French Riviera real estate market predictions, current & historic pricing trends in the market, and the reasons why prices will continue to fall. Plus, supplementary guide to Russians & their impact on the French Riviera real estate market.
Our guide to real estate listings includes: how to find villas for sale, what to look out for, misinformation and warnings, auctions & foreclosures, buying direct from sellers, why timing is everything, and the reason why only about half of villa sales are publicly listed.
Our guide to scams and secrets includes: warnings about the unethical tricks that agents, notaires, sellers, developers and builders use to get more money out of you. This is a must-read, and the whistleblower guide that those in the business don’t want you to see.
Our guide to real estate agents includes: the dishonest things agents will tell you, how real estate agencies operate, buyer’s agents and property finders, why you should avoid illegal and non-local agents, and who to trust (an important warning).
Our guide to pricing & determining a villa’s market value includes: why there’s so much extreme overpricing, how to estimate a villa’s market value (what it’s worth), and a step-by-step guide to finding your offer price.
Our guide to important things to find out includes: diagnostic reports and surveys, sun & micro-climates, potential issues with the view, housing taxes, the age, internet and mobile access, danger (red) zones, health risks, privacy & space issues, nearby problems, what you’ll actually own, illegal additions and structures, why they’re selling, how to verify, and more.
Our guide to the buying process includes: negotiating the price & the initial offer, choosing an honest notaire, buying in the black, the official offer & deposit, using a SCI, contract pitfalls, the cooling-off period, what to do before handing over the money, and the final signing.
Our guide for after you buy includes: insurance pitfalls, tips for second homes, renting your villa, renovating, and what to know about hiring people.