Investors Get Culture Shock Too
Date: 06/06/2008 Author: Lief SimonSaturday, June 7, 2008
Learn more about investing in overseas real estate in International Living Postcards—Saturday Edition
Besides the technical differences you’ll encounter when buying real estate overseas—notaries versus attorneys, net pricing versus detailed and disclosed commission structures, stamp duties, transfer taxes, title issues, etc.—prepare yourself also for cultural differences: things that won’t make any sense to you, and that are perhaps even illegal in your home country.
Differences in negotiation techniques, for example. You probably expect a real estate negotiation to be a two-way conversation that goes something like this: offer, counter-offer, counter-counter-offer, etc., until an agreement is reached.
Don’t be surprised, though, if, in some parts of the world, the response to your offer is a simple, “No,” with no elaboration and nothing resembling an alternate proposal.
What do you do next? Where do you go from there?
If you really want the property, you could go back with a second, better offer. However, you’ll likely receive another unembellished “no.”
Rather than making that second offer, consider meeting with the seller to discuss the property, your interest, and your offer. Sometimes, the flat “no” is coming from the real estate agent, not the owner, because he wants a bigger sales price (and, thus, a bigger commission). He may not even have relayed your offer to the seller. Your best strategy, therefore, is to take the agent out of the middle of the conversation. Meet one-on-one with the seller and present your offer yourself.
On the other hand, sometimes when you show serious interest in a property, rather than countering your offer with a compromise offer, the seller responds to increase his price. You’re a foreigner, after all. You’ve got money to burn, right? As he’s got your attention, why not shake you down a bit?
My advice in this kind of situation: Walk away. Bottom line, a seller like this probably is not someone you want to do business with…as I’ve learned from experience.
One time, long before I learned to cut bait early, a seller continued to raise the price every time I raised my offer. After three rounds of this silliness, I finally walked away...only to be chased by the seller trying to continue the negotiations but still at the higher price!
Here’s a new cultural quirk, one that I’ve not encountered personally, I’m relieved to say. This one was relayed to me by a friend who’s been investing in Sweden recently. He reports that they stage weekend open houses for certain properties. After the open house, the agent has the names and numbers of everyone who viewed the place. As soon as the agent receives a first offer, he works his way through the list of everyone who attended the open house. He calls each one to say, “I’ve received an opening offer of 1 million krona (or whatever). Would you like to make a better offer?”
These calls are to people who haven’t made offers yet. Call by call, the agent creates an active bidding war, in effect auctioning the property over the phone.
In some parts of the world, this is called “gazumping,” and it’s not legal. In Sweden, though, it’s standard operating procedure.
Lief Simon
For International Living
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