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Buying an apartment
Buying or selling an apartment in the Principality of Monaco often requires a guided decision. In most of the cases, it is important to work with the right real-estate partner who is more client-oriented rather than transaction-oriented.
Unfortunately, in Monaco some agencies focus only on their bonuses and forget the best and long-term interests of their own clients. It happened to my friend who bought an apartment in Monaco. The transaction driven real-estate agency forgot to tell him that from the next year on there would be construction next door. It brought loud noises, destroyed the view and also will decreased the future value of the property. Ouch… Yes, it was the fault of my friend because he did not do his homework properly. When you make your decision to invest into a multi-million Euro apartment, do not rely on one source only and learn from others’ mistake. Convert it to your advantage.
By working with a good partner, you can easily identify and estimate the market value of your property, which is not always equal to the emotional value that you might prefer to obtain. I believe that a good real-estate partner who really represents you is able to negotiate the best possible conditions for you and your budget, which will definitely respond to the demand of the current market.
The real-estate agencies in Monaco usually work for an average of 3% intermediary fee from the buyer and a further 5% from the seller. When you enter into a business relationship with an agency make sure that you phrase the intermediary fee as a success fee. The wording could be important for you.
In some cases when a buyer or a seller steps back and he/she refuses to sign the final contract, the agencies will still ask for their intermediary fees. This means that it might happen that you get nothing valuable and you are still obliged to pay a serious amount without any exchange.
In any contract, it is important to see clearly when the real-estate agency is entitled to a fee.
Once a friend of mine had an interesting experience from a different angle when he tried to sell his own apartment through a local real-estate agent. The agency successfully found him a person who was interested to purchase the property. They signed the contract whereby the buyer ensured a ten percent deposit payment and the buyer aimed to find a financing solution for the rest of the balance during a mutually agreed timeframe. Unfortunately, the buyer could not manage the financing, and therefore the deal was terminated. The interesting part was that even if the agency could not close the deal, or provide the right buyer for my friend, they were ready to charge the three percent fee from the total price of the property.
Therefore, whether you buy or sell real-estate in the Principality, it is always good to agree on the success fee. And by definition, success fee means that the real-estate agency provides a prospect and closes the deal. The importance is on the closing; do not pay for intentions or unclosed deals. A real-estate deal should be considered closed when the beneficiary has received the full exchange for his/her property.
Tips for buying
Despite most of the European real-estate markets, in the Principality of Monaco, real-estate agents and property owners do not prefer negotiations. Since Monaco is in the unique position that its real estate prices have been continuously growing during the last decades, there is no place for negotiations. When you purchase a property in Monaco you can be almost hundred percent sure that its value will rise even in a short-medium period.
Tip: Before signing any commitment always check the city development plans because a new building or construction could affect the aesthetic and material value of your property investment. It might happen that the agency has forgotten to present you the long-term value of your specific apartment.
Once you have found your ideal property, which clearly matches all your criteria, you can start the acquisition process. Usually in Monaco, the acquisition process is a combination of four steps:
- Purchasing offer
- Final offer
- Commitment
- Notarised agreement
Step 1. Purchasing offer
When you have made your final decision and have chosen the property, it is your time to place your initial purchasing offer. It is a common real-estate practice in Monaco that no negotiation process starts without a written purchasing offer from the prospective buyer.
In most of the cases, real-estate agencies do not forward verbal offers or negotiations to the property owners. You might have a possibility to create a verbal negotiation, but for this the reason has to be a very special circumstance.
Once you have placed your purchasing offer, always ask for a written delivery confirmation from the real-estate agency. This way you will have a legally enforceable commitment from the agency and can also gain time to revisit and reconsider the conditions.
Step 2. Final offer
Once your initial purchasing offer – with all its details and concerned goods – is interesting for the owner you will have the first opportunity for negotiation. During this period, you have to define all the purchasing terms, especially the terms related to the payment conditions such as the timing of the acquisition.
Step 3. Commitment
Once the offer is acceptable for both parties, the good faith of the buyer must be confirmed by a deposit payment. In most cases, the deposit payment does not exceed the ten percent of the final purchasing price.
The deposit down payment is used to demonstrate the serious intent of the buyer, therefore, all the deposit is collected by a Monaco-based notary.
In order to proceed further, the buyer is also obliged to pay the legal fees of the notary, which is six percent of the final purchasing price. Therefore, any purchasing intent must involve a minimum of sixteen percent of the down payment of the final purchasing price.
Usually, this is the point when the seller or buyer (it depends) also receives the invoice for the intermediary commission from the real-estate agent for its intervention. The real-estate commission is usually three percent calculated on the final purchasing price. The commission is regulated in the Principality of Monaco, however, it is not declared when the deal can be considered as closed and fulfilled by the real-estate agency. It depends on your initial negotiations with the real-estate agency.
Furthermore, there is a 19.6 percent commission towards the Real Estate Board of Monaco.
In Monaco, the deposit payments are generally made with a single bank cheque from any bank located in the Principality of Monaco. For the remaining balance, the accepted way is a bank wire-transfer. If the buyer has no bank account in the Principality of Monaco, then the confirmed bank wire transfer is the requested way to proceed further.
The benefit of the bank cheque is that usually the notary never collects the down payment before the signed agreement. Therefore, you do not need to move and allocate your money before there is a finalised legal binding from both parties. However, right after the signed agreement the notary is obliged to collect and allocate the down payment in order to protect the best interest of the seller and to avoid any conflict by an unsecured cheque or even a fake one.
The signed offer to purchase is a very serious commitment, a document that has a legal value in the Principality of Monaco. It is highly recommended to find an advisor to accomplish every act dealing which such a purchase, particularly in view of the fact that this is a several million Euro operation.
The accepted and signed offer is a firm commitment for both parties. In case the buyer withdraws its intent from the final transaction, the seller will be entitled to its deposit cheque.
Once the commitment is signed, the only possibility for the buyer to get back the bank cheque is if the seller fails to fulfil his/her conditions on the purchasing agreement. In these rare cases, the Principality of Monaco protects the buyer, by asking the notary to force the seller to pay an extra compensation to the buyer, which is usually the same amount as the ten percent of deposit payment. Therefore, it is more convenient for the seller to go through the actual sale process instead of stepping back.
Step 4. Notarised agreement
The purchasing process usually ends with a formalised agreement notarised by a Monaco-based notary. The final agreement is usually more detailed than the previous offers and commitments.
Since the notary is a public officer of the State, his sealing gives a guarantee of authenticity for the purchase.
In this step, both parties testify when they have to express their will and liability to fulfil all the content of the final purchasing contract. Once it is signed and notarised, this document will protect the buyer by stating the date for the hand over. From this time on, the buyer becomes the new owner.
The final payment is usually performed after this notarised agreement.
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