How To Find An Honest Real Estate Agent In A Developing Market
Jan. 30, 2009
Panama City, Panama
PLUS:
- "An American Should Be Able To Retire Just About Anywhere Overseas
Tax Free"...
- Europe Can Make More Sense Right Now Than It Has In The Past 10
Years...Look to Zagreb, Bucharest, and Paris...
- The Pluses And Minuses Of Retirement Down Under...
AND:
- More No Money Down Deals In The Algarve...
----------
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Complete details of our
Premier Live & Invest in Panama Conference.
Here's how to be in the room for the most important Panama event of the year.
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Dear Overseas Opportunity Letter Reader,
"Kathleen, your reader who asked how to find an honest real estate agent
in Costa Rica?" wrote friend and Correspondent from that
country David Stubbs yesterday in response to a reader e-mail I forwarded to
him.
"Here's how I'd reply:
"First, you need to understand that everyone in Costa Rica is a 'real estate
agent' or has a brother, a cousin, or a friend who is a 'real estate agent' or
who has a piece of property for sale.
"There is a licensing process in this country, with a test, but no requirement
that you be licensed before you declare yourself an agent.
"I have yet to meet a single real estate agent in Costa Rica who was as
efficient, honest, and competent as the agent we used when we purchased in the
States.
"This isn't surprising, really. There is little in Costa Rica in the way of the
systems or the information infrastructure, legal requirements, or checks and
balances that exist in the United States.
"It is next to impossible, for example, for a Costa Rican property agent to show
comps--that is, prices for homes sold in any particular area over the last 12
months.
"In addition, you must remember always that the typical agent in Costa Rica, as
in any emerging, developing market, is not working for the buyer or for the
seller. He's working for himself.
"Net listings (where the agent agrees the price with the seller and then sells
the property for a higher price, pocketing the difference) still happen.
"Understand that, in a place like Costa Rica, the real estate market is very
localized. There is no MLS service. There are few national real estate
companies, and the ones that do exist are generally ineffective. So listings are
typically limited to what any particular agent has on his books.
"Given this, your first challenge is to figure out where you want to live. Then
you can begin the search for an agent in that area.
"Once you begin shopping, you need to understand further that there are (at
least) two prices for almost every piece of property for sale--the gringo price
and the Tico (local) price. This is less true for new homes in sub-developments,
as the prices are set and visible in the marketplace...but these properties are
typically overpriced anyway.
"The best deals never show up on a website or with any agent. They are
publicized by word-of-mouth. Certainly if you're shopping for investment, but
even if you're shopping for a place to live, instead of a real estate agent,
you're typically better off using a (Tico) property scout.
"Having said all that, some agencies and individual agents are better than
others, of course. Once you have chosen the part of the country where you're
interested in buying, ask around in that area for recommendations from others,
especially other expats, already living there.
"Your attorney or another professional you know and trust is also a good person
to ask for a reference. These word-of-mouth referrals are really the only way to
create a short-list of agents you might feel comfortable working with. Then you
can go around and interview each agent on your list to make your own
determinations.
"Remember that 'referrals' are part of the Tico financial merry-go-round, with
the referrer typically getting a payment from the referee. There's nothing wrong
with this, per-se, and the fact of it shouldn't keep you from asking for
recommendations. It's just the way things work and something to keep in mind.
"My final recommendation would be to come on down to Costa Rica (or wherever
you're shopping) yourself. If you have time, rent for a few months or longer in
the area where you think you want to live. Engage a local property scout...
"Of course, that begs the question, how do you find an honest local property
scout?
"I'll leave that discussion for another day..."
Kathleen Peddicord
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International tax expert
Chris Rusch writes in response to
my comments yesterday on no- and low-tax havens to add:
"A U.S. citizen should be able to retire just about anywhere overseas tax-free.
All U.S. tax treaties tax retirement income at the source country, not the
residence country.
"The logic behind this is that retirement income was earned in the source
country from work done in that country. Therefore, it should be taxed there.
"For example, a Canadian citizen comes to the U.S. and works for 10 years. He
then retires, returning to Canada. His retirement is taxed in the U.S., not
Canada.
"As you suggested, Kathleen, by retiring offshore, an American should be able to
eliminate state tax...but not federal tax."
"Do any retirement bargains exist in any English-speaking countries, such as
Australia or New Zealand?"
-- Charles L., United States
The trouble with Australia and New Zealand is establishing residency. The rules
change often, but, bottom line, neither of these countries is clamoring to
attract foreign retirees.
Because of the restrictions and hurdles to full-time residency, part-time living
makes more sense in both these places. You could live here during their summer,
then return to the Northern Hemisphere during their winter.
Options in New Zealand range from Auckland for city life to Christchurch for
mid-sized town life to Queenstown for high-end expat life...and everything in
between. Cost of living could be cheaper than in the U.S., depending where
you're coming from in the States. But neither New Zealand nor Australia is an
extraordinary bargain.
Tasmania could be an interesting option. It's beautiful,
peaceful, and safe and is increasingly popular as a retirement destination among
Australians.
"I am 24, from Sydney, currently living in Europe. I have a studio in Sydney,
but, since receiving your newsletter, I have begun thinking about other options
for how I go about buying property number 2. My property's value has plateaued,
but I have a fair amount of equity in it.
"Is Panama your best suggestion for investing during the next
one to two years? I had hopes for buying somewhere in Europe,
but do you advise against this completely in the current market?"
-- Steve J., Europe
No, we don't advise against Europe. Quite the contrary. Interesting
opportunities are being created by the current global recession.
Bucharest and Zagreb are two cities in particular
worth looking at right now.
Paris is perhaps the most recession-proof real estate market in
that part of the world. Still, even here, the market is soft, and sellers are
more open to your offers than they've been in years.
The trouble may be financing. It's not available for foreigners in Bucharest,
and it's difficult to obtain as a foreign buyer in Zagreb. Foreign financing can
be a straightforward process, on the other hand, in France.
Best Euro-deals I know right now are in the Algarve, where our
Correspondent is uncovering almost too-good-to-be-true no-money-down
opportunities with guaranteed yields from rental.
I told you about the first of these this week. It has sold out (in two
days).
Our man is on it, though, and I should be able to alert you to other similar
chances starting next week.
P.S. In the Americas, yes, Panama is our top recommendation.
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