How to buy a property in Monaco
Purchasing real estate in the Principality of Monaco is not as easy as many people believe and it requires the support of an advisor or real estate agency. Monaco is in the unique position of high demand and low supply, its real estate prices have been continuously growing during the last few decades, therefore unlike most European real estate markets, in the Principality of Monaco, property owners usually do not negotiate much. This make’s complete sense when one sees the facts.
We reached out to our trusted real-estate partner CM Monaco Real Estate to collate for you the most important insights about purchasing property in the Principality.
“In 2018 the number of transactions was +11% in existing apartments and a record number of sales for new apartments. Prices have been up +18.1% on average from 2017. Mean value in Monaco is now 48 799 euro’s per square meter, which is a new record; this is almost two times the average price of 2009.” – says Christian Miceli, Associate Manager at CM Monaco Real Estate
To buy or sell an apartment in the Principality of Monaco requires the support of an advisor or real estate agency. In most cases, it is important to work with the right advisor or real estate partner who is more client-centric rather than transaction oriented. For this reason, with any realtor contract, it is important to identify when the real estate agency is entitled to its fee.
When you buy an apartment in Monaco a transaction driven real estate agency might forget to tell you that from next year onwards there will be construction starting next door, which may bring uncomfortable noises, possibly destroy the view and decrease the future value of the property.
“When you make an educated decision to invest into a multi-million euro apartment, you will want to ensure it will maintain and/or gain its market value in the future, especially now that Monaco implements many new real estate developments.” – says Christian Miceli, Associate Manager at CM Monaco Real Estate
By working with a trusted partner, you can easily identify and estimate the market value of your property, which is not always equal to the emotional value. A good real estate partner who represents you and your interests should negotiate the best possible conditions for you and your budget in response to the current market conditions.
The real estate agencies in Monaco work for a three per cent intermediary fee, which is the maximum allowed by law. When you enter into a business relationship with an agency, make sure that you phrase the intermediary fee as a success fee. This 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 obtained nothing valuable and you are still obliged to pay a serious amount without any exchange.
Therefore, whether you buy or sell real estate in the Principality, it is always good to agree on the success fee. By definition, success fee means that the real estate agency provides a prospect with a fully signed exchange contract and they close the deal with it. 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
Unlike most European real estate markets, in the Principality of Monaco, real estate agents and property owners do not negotiate so much. Since Monaco is in the unique position of high demand and low supply, its real estate prices have been continuously growing during the last few decades, so there is not a big room for negotiations in Monaco.
When you purchase a property in Monaco you can be almost one hundred per cent sure that its value will rise even in the short to medium period.
Once you have found your ideal property which matches all your criteria, do not engage a contract immediately. It might happen that the agency has forgotten to project to you the long-term value of your specific apartment.
“Before signing any commitment, always check the city development plans, because a new building and construction could influence the aesthetics and the material value of your property investment.” – says Christian Miceli, Associate Manager at CM Monaco Real Estate
If everything is fine and no future development risks the value of your property, then you can start with the acquisition process.
Usually, the real estate acquisition processes in the Principality of Monaco is a combination of four steps:
1. Purchasing offer
2. Final offer
4. Notarized agreement
Step 1. Purchasing Offer
In Monaco, no negotiation process starts without a written purchasing offer from the prospective buyer. Therefore, when you have made your final decision and you have chosen the property you would like to purchase, it is your time to place your initial written purchasing offer.
Most real estate agencies in Monaco will not forward verbal offers or negotiations to the property owners; you might have the possibility to create a verbal negotiation, but only in very exceptional circumstances.
“As a standard practice in Monaco, no negotiation process starts without a written purchasing offer from the prospective buyer.” – says Christian Miceli, Associate Manager at CM Monaco Real Estate
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 this will help you gain time to revisit and reconsider the conditions.
Step 2. Final Offer
Once your initial purchasing offer with all its details and concerned goods has been presented to the seller, you will have the first opportunity for negotiation. During this period, you must define all the purchasing terms, especially the terms related to any payment conditions such as the timing of the potential 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 ten per cent of the final purchasing price.
“The deposit down payment is used to demonstrate the serious intent of the buyer, therefore all the deposits are collected by a Monaco based notary.” – says Zsolt Szemerszky, Founder of Monaco Wealth Management and co-author of Monaco: The Essential Relocation Guide
To proceed further, the buyer is also obliged to pay the legal fees of the notary, which is six per cent of the final purchasing price. Therefore, any purchasing intent in Monaco must involve a minimum of sixteen per cent of down payment of the final purchasing price.
Usually, this is the point when the seller or the 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 per cent calculated on the final purchasing price.
“Realtor commissions are regulated in the Principality of Monaco; however, it is not declared until the deal is considered closed and fulfilled by the real estate agency. It also depends on your initial negotiations with the real estate agency.” – says Christian Miceli, Associate Manager at CM Monaco Real Estate
In Monaco, 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 a confirmed bank wire transfer is the requested way to proceed further.
Right after the agreement is signed, the notary is obliged to collect and allocate the down payment to protect the best interests of the seller and to avoid any conflict by an unsecured cheque or even a counterfeit one.
“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 finalized legal binding contract from both parties.” – adds André C. Perry, CEO of Monaco Wealth Management and co-author of Monaco: The Essential Relocation Guide
The signed offer to purchase is a very serious commitment, a document that has legal value in the Principality of Monaco. It is highly recommended to find an independent advisor to help you finalize every act when dealing in the purchase or sale of property in Monaco.
“The accepted and signed offer is a firm commitment from both parties, if the buyer withdraws their intent from the final transaction, the seller should be entitled to retain the deposit cheque by the fact itself.” – explains Christian Miceli, Associate Manager at CM Monaco Real Estate
Once the contract 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 extra compensation to the buyer, which is usually the same amount as the ten per cent of deposit payment. Therefore, it is more convenient for the seller to go through the actual sale process instead of stepping back.
Step 4. Notarized Agreement
The property purchasing process ends with a formalized agreement notarized by a Monaco based notary. The final agreement is more detailed than the previous offers and commitments.
As the notary is a public officer of the state, their seal provides a guarantee of authenticity for the purchase.
In this step, both parties testify their will and ability to fulfil the content of the final purchasing contract.
“Once signed and notarized, the contract will protect the buyer by stating the date of the handover, and from this time on, the buyer becomes the new owner.” – explains Christian Miceli, Associate Manager at CM Monaco Real Estate
The final payment is made after the agreement has been notarized.
The Insider Knowledge: Commitments
Whether you buy or sell a property in the Principality of Monaco, you must be very careful with the ‘commitments’. If you do not clearly define when the real estate agency is entitled to its fee, you can face some very unpleasant surprises.
“There are foreigners just like in any other city in the world doing investment gambling in Monaco. For example, you can book a property with 10% deposit for 6 months. The real-estate gamblers aim is to resell the booked apartment within the allowed 6 months’ timeframe, which is their legal right; there is nothing against this in the Monégasque law.” – says Zsolt Szemerszky, Founder of Monaco Wealth Management and co-author of Monaco: The Essential Relocation Guide
In some cases, foreign buyers take risks and gamble with the real estate in the Principality.
For example, buyers are ready to place a deposit on the property (generally, this is when the real estate agencies immediately take their 3% fees on the total selling price). However, the supposed buyer may not have a great interest to buy the apartment because he or she is a real estate gambler, whereby they aim to resell the booked and deposited apartment within the allowed 6 months’ timeframe, which is their legal right; there is nothing against this in the Monégasque law.
However, if a new buyer has not been engaged in the 6 months, they can be faced with the situation that they lose their deposit. This means the seller not only have lost a buyer and over 6 months of selling time, but you also paid 3% for your real estate agent for nothing.
“Alternatively it also happens that the buyer is not financially able to afford the property. Using this 6 months of timeframe these buyers will aim to find a financing solution for the rest of the balance.” – adds André C. Perry, CEO of Monaco Wealth Management and co-author of Monaco: The Essential Relocation Guide
You may also face a similar situation when the buyer is not financially able to afford the property. The buyer will aim to find a financing solution for the rest of the balance during the mutually agreed timeframe.
Unfortunately, if the buyer cannot manage the financing you might have already paid your success fee to your real estate agent for the unsuccessful deal.
Monaco Wealth Management always recommends to its members to seek for professional advice. Please feel free to contact us or our trusted real-estate partner CM Monaco Real-Estate who is a family owned Monégasque real estate agency.
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