It's a dream come true. After months of searching and years of saving, you've come across the perfect French villa. Surrounded by lavendar fields, a quaint French village, and all things rustic, the spacious property is drowned in sunlight. You're already picturing yourself and your family in the villa, sitting back with a glass of red, as your mortgage payments slowly drip their way to total ownership. Most importantly, it's within your budget. Or is it? Not to dampen your lavender-induced high spirits, but a lot of first-time property buyers only look at the attractive price tag dangling from the for sale sign, and fail to see what other costs lurk within the purchasing process itself. Notaire's fees, title transfers, stamp duty, VAT: it all adds up, and it must all be accounted for in your property budget.

Check the exchange rate
Before you extract any money from your hard-earned savings, consider the way exchange rates can affect the purchase of an overseas home. The price you see advertised may not be the price you end up paying unless you put careful thought into your currency exchange. So say you buy a villa in Europe for 620,000 euros.
 
At some stage, you will have to transfer the funds into a European bank account in order to pay the deposit and eventually the balance. This is where you have to keep an eye on fluctuations between sterling and euro. Because if the pound is at, say, 1.502 euros, the villa will cost you £412,783. But if you had purchased the property six months previously, when the exchange rate was 1.421 euros, you would have paid £436,312, a difference of £23,000. Exchange rates can be very volatile and you have to be aware of the risks in buying your euros just before payments are due. Most people are not aware they can buy currency in advance, or understand the benefits. An open forward contract with a specialist currency broker means you can fix the price for up to 18 months ahead. This means you know exactly how much you will have to pay for your property, in sterling.

The extras add up
The extras you'll be paying for your perfect French villa don't stop at the deposit. Conti Finance Services representative Greg Rhodes says that in France, Spain, Portugal and Italy, buyers should expect to pay ten to 12 per cent over and above the purchase price of the property. Rhodes says that in France, this includes agents fees, which make up five to six per cent of the extra costs, and notaire's fees which can be five to eight per cent. He also warns prospective buyers that they may need to fork out for translation fees for the contract if they are not fluent in French. On top of that comes administration fees on your mortgage, which in Conti's case is usually about £95 to £145, depending on the size of the loan.

Buying in France
While extra costs apply to all countries where you may be considering buying property overseas, this article will use France as an example. Sharon Edwards of Turner & Co solicitors warns that the purchase price quoted by a French real estate agent may or may not include their fees, so don't be caught out. "Unlike in the UK, where it is the seller who pays the fees of the estate agent, in France it is commonly the buyer, unless you have come to some kind of arrangement with the seller," explains Edwards. She says the agents fees are approximately five per cent of the purchase price. "However, usually when you see a French property advertised it will state that the purchase price includes fees." In rare cases these include the notaires fees. "The notaires fees are approximately seven per cent of the purchase price, unless it is a new build where the fees are only around two per cent. There will also be an additional one per cent approx payable to the notaire if you are having a French mortgage, which is the notaire's charge for preparing and registering the legal charge." However, Edwards goes on, "do not be alarmed, as all these percentages include our equivalent of stamp duty and land registry fees together with other purchase taxes, as the notaire will arrange for your title to be registered following completion".

If you are purchasing a new build, you should be aware of the French VAT (TVA), payable, at a rate of 19.6 per cent. Edwards says this is reclaimable under various government schemes, which she says should be explained by the developer. Additional service such as the translation of contracts and  £1,500 and £2,000 in addition to their standard fees. But wait, there's more... Edwards says you also have to pay the fee of an independent solicitor in England to check the contracts from a legal perspective, provide succession and inheritance advice and liaise with the notaire.

Solicitors fees can range from £600 to £2,000, "so you may wish to shop around, or speak to friends who may have engaged the services of a law firm for their purchase, as a recommendation is always worthwhile". Edwards also advices that if you require a structural survey, the cost can range from £600 to £1,500, so again you should shop around. If you cannot appear before the notaire on completion, you will require a proxy (power of attorney) enabling the notaire to complete on your behalf. The notaire will require you to sign this document in front of a notary public who will charge between £50 and £70. Then the proxy may need the seal of the Foreign and Commonwealth Office, which is £12 and the notaire would expect you to send the document to them by courier, which is a further £40. Then of course, there are removal costs, costs of re-constructing your investments and the costs of additional medical cover to consider.

You will also need to tally the costs of travelling to and from your new residence, either on a regular basis or just during the move. "There may also be an odd occasion, unfortunately, when you have to cancel booked flights or travel arrangements, if for some reason the completion is postponed. This is extremely rare, and this would only be the case if you have taken the completion date stated in the initial compromis de vente as being a date cast in stone for completion, when this date is a date that the notaire will work towards for completion." Edwards says the notaire will confirm when he/she has the results of all the searches and enquiries and it is at this stage you can arrange a date and book your travel arrangements. "Although the costs above seem high, when analysing the same you will realise that many are similar costs incurred in the UK, when buying a property. Therefore, hopefully, after reading this article you will not find it necessary to cancel your offer of 200,000 euros and look for a property of 20,000 euros."

It costs wherever you buy
As already mentioned, the extra costs that come in on buying a house do not just apply to France. In Spain, allow for up to ten per cent of the purchase price in taxes and other costs. Depending on whether you are buying a new property from a developer or a resale property from an individual, you will either have to pay VAT (IVA) and stamp duty or a transfer tax. Estate agency fees or commissions are paid by the seller, unless otherwise agreed. The IVA on the purchase of a built residential property (apartment, villa etc), plots of land and commercial premises is seven per cent. The transfer tax on properties is six or seven per cent, depending on which region the property is in. Legal fees should cost you around 1,000 to 1,500 euros. Many people pay around one per cent of the total purchase price in legal fees, but beware lawyers who nudge it up to 1.5 per cent.

Notary expenses in Spain are nearly always paid by the buyer and can be one per cent of the purchase price, though they are usually only 0.5 per cent. In Cyprus, legal fees will cost you £1,000 up front. This is followed by three per cent stamp duty, and the typical deposit required is around 30 per cent. In the Canaries, you will be required to pay 20 per cent deposit and ten per cent legal fees. There are no agents fees. The deposit in Croatia is ten per cent, with agents fees of two to three per cent and one to 1.5 per cent legal fees. In Dubai, the agent fees are three to five per cent, the deposit is 30 per cent and there are no legal fees. Property buyers in Greece need a 25 per cent deposit, 2.5 to 5 per cent agent fees and two per cent legal fees on the declared purchase price.

In Italy there is typically a 20 per cent deposit, and buyer and seller pay the agent fees which vary from three to eight per cent. The notary will cost one to two per cent of the purchase price and a lawyer is recommended. In Portugal buyers need three to five per cent for the agent fees, a 20 per cent deposit and one to three per cent in legal fees. In Turkey the deposit is yet to be established, but agent fees are three to five per cent and legal fees are between 15,000 to 100,000 baht. Bulgarians need a ten per cent deposit, three to seven per cent in agents fees and two per cent in legal fees.

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Articles first published in January 2006