The golden rules about buying houses and apartments anywhere in the world are very simply itemized:
- Take your time
- Listen to different people
- Do your homework - look and look and look
This isn't rocket science, but practical common sense.
The good news? Outsiders can get good deals, in terms of getting property for a good price. Old-timers who really know the market do have some advantages, but they are very small indeed. If you take a few days (or a week) to learn about a particular housing market and to compare prices - you're more or less on a level playing field with everyone else.
This is well established by research. What locals know about market prices - well, that's out of date. So when locals buy, they have to go through just the same price-research process as you do. Relax, and trust your intelligence.
The Trouble with Buying Overseas
Buying in unfamiliar countries can present special difficulties. The problem isn't finding the right price, because most markets are sufficiently well-organized even for a foreigner to find a good prices.
It's not the price so much as understanding the institutions, the costs, the dangers.
It's important to enlist local help when buying in potentially hair-raising countries. A relative can give you good advice, and so can a friend (or a friend of a friend). We wouldn't even consider buying in many countries if no trustworthy advice-source was available.
What's dangerous? Click on the 'Property Rights Index'. Anything with a score of 4 or less is dangerous.
Find a good lawyer to maneuver your way around the vagaries of the cadastral system, preferably a lawyer recommended by a friend, or by your Embassy, or by your national chamber of commerce. High quality international agents like Coldwell Banker, Colliers, La Salle, Cushman & Wakefield can also largely be relied on, though they do have an interest in selling you expensive advice.
Selling: Your agent is not your friend
Did you know that realtors aren't all saints? Ah, you did? Is it significant that not one real estate agent has ever been beatified? (Though they have a patron saint, St Joseph).
Bottom line: the interests of real estate agents aren't the same as yours, particularly when it comes to selling.
The realtor is predisposed to underprice, for the simple reason that selling five houses quickly at 15% below their true value brings him more money than slowly selling four houses at full value. Underprice - and he moves the inventory. That's his business.
Selling a house isn't the mirror image of buying a house. They're different processes.
When you sell, you're unlikely to spend time viewing several dozen houses (you do that when you buy, not when you sell). Lacking the fruits of intensive research you're tempted to rely on your realtor. When people sell they're often suckers for realtors - guidance.
But remember: He wants a fast sale. You want the best price.
Consider how real estate agents behave when it is their own property that they're selling. A Chicago University survey looked at some 100,000 home sales in the US in the period 1992-2002. Overall, agents' houses spent 10 days more on the market than the local average, and sold for 6% more than comparable non-agents houses.
Agents have targets. They're often under intense pressures to sell. They must move the stock, or they're out. They develop all kinds of techniques, sometimes unsavoury.
Unscrupulous agents may even deliberately mislead sellers about what offers have been received for the property. (See the BBC story: The Secret Agent). The seller is fed false reports of offers below the original valuation, so that he will reduce the price. Such intense pressure is called by one agency "price reduction hour" and "vendor care" (anyone else would call it lying).
Aligning the agent's interest with the seller
The answer to such problems is to get several agents working for you.
Agents give all sorts of reasons why you should agree to 'exclusive arrangements'. No way. Ignore them. It is best to employ several agents. If three agents are trying to sell your house, only the agent who gets the highest price will make the sale and get your commission. That's the single best way of aligning their interests with yours.
To cap that, fix a target price. Then tell your agent he'll get X if he manages to better that price. Do some research on your own, see what you should be getting, and offer him a premium for bettering it. He'll have a specially strong interest in working hard.
Remember - the institutional pressures are towards a quick sale. But there's no need to buckle under these pressures.