Swapping your French home
Having difficulty finding a buyer for your home in the UK or France but want to move asap? Karen Tait has a solution...
The concept of home exchanges has been around for some time for money-saving holidays and the chance to stay in a real home rather than an impersonal hotel. Although these are generally for holiday-length swaps, for a couple of weeks or so, some homes are also available for longer exchanges, even up to a year. This would be ideal for anyone wanting to really experience life in France, perhaps before making a permanent move and committing financially to purchasing a property across the Channel.
Recently, a new trend has emerged from the swap shop’ phenomenon – that of exchanging homes permanently. Although a council house swapping service has been operating in the UK for a while, advertising your home as a swap for one in another country is becoming increasingly popular.
In today’s financial climate, it makes a lot of sense. With people struggling to sell their properties on both sides of the Channel, why not find a suitable home to swap instead?
“We started thinking about property exchanges as a way of stimulating the stagnant property market towards the end of 2008,” comments Peter Elias of Allez Francais.
“Fluctuations in property valuations, currency rates and banking policies were adversely affecting the sale chain. The idea is something that I knew existed in the US, and a couple of vendor clients had mentioned that they would be open to exchanging with a UK buyer if it would facilitate their sale. We spent some time exploring the legal aspects of the transaction, in order to ensure that we were not going to encounter problems that were not immediately obvious.
“Provided people are prepared to compromise a little more perhaps than normal on certain aspects of a property, it may just work. It is about matching willing vendors and buyers who otherwise would not be able to make a move at all. Around 10% of our vendors would consider this facility.
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“French properties may be a holiday home, the home of an expat returning to the UK, perhaps wishing to be closer to family or someone who hasn’t settled in France,” he adds.
In December, Trevor Leggett of Leggett Immobilier, based in south-west France, launched a new website aimed purely at house-swapping. “We had so many calls from frustrated potential buyers who couldn’t sell their homes in the UK and were looking into the possibility of bridging loans from French banks, which are now almost impossible to obtain,” he explains. “As the largest British agency in France, we had a lot of British vendors wanting to return to the UK or move within France. It occurred to me that swapping’ – permanent property exchanges – may be a solution for many people.
“The response has been very positive: we have had 85 French properties already and around 80 properties to swap with from all over the world, and we haven’t even advertised yet. It really has gone mad!”
The beauty of a house swap is that it is a win-win situation – someone having difficulty selling their house in the UK can swap with someone in the same position in France, and everyone’s happy!
FPN reader Steve Bailey is hoping to swap his home in southern Scotland for somewhere with more land in France, “where I can keep chickens, grow vegetables and live the good life,” he says. “With the pound dropping ever lower, the market seems to favour house swaps at the moment,” he adds. “However, it is a long shot for both parties to get what they want without a lot of compromise. Ideally, I’d like to move to the Midi-Pyr�n�es, far enough south to grow tomatoes and grapes outside, but we may need to compromise on our choice of area. Strangely, we’ve been receiving a lot of enquiries from Mayenne. We were expecting interest to be from people who’ve overstretched their credit and now need to sell, but we’re mainly hearing from pensioners who want to move back to the UK – certainly the mild climate here, benefiting from the Gulf Stream, would suit many pensioners.” Steve is also hoping the relatively low property prices in Scotland will appeal to someone wanting to move from France to the UK. His four-bedroom Georgian house in Whithorn, Scotland, is for sale at �135,000.
Currently living in Norfolk, Allan Coleman is hoping to swap his modern, four-bed house priced at �325,000 for one in south-west France. “We’re considering a swap because with the current credit situation, it is now as difficult to sell a house in the UK as it is in France,” he explains. “We’ll swap as soon as the opportunity arises; my wife and I plan to retire to France in two years. We’ve never swapped houses before, however, we have owned houses in France and lived full-time there from 2002 to 2005, so are familiar with most aspects of French life.” (firstname.lastname@example.org). On the other side of the Channel, Sylvia and Brian Butler want to move from Brittany back to the UK. “Our house has been on the market for two years and with the present fall in the market, we want to try a new way of moving,” they explain. “We came here eight years ago and renovated a long�re and three g�tes. The business (www.leboussac.co.uk) has been running for six years and 80% of our clients are returners or friends and contacts of returners.
“When we moved here, our two sons were living in Africa and Holland. Now they’re back in the UK and we have three grandchildren, who I miss like crazy. They visit, but it’s not the same, and as we grow older we want to see them on a more regular basis, hence the move back to the UK” adds Sylvia.
Having just launched www.the-part-exchange.com Katrina Riley explains why she is now focusing on swaps. “The idea for the website was basically bourne out of the recession problems,” she says. “We’ve spent over three years on a project of eight houses only to find we’re now having difficulty selling them. As long as we still have a bit of working capital, we can afford to exchange the houses and take on a property elsewhere which would give us a bit of a second income. It hasn’t been easy as people always suspect new ideas and are reluctant to even think about selling a property at the moment. They just can’t see how they can possibly achieve their dream of moving in the present climate. This, I feel, gives them some hope and another way out. We had a huge response from the France Show, not only from the public but agents too.”
Of course, it’s not quite as simple as just swapping house keys. Financial and legal issues need to be carefully considered.
“The property prices may be very similar or quite different, with an appropriate payment made either in sterling or euros,” says Peter Elias. “It is possible one party might even agree to give a secured loan for the difference. Since the French legal process proceeds at a faster rate than the UK equivalent, it is important that certain safeguards are put in place to protect both parties. Generally this will be achieved by using a clause suspensive, with the sale of the French property being dependent upon exchange of contracts on the UK property within an agreed period of time.” When Trevor Leggett looked into the legal options, he found few notaires were prepared to co-operate with what is, in fact, a payment in kind outside of the notaire’s accounts. “This in turn could lead to problems with fiscal redressment (tax controls),” he explains. “A large firm of notaires with whom we work already were happy to do the conveyancing on the exchanges, but they insist upon more than one valuation, as lowering the property price could result in less tax being paid to the government.” Another point to consider is establishing the value to be used in CGT calculations, as this could be more difficult.
Exchanging properties can also have exchange rate advantages. “An agreed rate in sterling can be included, so that the bulk of the transaction is free from exchange rate uncertainty,” adds Peter Elias. “It may be possible for the whole transaction to be undertaken in sterling, with just the agency and notaire’s fees being paid in euros. To optimise savings, it’s preferable to exchange as little currency as possible.” To this end, you could also consider exchanging furniture, white goods and even cars. Properties with outstanding mortgages can complicate matters, as Trevor Leggett explains: “You can only exchange the equity, not the finance. If there is a mortgage on the property, it is more complicated; the buyer may have to pay some in cash to pay off the mortgage for the seller. This would happen if someone was selling down, for example, a �300,000 house in France to a �200,000 house in the UK. The person moving to France would swap but pay the extra �100,000.”
However, as Katrina Riley points out:“If someone does require a mortgage, they’re generally asking for less – obviously a bonus and great with the low rates at the moment, plus French banks are always more cautious so if you are asking for less, you have a better chance.”
What about fees? “Fees for property transactions in France are paid by the buyer, just as if it was a normal purchase, and fees in the UK are, of course, paid by the vendor,” explains Peter Elias. “If exchanges are carried out, the French house will be dealt with as above, and there may be a possible saving on fees for the UK house, dealing direct with the vendor.”
Trevor Leggett adds: “The notaire’s fees are paid by the buyer moving to France. All the French fees must be paid in France in euros. The notarie works out his fees based on the valuation. Solicitor’s costs for conveyancing are paid by the person moving to the UK, as they would be normally.
“Realistically, they’re still paying what they’d pay in any normal move,” he adds, “it doesn’t actually save money or cost any more (although they save on currency as they don’t have to buy foreign currency, other than for the fees). It does speed up the move though, as a lot of properties just aren’t selling from either side; some have been on the market for over a year which can be really frustrating when you want to move on. It does get the property market moving.”
“It’s a fairly straightforward process – farmers often swap land and buildings here so notaires are used to property/ land swapping and generally it’s easier as less actual cash is exchanged,” says Katrina Riley. “You should complete the sale on the same day and make sure there is some sort of contract in place to prevent one party dipping out while the other property is going through. Also, it may be that an estate agent has a client who is willing to part exchange, so their fees may also be included, which affects the value put on the swap, so that’s something to bear in mind. Some of it has to be trust.” In summary
The advantages to both parties is that a move could be possible which could not occur without the intervention of the other person involved in the transaction. “It may mean that the perfect property is not the outcome, but at least both parties will be where they want to be,” says Peter Elias. “This is the one downside – the level of compromise involved has to be carefully thought through.”
Trevor Leggett points out that there may be a smaller choice of properties, especially in a particular location. “At present, as we have only been running this since December, there isn’t as much choice, but this should change as more properties come onto the site,” he says. “Our clients tend to like similar properties which is an advantage, but to get moving quickly they may have to compromise a little more than they may have done had they been cash buyers. The complexity of paying off mortgages can be a disadvantage, but where there is no outstanding finance, it is a very simple transaction.”