Totally Frenched Out

From the blogger formerly known as Samdebretagne

Friday, April 6, 2012

Viager, part 4

So let's say you've decided to do a viager and have found the perfect place.  What are some of the things you should do before signing on the dotted line?
  • The first thing is to do some research into the listed worth of the apartment. Luckily this is very easy nowadays thanks to the internet.  But you should make sure that the price they list matches up to the prices for other apartments for sale (with similar features and in a similar state) in that area. 
  • Another great site is - they let you put in all kinds of information about the apartment, the building, etc and then they come back with a fairly accurate estimation of its value (at least for Paris anyways).
  • Next, you want to estimate how much it would cost to rent a similar apartment that month, as that amount should be fairly similar to what they are asking for the monthly stipend (but know this can also vary according to the age of the person, for example if they are particularly "young" or old). 
  • You should also do a quick estimation of their calculations, using the person's age, the bouquet and the monthly rent, to make sure it all adds up.
  • Once you've done your homework and everything seems okay, you should contact the agency to set up a viewing.  Make sure you sit down beforehand though and think about everything you want to ask during the visit.  Here were our questions - a lot of them would not apply though to a house in the countryside:
    • How did you calculate the apartment's worth?
    • How did you calculate the bouquet and the monthly stipend?
    • How did you calculate the 'abbatement d'occupation'?
    • How much is the annual property tax?
    • How much are the annual owners/building taxes?
    • When was the 'ravalement' last done? How much did it cost? When will it be done again? Can I get a copy of the invoice?
    • When was the building (and its common area) last renovated?  How much did that cost? When will it be done again? Can I get a copy of the invoice?
    • Are there any other big projects that have been voted but not yet paid for?
    • Can you provide us with the minutes from the last two syndic meetings?  (Read through to have a better understanding of the building's issues and to make sure no other gros travaux have been authorized)
    • How much are the notary fees?*
    • What happens after the person passes?  What about everything that's in the apartment?
    • What happens if the person moves into a nursing home?
    • What 'diagnostics' have been done on the apartment? Can we see them?
  • Other things you want to pay attention to during the viewing:
    • The general state of the building - its entryway, the lobby, the grounds. 
    • The safety/security of the building
    • The general state of the apartment - as you will now be the owner, you will be responsible for anything that goes wrong (water heater breaking down, etc).
    • What kind of heating it has, single/double-paned windows, how much light it gets, etc (things that will be important if you ever want to resell it)
Basically you are just trying to gather as much information as possible about the place, especially if it's an apartment, because as soon as you sign, you will be liable for all the things a normal owner would be liable for - taxe foncière, ordures, charges propriètaires, gros travaux, etc. You will also have to take out a yearly insurance for non-resident building owners (the seller will have to have their own renters insurance). All of these things need to be taking into account in your budget forecasting, because it's not as simple as just giving them a down payment and then paying them a flat fee each month.  However it shouldn't add up to that much extra - in our case, it's about 100€ extra per month for all of this.

Another thing to keep in mind is that most of the time, the owner will also insert a clause into the contract saying that the monthly rent should be recalculated each year, either based on inflation or based on the national INSEE rate. This is negotiable however - you can propose your own rate, or a flat rate or whatever.

Other negotiables - the amount of the bouquet, the amount of the stipend (ie you can either offer to pay a higher bouquet up front and a lower monthly stipend or vice versa).

You can (and should) specify in the contract what will happen if the person leaves the apartment for a certain period of time.  Ie. as the buyer, you want to make sure that in the contract, it is noted that only the seller can live in the property (droit d'usage et d'habitation sa vie durant). Otherwise, even if they left, they could let their children live in it, rent it out, etc, causing you a lot of problems when they pass.

If they do end up moving into a nursing home, you should have the increased rent price written into the contract so that you are sure both parties agree on it.

You should also stipulate that the family has a certain amount of time after the passing to clear out any items they wish to keep (three months, etc).

Most contracts also allow the buyer to resell the viager in case of problems - this does happen and usually allows you to recuperate all the money you have put in, but know that if you do resell it and the new buyer doesn't pay, you will be liable. (Though this isn't a huge deal in my mind, since it means that person will have paid X number of years and then you'll get the bien back without having had to pay for those years).

Lastly, because the length of a viager is so unknown, they recommend you never buy a viager occupé with the idea that you will live in it yourself.  It should always be seen as an investment. (This does not apply to a viager libre or viager à terme are different matters however since you know exactly when you will be able to live in it).

If you don't feel comfortable investing in one directly, there are also investment groups that will do it for you - ie you pay them money and they use it to invest in several viagers.  This limits the risk in many ways, as some of them will end up being great deals and some non-so-great deals.  It can also be a good option if you don't have enough money to do a viager on your own and you still want to invest (as it is almost impossible to get a loan for a viager**).

I hope this has been useful - if nothing else, at least it's all down on 'paper' for us when we do start looking again!

*Agency fees are almost always included in the bouquet, but the notary fees are not and will be on top of everything calculated here.  They are however lower than normal notary fees for a home purchase. Also, as the buyer, you will be the one choosing the notary, so be sure to shop around for one who has experience in viagers.

**The one exception for this is a viager sans rente because you are paying them a fixed sum of money up front and no monthly rente.



Blogger chickster said...

This whole subject has been fascinating, thank you for sharing! We discussed viagers in my ABAAFE class and I felt super smart throwing in a few details I learned from your posts. (plus one student talked as if she knew the famous 120 yr.old renter, but I felt bad calling her out)

April 6, 2012 at 1:31 PM  
Blogger Amber said...

In my experience, notary fees have never been more that 7 or 8 percent of the sale price, deducting agency fees, furniture you're buying like a fitted kitchen, etc. Is it about the same?

April 7, 2012 at 9:32 PM  

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