An apartment for sale in the French Riviera for 69,000 euros…
Must be a pile of rubble, right?
Au contraire, mon ami…
The property I’m looking at, 60 square meters in size, comes to the market in perfect condition. It has two bedrooms and an open living space. Best of all are the views. From the balcony, you can see over the city of Nice and right out to the Mediterranean. If you didn’t want to keep it for yourself, it would make an ideal vacation rental.
Still, you’re thinking, there must be some catch…
This isn’t your typical sale—the little Côte d’Azur property is being sold en viager.
What’s a viager property?
Viager comes from the old French word viage, meaning “duration of life.” How it works in terms of real estate is that you buy the property of an elderly person for a significantly reduced price.
In return, the seller gets to live in it for the rest of his life… and receives a monthly payment from you for as long as he lives.
When the owner dies, you get the keys.
That’s how a traditional viager agreement works. But there are variations on the theme that we’ll come to later.
First, let’s look at how the numbers can play out…
The value of a viager property is not based on actual market value. It’s calculated on the age of the seller (or both ages in the case of a couple) and is known as the property’s “occupied value.”
Let’s take the Nice apartment I mentioned earlier as an example…
The market value is given as 270,000 euros (US$297,465). The viager value, based on occupants aged 76 and 77, is 162,600 euros (US$178,480)—that’s 40% less than market value.
So, buying a viager property is a chance to secure a piece of French real estate at a bargain.
But it doesn’t come without risk…
Essentially, you’re gambling on the life expectancy of your seller. For this reason, most viager buyers tend to be middle aged, looking to secure a home for their retirement.
For foreigners like us looking in, it’s hard not to feel uncomfortable about this system… like we’re wishing away the life of some poor old dame. But this is a completely legal way to transfer property in France.
Bear in mind, too, that there are attractive benefits for the seller:
- He receives a lump sum (the bouquet) from the buyer at the outset. This is usually 30% to 50% of the occupied value (50% is typically paid to sellers aged 70 and over).
- He continues to live in the home for the rest of his life while receiving a monthly annuity from his buyer. Once past the age of 70, only 30% of this income must be declared for tax purposes.
- He is well protected under viager law. Should the buyer default on the monthly annuity payment—and fail to resolve it within the allowed grace period—the seller keeps everything: his property, his down payment, and all annuity payments received to date.
Viager occupé vs. viager libre
The majority of viager property is sold as viager occupé—where the seller remains living in the home for the rest of her life… or for as long as she is able.
But you’ll find some properties listed on the market as viager libre. This means that the seller leaves the property immediately and you are free to move in or rent the place out. The down payment and monthly annuity still applies. In this case, the monthly annuity will be higher than with a viager occupé.
A couple of other things to watch out for when looking at viager deals…
- Annuity period. Some properties have a limited-time annuity period. With our Nice property example, you only have to make monthly payments for 10 years. So, the 162,600-euro price tag breaks down into your initial bouquet of 69,000 euros, plus 120 monthly payments of 780 euros… for a total of 256,200 euros. Given that the venal value is 270,000 euros, you’re not saving a whole lot on this one. The advantage is that you know exactly what you’re paying from the start… and you get to spread the cost without taking on a mortgage. (Look out for a more attractive option with a five-year annuity period in the sample listings below).Though rarer, it’s also possible to buy a viager property without an annuity period, i.e. you pay just one lump sum (again, you’ll see an example below).
- Ongoing tax and maintenance costs. Usually, the seller continues to pay all utilities and minor repairs while the buyer must pick up the tab for major repairs and property tax. Property tax in France isn’t insignificant. On the Nice property, it’s 2,054 euros (US$2,260) a year. Be sure to understand all additional expenses and factor them into your budget.
What’s On The Market?
Only 1% of French property sales are transferred en viager, so you won’t find them in huge supply. But, to give you an idea of the type of deal you can expect, here are some sample listings I dug up…
- In the village of La Turbie, in the southeast department of Alpes-Maritimes, a 45-square-meter property with two bedrooms, bathroom, kitchen, and living room. Venal value: 450,000 euros (US$495,700). Viager price: 250,000 euros (US$275,385). No monthly annuity. Owner: 67 years.
- In Provence, in a tranquil area surrounded by nature, this 90-square-meter villa is just 10 years old. It has two bedrooms, open living/dining area, and covered terrace. Venal value: 200,000 euros (US$220,290). Bouquet: 12,000 euros (US$13,220). Monthly annuity (for five years only): 1,212 euros (US$1,335). Owners: 86 and 87 years.
- Charming 100-square-meter villa near the river in Chateaulin, Brittany. Venal value: 160,000 euros (US$176,230). Bouquet: 69,600 euros (US$76,000). Monthly annuity: 195 euros (US$215). Owner: 74 years.
- In Provence, a 50-square-meter apartment within 10 minutes of the beach. With two bedrooms, kitchen, and living area, it’s in a secure, gated building and is close to all amenities. Venal value: 230,000 euros (US$253,300). Bouquet: 35,000 euros (US$38,550). Monthly annuity: 600 euros (US$660). Owner: 75 years.
- In a luxury building in Marseille, close to shops and local transport, this 102-square-meter apartment has large living/dining area, recently-updated kitchen, two bedrooms, balcony, walk-in wardrobe, and cellar. The beach is 20 minutes away. Venal value: 425,000 euros (US$468,150). Bouquet: 281,850 euros (US$310,465). Monthly annuity: 450 euros (US$495). Owner: 88 years.
- And, finally, you’ll find that attractive Nice property with views to the Mediterranean here. Venal value: 270,000 euros (US$297,435). Bouquet: 69,000 euros (S$76,010). Monthly annuity (for 10 years only): 780 euros (US$860). Owners: 76 and 77 years.
Finally, you may come across viager tales where the seller outlives the buyer… and the responsibility falls on the buyer’s dependents to keep up the annuity payments. Of course this can happen (as in the famous case of Jeanne Calment who lived to be 122—outliving her buyer by two years)… but it’s not the norm.
That said, viager property is a niche market that doesn’t make sense for everyone.
At the very least, if you stumble on the term when browsing French property, you know what you’re up against.