In addition to news, market updates, and advice for buyers and sellers, I want to share in this blog some of my personal experiences with real estate related matters (and I use the word “related” quite broadly here), that have shaped my views about the real estate industry and my attitude towards my business.
So, today, I will start by sharing something that has been on my mind since the beginning of the year.
When I first started working in real estate I became involved with an organization called FIABCI (The International Real Estate Federation). It is an influential Paris based association of real estate professionals interested in, or involved with international real estate. Through my FIABCI involvement an opportunity arose to market a development of resort homes in Mount Pelion in Greece. At the time, the market had slowed down substantially in the DC area so it was a great opportunity for me to explore this other aspect of the real estate business. As a result I went to Greece for several months to become familiar with the resort and the legal framework for real estate there.
While doing some business planning for the upcoming year, I found my self thinking about my past experiences and I couldn’t help but feel a strong appreciation for the business and legal framework the real estate industry has in the United States.
Compared to most European countries and, I speculate, most other countries in the world, the U.S. has a great framework in place which helps protect the consumer, reduce the cost of the transaction, enable transparency and liquidity, and overall make a real estate transaction simpler and much more user-friendly.
I will mention some of the most important differences, but please keep in mind that, even though this probably applies to most countries and most U.S. states, I am using as the basis for my comparison Greece and the DC metro area (which in itself is comprised of three separate jurisdictions – DC, MD, VA – each with its own set of laws, rules and regulations).
Fair Housing
- U.S.: One may not discriminate in the sale or lease of a home. (I will get into specifics in a separate post)
- Greece: No Fair Housing or similar laws. Many people are discriminated against and have difficulty finding housing.
Agency Laws
- U.S.: Buyers and sellers have the right to be fully and exclusively represented by an agent who is obligated by law to act on the client’s best interest.
- Greece: Agents are in it for themselves. They don’t represent anybody, and as such they will bend the truth to get you to buy a house. A buyer/seller has little recourse against an agent in case of fraud or misrepresentation.
Transfer Tax:
- U.S.: Thirty-five states plus D.C. impose a real estate transfer tax. Tax rates range from a low of 0.01 percent in Colorado to a high of 2.2 percent in D.C. In about 2/3 of the states imposing the tax, the rate is below 0.5 percent of the value of the transfer.
- Greece: With the exemption of first time buyers, transfer tax is on average 10-11% of the sale price. This increases the cost of a sale significantly, and results to most people reporting false sales prices (not showing the true sales price on the contract), which in turn results to a less transparent market.
Multiple Listing Service:
- U.S.: Most major markets and many secondary markets have a Multiple Listing Service (MLS). As a result, a buyer can work with one agent only and will have access to all properties for sale in the area. Similarly, sellers list their homes with one agent, and the homes automatically become available to all other agents in the area who can bring in buyers.
- Greece: There is no Multiple Listing Service and no co-operation at all between real estate brokers. As a result, sellers, in order to get the largest exposure for their properties, will have to sign listing agreements with multiple companies (often 10 or more). These agreements are non-exclusive and as such, the agents don’t have any incentive to market the property, since the property could be sold at any time by another company. Instead, the agents hope that they will have a buyer they can match with a property listing they have. On the other hand, buyers must work with many real estate agents, as each agent will have different listings to show, and more importantly, the agent does not care about what the buyer really wants, but rather hopes that the buyer will like one of the listings the agent shows them. Not only is this very inefficient, but it serves nobody well.
Real estate in our country, even though far from perfect, is light years ahead of other countries. We didn’t get here overnight. NAR’s history (National Association of Realtors) is quite interesting and tracks the evolution of the real estate industry in the U.S., which is truly a victory for the consumer.
As we are all consumers in one way or another, despite the current financial issues we are facing, we should all appreciate how far we have come and where we are now. Having experienced first-hand how real estate works elsewhere, I have tremendous appreciation for the real estate industry in the United States, and feel privileged to be involved in it.
