Buying at Auction

What to bear in mind when bidding for property

The best property bargains can often be found at auctions (ventes aux enchères) – but this isn’t necessarily the case and you must know exactly what you’re doing; buying at auction isn’t for the faint-hearted.

Buying at Auction

There are three types of property auction in France:

  • Voluntary auctions (vente volontaire), run by the Chambre des Notaires, at which properties that vendors wish to auction (e.g. for a quick sale, in the hope of selling for a higher than market price or to save estate agents’ fees) are offered.
  • State auctions (vente domaniale), organised by the Direction Nationale d’Interventions Domaniales for the sale of public buildings and properties acquired by the state (e.g. where the owner has died without leaving an heir).
  • Judicial auctions (ventes judiciares), ordered by the courts, at which you can bid for properties that have been repossessed by mortgage lenders or over which there have been inheritance disputes, for example.

The last type of auction is the most common. Somewhat surprisingly, there often isn’t a lot of competition for properties sold at auction, particularly as many are old properties in rural areas which aren’t of much interest to French buyers.

Properties due to be sold at auction are advertised in local papers by the Tribunal de Grande Instance (local county court) responsible for the auction, and details are published around six weeks in advance by the person (e.g. the notary or lawyer) responsible for the sale. The form (fiche) contains the date and place of the sale, a description of the property, land details with cadastre references, the name and address of the person handling the sale, details regarding inspections, and the reserve price. Domaines sales are advertised by the local tax office (in Paris, at the Salle des Ventes Domaines, 15 rue Scribe, 75009).

Tip: You should check that a property isn’t occupied (e.g. by squatters), as it can be difficult, time-consuming and expensive to have them evicted.

Reserve Prices

Properties usually have a reserve price, which is often as little as half the market price. This is included in the cahier des charges, which includes details of the date and location of the auction, times when properties can be inspected and other information, such as the required deposit (which can vary between 5 and 20 per cent of the reserve price). The deposit must be paid in advance by bank draft but is refunded if your bid is unsuccessful.

In the case of voluntary and state auctions, the property will have been valued, and the reserve price (mise à prix) is usually 20 or 30 per cent below the valuation; it therefore obviously isn’t wise to bid much more than 30 per cent above the reserve price. With a judicial auction, on the other hand, the reserve price is the amount owing (e.g. to the mortgage lender), which may be far below the value of the property, which means that you may get a bargain. (A lender isn’t interested whether a property sells for more than is owed.)

Tip: Before making a bid, it’s imperative to assess the market value of a property and (if applicable) what it will cost to bring it to habitable condition.

You can bid (enchérir) at a voluntary or state auction, but at a judicial auction you must appoint a notaire or lawyer (avocat) who is registered with the Tribunal de Grande Instance to bid on your behalf. In this case, instructions regarding the maximum price that you’re prepared to pay must be provided in writing and bids are delivered in sealed envelopes. It isn’t necessary to attend a judicial auction, nor indeed a voluntary or state auction, as a lawyer can act on your behalf.

Fees

In addition to normal fees, you must pay for the publication of the judgement, court expenses and lawyer’s fees. Court expenses are between 1 and 2 per cent of the sale price (2 per cent or €765, whichever is higher, at a voluntary auction, usually shared between the buyer and the seller). Fees must be paid within a month and the purchase price usually within two months. It’s possible to arrange a mortgage after a successful bid, although if you fail to raise a loan you will lose your deposit.

If you want to buy a property at auction with a bank loan, you must normally advise the lender of the date of the auction, the details of the property and the maximum amount that you will need to borrow, as well as your personal details, as for an ordinary mortgage.

A judge presides over the auction proceedings and bids, which start at the reserve price and increase in small increments. The sale usually takes place à la bougie (by candle or, more commonly nowadays, by artificial candle!). When the auctioneer has announced the reserve price and any costs to be added, a candle is lit to signify the beginning of the auction. When three candles have burned down (each burns for only 10 to 30 seconds), the auction is finished and the property is sold to the highest bidder at that time.

Waiting Time

The successful bidder must wait ten days, during which time someone can make a higher bid (surenchère). If this is at least 10 per cent above the auction price, the property must be re-auctioned, usually within two months, starting at the price bid by the person who intervened. Such interventions are rare and are permitted once only. You can, of course, make no bid at the auction itself but wait until a successful bid has been made. Then, if you decide that it’s worth more, you can make a higher bid and force a re-auction, although this may force the price up even higher!

Completion of voluntary auction sales takes place 45 days after the auction, when the balance of the purchase price, plus fees (which include auction costs of between around €3,000 and €6,000 in addition to the standard purchase fees, must be paid. Completion of judicial sales takes place within between 30 days and three months depending on the reason for the sale.

If you buy at auction, you aren’t entitled to a ‘cooling-off’ period before being committed to a purchase, nor can you withdraw from the deal without penalty if you’re unable to secure finance.

Paris has the busiest auction scene, with a property auction almost weekly (properties can be anywhere in France). Details of properties for sale by auction can be found by contacting local notaires or via the internet. The Chambre des Notaires’ website (http://www.encheres-paris.com  – available in English) advertises properties to be auctioned around three weeks in advance of the sale and even offers ‘virtual’ tours of some properties; the Paris site (http://www.parisnotaire.fr  – available in English) has the most properties for auction and provides general information about auctions and market trends. To find properties for auction in a particular area, go to http://www.info-encheres.com . For properties on the Côte d’Azur, visit http://www.special-encheres.com , run by Var Information. For details of judicial sales, visit the site of the Ordre des Avocats (http://www.licitor.com ). Commercial websites include http://www.ventesauxencheres.com/immobilier , where there’s a nominal viewing fee.

There are three types of property auction in France:

  • Voluntary auctions (vente volontaire), run by the Chambre des Notaires, at which properties that vendors wish to auction (e.g. for a quick sale, in the hope of selling for a higher than market price or to save estate agents’ fees) are offered.
  • State auctions (vente domaniale), organised by the Direction Nationale d’Interventions Domaniales for the sale of public buildings and properties acquired by the state (e.g. where the owner has died without leaving an heir).
  • Judicial auctions (ventes judiciares), ordered by the courts, at which you can bid for properties that have been repossessed by mortgage lenders or over which there have been inheritance disputes, for example.

The last type of auction is the most common. Somewhat surprisingly, there often isn’t a lot of competition for properties sold at auction, particularly as many are old properties in rural areas which aren’t of much interest to French buyers.

Properties due to be sold at auction are advertised in local papers by the Tribunal de Grande Instance (local county court) responsible for the auction, and details are published around six weeks in advance by the person (e.g. the notary or lawyer) responsible for the sale. The form (fiche) contains the date and place of the sale, a description of the property, land details with cadastre references, the name and address of the person handling the sale, details regarding inspections, and the reserve price. Domaines sales are advertised by the local tax office (in Paris, at the Salle des Ventes Domaines, 15 rue Scribe, 75009).

Tip: You should check that a property isn’t occupied (e.g. by squatters), as it can be difficult, time-consuming and expensive to have them evicted.

Reserve Prices

Properties usually have a reserve price, which is often as little as half the market price. This is included in the cahier des charges, which includes details of the date and location of the auction, times when properties can be inspected and other information, such as the required deposit (which can vary between 5 and 20 per cent of the reserve price). The deposit must be paid in advance by bank draft but is refunded if your bid is unsuccessful.

In the case of voluntary and state auctions, the property will have been valued, and the reserve price (mise à prix) is usually 20 or 30 per cent below the valuation; it therefore obviously isn’t wise to bid much more than 30 per cent above the reserve price. With a judicial auction, on the other hand, the reserve price is the amount owing (e.g. to the mortgage lender), which may be far below the value of the property, which means that you may get a bargain. (A lender isn’t interested whether a property sells for more than is owed.)

Tip: Before making a bid, it’s imperative to assess the market value of a property and (if applicable) what it will cost to bring it to habitable condition.

You can bid (enchérir) at a voluntary or state auction, but at a judicial auction you must appoint a notaire or lawyer (avocat) who is registered with the Tribunal de Grande Instance to bid on your behalf. In this case, instructions regarding the maximum price that you’re prepared to pay must be provided in writing and bids are delivered in sealed envelopes. It isn’t necessary to attend a judicial auction, nor indeed a voluntary or state auction, as a lawyer can act on your behalf.

Fees

In addition to normal fees, you must pay for the publication of the judgement, court expenses and lawyer’s fees. Court expenses are between 1 and 2 per cent of the sale price (2 per cent or €765, whichever is higher, at a voluntary auction, usually shared between the buyer and the seller). Fees must be paid within a month and the purchase price usually within two months. It’s possible to arrange a mortgage after a successful bid, although if you fail to raise a loan you will lose your deposit.

If you want to buy a property at auction with a bank loan, you must normally advise the lender of the date of the auction, the details of the property and the maximum amount that you will need to borrow, as well as your personal details, as for an ordinary mortgage.

A judge presides over the auction proceedings and bids, which start at the reserve price and increase in small increments. The sale usually takes place à la bougie (by candle or, more commonly nowadays, by artificial candle!). When the auctioneer has announced the reserve price and any costs to be added, a candle is lit to signify the beginning of the auction. When three candles have burned down (each burns for only 10 to 30 seconds), the auction is finished and the property is sold to the highest bidder at that time.

Waiting Time

The successful bidder must wait ten days, during which time someone can make a higher bid (surenchère). If this is at least 10 per cent above the auction price, the property must be re-auctioned, usually within two months, starting at the price bid by the person who intervened. Such interventions are rare and are permitted once only. You can, of course, make no bid at the auction itself but wait until a successful bid has been made. Then, if you decide that it’s worth more, you can make a higher bid and force a re-auction, although this may force the price up even higher!

Completion of voluntary auction sales takes place 45 days after the auction, when the balance of the purchase price, plus fees (which include auction costs of between around €3,000 and €6,000 in addition to the standard purchase fees, must be paid. Completion of judicial sales takes place within between 30 days and three months depending on the reason for the sale.

If you buy at auction, you aren’t entitled to a ‘cooling-off’ period before being committed to a purchase, nor can you withdraw from the deal without penalty if you’re unable to secure finance.

Paris has the busiest auction scene, with a property auction almost weekly (properties can be anywhere in France). Details of properties for sale by auction can be found by contacting local notaires or via the internet. The Chambre des Notaires’ website (http://www.encheres-paris.com  – available in English) advertises properties to be auctioned around three weeks in advance of the sale and even offers ‘virtual’ tours of some properties; the Paris site (http://www.parisnotaire.fr  – available in English) has the most properties for auction and provides general information about auctions and market trends. To find properties for auction in a particular area, go to http://www.info-encheres.com . For properties on the Côte d’Azur, visit http://www.special-encheres.com , run by Var Information. For details of judicial sales, visit the site of the Ordre des Avocats (http://www.licitor.com ). Commercial websites include http://www.ventesauxencheres.com/immobilier , where there’s a nominal viewing fee.

This article is an extract from Buying a home in France. Click here to get a copy now.

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