Buyers of property in the U.S. and some parts of Europe can avail themselves of easy-to-use tools to establish fair market value, but those tools may not be available in many locations around the globe. Oftentimes buyers fail to do the legwork necessary in a foreign location to uncover the hidden costs and benefits of a property. Suggestions on how to avoid this include talking to local attorneys as well as agents, looking at several properties, reading local newspapers, reviewing available online listings and talking to people in the community of interest. For more on this continue reading the following article from PathFinder.
When you’re buying a property in the U.S. or parts of Europe, it’s easy to establish fair market value. You can do a simple online check based on zip codes that reveals the actual prices paid for different types of properties in that neighborhood. You can also check out the MLS (multiple listing services) in that area to get a feel for the local market.
It’s not that easy when you’re buying overseas. You don’t have an online system to access closing prices, nor do you have an MLS. So how can you determine fair market value for your chosen property?
Let’s start with Jim. He saw a condo project in a city that the developer told him was booming. The developer said his unit prices were low, and that Jim shouldn’t wait—the developer had plenty of other buyers just waiting to snap them up. Jim wanted in…and took the developer’s word as gospel.
In fact, the developer had tried to sell these condos since he finished building them six months earlier. The city is booming…but not for over-priced condos like the developer’s, in a marginal location with poor finishings. But Jim snapped up the condo without checking for comparisons in that neighborhood… and paid too much.
And of course Jim’s not alone.
Martha found a re-sale in a good neighborhood, at a really good price…not far from where I live. It was way below the average price for the area because of the busy, noisy workshop next door. But Martha was “in luck”… her real estate agent told her out that the workshop was moving, which presented her with a great opportunity.
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In fact, the workshop owner has no intention of moving. The agent either had incorrect information, or made it up to get the sale. Either way, Martha never thought to ask the workshop owner himself, so she’s now stuck with a very noisy apartment.
Unfortunately, I do see things like this happen from time to time.
The information you’re given in Latin America can be hard to verify. You won’t find information online about actual sales or closing prices. Actual sales prices are usually kept private between buyers and sellers. Even if you can access the registry information for a property, title deeds often under-report the actual sales price (to save on taxes).
So don’t take anything at face value when it comes to property prices. Investigate to find out what fair market value is, and what it’s based on. It’s up to you, the buyer, to do a little bit of legwork before you buy… but it will pay dividends in the long run.
Here are a few things you can do to dig to the bottom of the price game, and come up with a price that’s closer to the true market value of the property.
Talk to as many local agents as you can. Some agents pad the prices, and some don’t. But if you talk to enough of them, the real picture should become clear.
See a lot of properties. Just like agents, some sellers quote outrageous prices, while others place a fair value on their property. If you see enough properties, you’ll spot price trends.
Visit one or two local attorneys. You’ll need an attorney to help you complete the sale and carry out the due diligence on your property. You should also ask them if they’ve handled any sales in the neighborhood you’re buying in, and what the price range was.
Look in the local newspapers. Often, newspapers target the real, local market…and you’ll see a mix of pre-construction, brand-new and older property…and properties listed by agents, developers and by owners. It should give you a snapshot of the market from different angles.
Review online listings. Sometimes online listings are on the high side, but often you’ll find sale-by-owner ads on the web that will give you fair price examples. Also, you may find the property you’re interested in listed with someone other than the agent showing it to you…and you can compare prices.
Talk to neighbors, gardeners, and doormen…or the owner. If you can find them and start up a conversation, you’ll sometimes hear a price that’s very different from what the agent told you.
When shopping for property overseas, keep a careful track of the price, location and size of everything you see. Break it down to see the price per square meter. After a few properties, you’ll begin to see which prices fall into the normal range and which are outliers in a given area.
Don’t commit to buying until you’ve done these checks. It’s up to you to do your own research. It takes a little more time and effort, but it’s worth your while in the long run.
This article was republished with permission from Pathfinder.