Condo ads try to be attractive. However, they are not an investment optimized for return. Of course, the whole point of a condo developer is to take advantage of the difference between the cost of construction and the selling price.
How Asian Real Estate Agents Work
The fastest way to lose money overseas is to be stubborn and try to do things âyour wayâ. You have to adapt to the realities on the ground rather than your hopes.
For the most part, you will not find any concept of âbuying agentsâ or âselling agentsâ in Asia. Real estate agents simply list properties for sale and generally do not act as a buyer’s representative.
They can also fluctuate wildly in terms of price – commission rates for real estate agents vary between 1% and 3%, depending on the country. Rates are lower in places where the average price per square meter is high such as Hong Kong and Singapore.
For expensive properties in the multi-million dollar range, commissions can be as low as 0.5%.
Whether they are worth their commission remains to be debated. Overall, don’t expect all emerging market or frontier real estate agents to meet the standards of those in a developed country.
The most common issues that you might run into if you rely on them are:
– The documents, including the rental agreement or the transfer of ownership documents, have not been drawn up by a lawyer and are not legally binding. So you could end up in a protracted legal dispute or have to absorb the loss.
– Rather than being impartial agents, they might be prejudiced and negotiate in favor of a party.
– You are only exposed to a fraction of the options available in the market, given the often opaque nature and word of mouth of the real estate industry.
Knowledge of local ownership is essential
A fact that is difficult to accept when investing overseas is that you are a foreigner. Chances are, no amount of living there and learning the language or culture will ever give you the social nuance you need to navigate the local scene better than a native.
The simple and lazy way to go about it is to simply go to these few realtors that cater to expats like you. Be warned though, they will often charge you high fees for their services, even if the only thing of value they did was put you in touch with an interested party and translate.
You automatically lose much of the bargaining power and choice if you chain yourself to a local real estate agent – and that assumes they actually have your best interests at heart!
Wherever there is money to be made, there will be people with a bad reputation who want to make a quick buck.
It is also a huge advantage for these disreputable people if their potential victims cannot be warned by others of their infamy. As such, foreigners without language skills or know-how are often an ideal target.
Make no mistake: not all real estate agents in Asia are like this. But you just need to keep your guard.
If you have to depend on third parties to help you find great deals, it’s best to align their interests with yours. As such, I suggest you follow the route I usually do, where I enlist locals to translate for me and contact sellers directly.
Another tactic that I have seen working quite well is to go to a leading law firm in the country, hire the chief lawyer for certain legal proceedings, and overpay for services rendered. Then you slowly make friends with them.
This way you hire someone high up in the food chain, you have access to important people in society (as well as their business opportunities), and you won’t fall into the typical outsider traps that people fall into. other more distraught investors.
Regardless of what you ultimately decide to do, the main takeaway is that you shouldn’t enter an unfamiliar market without preparation and local partners.
Sometimes it may even be necessary to have a local partner or real estate agent in Asia. Many countries place restrictions on foreigners who own property themselves.
Overall, real estate agents provide a valuable service and provide convenience, especially if you are a foreign buyer. However, investments that are optimized for return often require effort and creativity on your part.