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.
And yet, the notaire was disinclined to transfer funds to the account details provided.
We understand now that this is because our client had simply printed out the IBAN and SWIFT code they wanted the money sent to. This was, in the eyes of the notaire, not formal enough and dissimilar to the conventional french 'RIB' details that typically accompany such an instruction.
Why such an objection couldn't have been expressed at some point prior to the actual day of completion is something we are unlikely to ever know, and objecting in such a way did very little to insulate our client's nerves from attack.
The acronym 'RIB' stands for 'Releve D'Identite Bancaire'. Translated this basically means 'Bank details'.
This is typically a formal document often available from or provided by a french banking institution; an equivalent of which does not actually formally exist within the UK banking sector.
It is one of these formally laid out representations of the bank details that our client's notaire was expecting, and, as our client found out, it was only this that our client was prepared to accept.
Quite rightly, our client wondered how he was expected to provide such a document when they do not in fact exist in the UK.
Fortunately, our client was yet to close their French euro account. This meant that he was able to provide the notaire with alternative banking details, domestic to him and in the form or a RIB (as our client has sensibly brought one to the signing).
It is situations like this which inform our experience and our ability to guide our clients in the most sensible way. Going forward we will intend to suggest our client(s), were they choosing to instruct their notaire to send funds directly to us, that they bring a RIB for their french account too, just in case their notaire feigns unfamiliarity with their sensible and perfectly legitimate request for money to be sent to us in the UK.
Despite having worked with hundreds of private clients repatriating money from the sale of their french properties, we had never encountered a notaire refusing to act on the instruction of the client in this way.
Luckily the client could act swiftly so as not to derail the signing and, once funds were in the client french account, they were able to advise their bank to make a same currency euro to euro transmission to us.
At the top of the post we mentioned that our client bought their house in France before the single currency was even in circulation.
This was interesting to us because it meant that our client had no particular benchmark or EUR to GBP rate of exchange they felt they needed to aim for.
Yes, they wanted to achieve a specific GBP sum from the sale of their euros, but, it wasn't the case that the rate of was at 1.30 when they bought and that anything better than that (GBP being lower) constituted a currency gain for them. They were a client without the sort of expectation that most come to us with.
The sale price of the property was €2,700,000.
Therefore, every fractional movement in the rate of exchange - every 0.01%- was worth the GBP equivalent of €270.
We express that value in that way because, the GBP value of that €270 varies depending on the prevailing rate at the time... minute by minute, second by second, that EUR figure could be worth more or less.
Generally, as mentioned, a UK retail bank will apply a premium or 'mark up' to their rate of exchange in the region of 3.5%. This would be the case if you just sent EUR to your GBP account.
So, this client stood to hold onto more than €81,000 worth of currency simply by working with us on the exchange.
Our commercial rates are tailored to undercut even the most competitive challenger. That is precisely the reason why we advocate the tailored pricing process we use. A computer or an algorithm cannot effectively account for the aggressive pricing of a competitor, but, an experienced broker can.
One of the most competitive payment and international transfer providers in the market today is a company call Transferwise. They offer competitive rates through a convenient desktop or app based platform. However, you do not have access to an experienced operate to who will advise you to take your domestic RIB to your contract signing.
Furthermore, although the rate they offer you will not be 'marked up' by any great measure, Transferwise et al will still charge you 0.35% as a stand alone fee for access to their 'trade' rate.
In this scenario this still means a fee payable of €8,100.
Knowing this, as we do, means we can tailor our fee or our mark up to ensure you pay less than this figure.
We deal with sizeable transactions on a regular basis. We have a dedicated team whose specific purpose is to guide you and to undercut the sort of online rates you get from these technology driven challengers...and this is how we can afford (for want of a better word) to undercut so regularly and by such a margin.
We warmly invite you contact us to discuss this in more detail.