How To Find An Honest Real Estate Agent In A Developing Market
“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…”
A friendly international tax expert 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.
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.