When buying real estate overseas, your primary source of information on the market and the specific properties you consider will be the real estate agent. And, while certification requirements and rules of conduct are formal and reliable in North America, this is not the case many places overseas.
It’s important to prepare and protect yourself before setting off to shop for a new home in the foreign country where you’re considering retiring. Manage your expectations by being aware of six important differences between real estate agents in the United States and real estate agents overseas.
1. You can’t take for granted that every real estate agent you encounter in a foreign market is a licensed, trained professional. I knew a real estate agent in Ecuador who operated out of a dilapidated old taxi. He had no office, no landline phone, no car and definitely no license. He found clients by hanging out in hotel lobbies and bars.
The fix: Work only with agents who have a genuine business or are employed by a business. A good rule of thumb is that if the agent doesn’t have an office, a website or a car to drive you around in, he’s not a pro. This advice might seem obvious. But in some places around the world, when the sun is shining and the rum is flowing, it can be easy to forget these kinds of fundamentals.
2. There is usually no multiple listing service. Buying real estate in the United States is a straightforward, transparent and efficient undertaking thanks to the multiple listing service. You can search for exactly the kind of property you’re looking for and see every home on the market that fits your specifications no matter where the home is listed. As a result, you can work with a single agent that you like and trust and still have access to the entire market.
And convenience is only part of the benefit of a MLS. The real value is that it establishes an official price for every property that’s on it. No one will try to charge you more.
In markets with no MLS (that is, most of the rest of the world), you need to go to several different agents to see everything that’s out there meeting your criteria. This is time consuming and can be tedious. You can’t just pick a good agent and see everything.
The fix: Don’t work with just one agent, especially if that agent is not showing you a good selection of properties that fit your criteria. Check the newspaper, private sales on the Internet (in the local language to find the best deals) and as many real estate sites as you can find. Eventually, you’ll see what’s out there. You just have to be sure to allow time for the extra work.
3. Agents often pad the asking price. When I was house shopping in Panama City, Panama, I walked into one of the biggest real estate agencies in the city to get a price on a house I’d seen while driving around. Instead of one price, within 30 minutes I got three different prices from three agents working there. The highest asking price was $30,000 higher than the lowest, which was probably already inflated. I had another agent add 30 percent to the asking price and then have the nerve to tell me that she’d negotiated a great deal on my behalf.
In many markets, local agents don’t post prices at all, preferring to assess the client and then price the house according to what they believe the client can pay. All of this is possible when there’s no MLS to keep everyone honest. When I first encountered these practices, I thought of the agents engaging in them as crooks. However, as the years have gone by, I’ve come to realize that this is simply how business is done in many markets.
The fix: Accept that the burden is on you to understand what properties are worth. This means you’ll need to work with a number of different real estate agents and look at as many different properties for sale as possible. Keep a record of each property you see and break down the cost in each case into dollars per square meter. After looking at a handful, you’ll begin to see the averages and the outliers.
4. Your agent may not convey your offer. I offered a low $50,000 for a small house in Nicaragua a few years ago and was told the seller turned the offer down. So I raised the offer to $55,000, which the seller accepted. Later I learned that he would have accepted the $50,000, but the agent had not conveyed the offer. This is common in markets where there’s no official requirement to present every offer. You have to get by the agent first. If the agent isn’t happy, the seller will never hear your offer.
The fix: Determine what you’re willing to pay and stick to your guns. Once you’ve gotten a feel for a market, you’ll know what a piece of property is worth and be able to make a fair offer. The agent will either pass your offer on to the seller or he won’t. Maybe you’ll never know. But if your agent reports that the seller has rejected what you believe to be a fair and your top offer, then move on.
5. Your agent may not manage all the items required for closing. In the United States, a real estate agent generally manages everything required for closing, from the termite inspection to title insurance. This is often not the case in other countries.
The fix: Familiarize yourself with the property purchase process before you begin shopping and engage an experienced local attorney. Your attorney is your most important ally in the property purchase process overseas. You should work with someone with experience helping foreign buyers, and you should never use the same attorney as the seller, as this creates a conflict of interest.
6. Your agent may not speak English. There’s a language barrier in many countries, and you should be prepared for overcoming this challenge.
The fix: If an agent you want to work with doesn’t speak your language, I’ve found that people can usually get by with just a few key phrases. You could create a real estate dictionary for yourself in the language of the country where you’re shopping so that you have common relevant words and phrases on hand for quick reference.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.
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