This week's post talks you through currency related things to consider once you've accepted an offer on your french property.
Our client bought their house in rural France before the single currency even existed.
They have used us for many years to send sundry amounts to cover living costs, expenses and for spending money whilst 'out there', relying on us to transmit GBP to the EUR account they hold.
We were delighted when this client asked us if we could help to bring the euros from the sale of this house back to the UK.
He asked if we could help even before he had received an offer on the property. This forethought was truly welcome and, if nothing else, meant that he had a rough idea of what his euro asking price might equate to in GBP.
First off, our client was keen to achieve as close to a GBP sum as possible. In speaking with us around the time he listed the property, he was equipped with an understanding of what sort of offer he could afford to accept in order to realise that sterling goal.
We were keen to impress on him the fact that a rise or a fall in the value of the pound would affect how many euros he needed to achieve for the property.
A rise in the value of the euro would mean he could accept a lower offer for the french house. Conversely, a drop in the value of the euro would mean he needed to be more robust in his negotiations with his would-be buyer.
Fortunately for our client, his buyer offered him a very satisfactory price and the pound also began to move to it's present lows.
So, given the clear chronological structure of the french buying and selling process, having accepted the offer and with his buying having paid the 10% deposit required, our client knew precisely the date on which contracts (the Acte de Vente) would be signed.
His mind now turned to his options with regards to extracting the euros and realising them as sterling. He options were:
1. To provide his notaire with details of his own France based euro account, into which the notaire could deposit funds on the day of completion and from which our client could then arrange for their onward transmission to the UK.
2. To provide the notaire with his UK GBP account details, that the notaire might send the euro sum directly to the UK.
3. To provide the notaire with our EUR denominated client trust account details, that the notaire might credit us and we could facilitate the exchange and transmission of funds to our client's account.
We would always advise client to avoid the second option.
Here's why: By asking your notaire to send euros directly to your sterling account you are inviting your bank, or indeed the notaires banking provider, to exchange the money for you.
This leaves you without any even remote estimate as to what GBP sum might arrive with you.
Your bank applied an arbitrary retail rate of exchange.
From experience we know this retail rate is likely to be 3.5% less competitive than other non-bank channels can offer.
Furthermore, the time it takes for you euros to arrive as GBP in your UK account is difficult to know and hard to estimate. We know if instances where it can take between 7 and 10 days to clear into the UK; however, it must be said that such a long time is rare and usually due to other obstacles not being factored into proceedings.
Prime Cap does not mind whether you provide your own french bank details, or our EUR client account details to your notaire.
We are concerned with you using a broker like us and you achieving a commercial rate of exchange. The difference between a commercial rate and a retail one can be worth many thousands of pounds to you, so, the key is to ensure that a retail banking institution is not involved in the exchange.
One thing we are keen to impress here is that, although we would be delighted to facilitate the exchange of your euros into sterling, much of our work is to do with illustrating to would-be clients what they have a right to expect.
We do not charge anything for our consultancy, transaction mapping or pricing services and we are often used as a benchmark against which experienced clients and advisors to high net worth families compare their current brokers.
For us, there is still value in being used a resource in this way. If our service, style and rates dont directly tempt to you to engage us, then we still want to make a positive and lasting impression on your and your advisers.
Now, in the scenario above, our considering which option to choose, it was agreed that our EUR client account details be provided to our client's notaire and that the proceeds of the sale be directly, electronically transmitted to us on the day of completion.
We mentioned that our client enquired with us early in the process. We welcome this because it still very much remains the case that some notaires in France are unfamiliar with sending money abroad for their clients of UK origin.
Like us, our client wanted to make sure that their notaire had our bank details in good time before completion, and that the notaire was content with the information they had been provided.
It is worth noting that our EUR client account is held in the UK, with our bankers in London. We use one of the world's largest clearing institutions which means we know that you notaire's bank (and indeed yours) won't have any issue sending us funds, however, if your notaire is not familiar with sending euro internationally, they may not realise/appreciate that it is an international payment, rather than a local or domestic one.
Now, here is where the plot thickens...
We received a call from our client on the day of their completion.
They were sitting in their notaires office.
Bear in mind that our client had provided their notaire with our bank details days before the completion and had no objections raised.