Two years ago, I bought a preconstruction condo in Northern Cyprus. Today, that condo is worth double what I paid for it, so I’m selling. Returns like that are impossible to ignore.
I’m not looking to get out of this market. I’ll take the profits from the sale and look for a next buy in Northern Cyprus, which continues to reward investors with extraordinary appreciation.
Meantime, the decision to sell reminded me of two things that Americans should but usually don’t think about when buying property overseas:
1. Use a real estate attorney when you’re buying, and
2. Avoid exclusive listing agreements when you’re selling.
Hiring A Good Real Estate Attorney Is Important
Readers often write in to complain about not having their title work completed for a purchase overseas.
The first question I ask is, did they hire their own attorney for the purchase? In each recent case, the answer was no.
I say it regularly and often in writing and at conferences… use an attorney when buying property overseas.
The more precise advice is to use your own attorney, not the attorney of the developer or real estate agent.
Despite hearing this advice, many North American buyers still don’t heed it… and then they are surprised when things don’t go smoothly with their purchase.
Most often, it’s the final step—titling—that gets dragged out.
The real estate agent will say you don’t need an attorney. The agent or their attorney will help with the paperwork, but it’s not their obligation, and that attorney is working for the real estate agent, i.e. taking instructions from the agent and not necessarily you.
The developer will say you don’t need your own attorney, as that speeds up the sales process for him. However, it slows things down after that for you.
Start Your New Life Today, Overseas
Even if the developer or real estate agent are truly happy, willing, and able to help you with the titling process, once the sale is made, their attention is on to the next sale. They won’t be focused on your paperwork process.
The truth is that even when using your own attorney, you’re going to have to stay on top of him and manage the process in most cases.
I’m going through that myself with a property I recently bought…
The title work hadn’t been completed. I signed the power of attorney (POA) for the law firm to be able to sign everything that needs to be signed to register the title six weeks ago. I still haven’t heard from them. I’m giving them some leeway, but I’ll be calling and pushing them to get the work done.
These are people I’ve paid to do the work. Think about how much less leverage you have over someone you haven’t paid to do the work… like the real estate agent (or his attorney).
The best option for getting things done is being in the country yourself.
Included in your overall purchase expectations should be a return trip to the place where you’ve bought so you can inspect the property and get the paperwork done for titling.
To be honest, though, I’ve done that maybe 50% of the time for my real estate purchases over 25 years. Much of the time, your attorney will be able to take care of things fine with a POA.
You may just need to have some patience. If you lack patience, get on a plane.
Should You Sign An Exclusive Listing Agreement?
The concept of exclusive listings is easier to manage. You just need to understand what that means.
Real estate agents in many countries don’t cooperate with other agents like they do in North America, so you’ll want to list with as many agents as you can find to list your property.
This is slowly becoming less of an issue in some markets, but no market has a full multiple listing service (MLS) like the one in the United States.
The association of real estate agents in Panama have tried for years to get one going and Belize is working on one.
In those markets, many agents are more willing to work with other agents and split commissions if one has a buyer and the other has the listing. However, you’ll probably still want to list with more than one agent or agency.
The danger of signing an exclusive listing is two-fold. First, it means you’re stuck with whatever marketing or lack of marketing your agent does for your property.
Most real estate agents around the world don’t work too hard, so you’ll want to be clear on what marketing the agent you sign with plans for your property and how long will they keep it up.
It is common when someone signs an exclusive listing agreement for the agent to do nothing other than wait for a potential buyer to walk into their office and say they want to buy your property.
The second danger of an exclusive listing is that if you find a buyer yourself or through marketing outside of the country the property and listing agent are located, the listing agent still expects to get paid.
One reader who had a property in Panama that they listed for sale contacted me about their property to ask if I had any recommendations for how to find a buyer.
I gave some recommendations on agents they could contact and suggested they could contact agents in the States who specialize in foreign properties.
The hiccup came when she told me she’d already signed an exclusive agreement with a Panamanian agent (who, by the way, did no marketing for the property).
She wrote to me a few months later to say she found a buyer herself, but she was concerned about the exclusive agreement. Fortunately, it was only a six-month agreement and had about six weeks left on it when she found her own buyer.
My recommendation was to wait six weeks before signing the sales agreement with the buyer. She did, and the Panamanian agent didn’t have any claim on a commission that he hadn’t earned anyway.
One thing you can do is limit the exclusivity to a specific area. For the property I’m selling with an exclusive listing, the exclusive area will be the country where the property is located.
I’m not interested in listing with another local agent as I have confidence in the agent and agency. However, I’m also listing the property with another agent outside of the country.
Most importantly, if the local agent finds a buyer, he gets paid. If the foreign agent finds a buyer, the local agent doesn’t get paid anything. It’s fair and simple, but you have to make it clear in the listing agreement and set expectations for both yourself and the agents you’re working with.
At the end of the day, you’re responsible for your investment when you’re buying and when you’re selling.
You’ll have to do some work and pay attention to the processes. You can’t just assume or expect that someone else will be taking care of everything for you.
Stay diversified,
Lief Simon
Director, Overseas Property Alert
