What We Global Property Buyers Can Learn From Mr. Blandings
Many people think buying property in another country is a risk-filled quagmire that is too complicated to overcome. Certainly buying property in a location you’re not familiar with requires due diligence and research, but that’s true whether you’re living in Chicago and want to buy a lake house in Wisconsin or living in Chicago and want to buy a beach house in Honduras. The same “foreign” effects can come into play.
A good example of all that can go wrong going wrong when buying real estate in a foreign place is the 1948 movie “Mr. Blandings Builds His Dream House,” which follows a New York City ad executive who’s fed up with apartment living and so searches for, buys, and then renovates a farmhouse in Connecticut.
One critical mistake Mr. Blandings makes early on is not consulting with his attorney, who also happens to be his best friend, regarding the purchase terms and contract. The price that Mr. Blandings agrees to pay for his land is multiples of even the “top-gouge price for city slickers,” as his attorney-friend explains to him too late.
In addition, Mr. Blandings’ attorney notices a note on the back of the title that explains that the amount of land indicated for sale may have been “optimistic”…and that the parcel likely will survey out to include 30% fewer acres than advertised, “more or less.”
The bulk of the movie follows the renovations to the house…well, the aborted renovations. Mr. Blandings and his wife quickly decide the old farmhouse has to be torn down and a new house built. The movie is a must-see for anyone thinking about renovating…the original “money pit” story.
Today in the United States, the would-be real estate buyer is supported by the world’s most sophisticated system of multiple listing services and a streamlined real estate buying process in which the real estate agent handles the contract and a title company manages escrow and closing. While you can still overpay for property in the United States if you’re not familiar with the local market where you’re buying, data is much more readily available than when Mr. Blandings bought his farmhouse in Connecticut.
While buying real estate in the States is a far more organized proposition today, buying real estate overseas is not. Non-U.S. markets operate like the one that Mr. Blandings bought into decades ago. He saw an ad in the paper and responded. His problems arose because he didn’t do his due diligence. He knew nothing of the market he was buying into. He knew nothing about renovating or building a house. None of that meant he shouldn’t have bought the property he bought. It meant his experience would have been less movie-worthy had he done more research beforehand.
What Mr. Blandings did would be the present-day equivalent of finding a piece of real estate for sale on the internet and signing a contract to buy it without taking the time to get to know the local market firsthand and without consulting an attorney.
It’s your local attorney who can prepare you for specific local pitfalls and risks—especially, for example, title risks. In Nicaragua, for example, there’s something called cooperative land. This is land that was given to local communities under the Sandinistas. Maybe it was government land…maybe it was confiscated land. Either way, best to avoid this kind of title altogether. Understanding that before you start shopping will help save you time, money, and maybe disappointment.
And Nicaragua isn’t the only market where you need to be on guard against title complications, of course.
Your attorney can also help to point you in the direction of reliable real estate agents. Your attorney may decline comment on this, as, the truth is, in some Latin American markets, there’s no such thing as a reliable real estate agent. Still, your attorney is a good starting point for your search for agents to work with. Also ask local accountants and other business professionals for agent references.
The last place you want to find your real estate agent is in a bar.
On a trip to Nicaragua years ago, my wife Kathleen was sitting at a bar overlooking the central square in Granada waiting for someone when a man sat down alongside her and started “chatting her up.” He asked some friendly questions before moving on to some questions to do with buying real estate. Kathleen had no interest in having him tour her around the town looking at real estate for sale, as he was suggesting, but she let him keep talking. Eventually, the guy asked if she’d ever heard of Kathleen Peddicord. She said that, yes, she had, and the guy went on to explain that he worked with Kathleen and was her preferred real estate agent in Nicaragua. About then her appointment arrived and she excused herself without bothering to set the real estate agent straight about his affiliation with her.
Not all real estate agents are that slippery, but you have to take everything many of them say with a grain of salt.
The real downside to real estate agents overseas can be that you have to work with so many of them. Because few foreign markets have anything like a multiple listing service, you must speak with more than one. Otherwise, you’re getting a very limited view of what’s available for sale.
Bottom line, don’t be Mr. Blandings. Do your due diligence before taking a leap in a foreign market.