13# Real Estate Pitfalls You Should Know About Before Buying Or Renting Real Estate In Georgia.
Renting or buying real estate in Georgia may seem easy. Georgia is known for its ease of doing business and its quick and easy real estate transactions. But you have to be careful. It’s an unregulated market. To base your real estate expectations in Georgia on Western standards would be to fundamentally misunderstand the Georgian market’s context.
Real estate in Tbilisi has enormous growth potential and is currently priced low compared to most European capitals. The lack of regulation and the general development of the market makes Georgia an interesting investment opportunity, provided that you understand the rules of this market to make the best deal possible.
The Georgia real estate market has its set of pitfalls. Purchasing real estate in Georgia requires a special and rather complex knowledge of Georgia’s unwritten laws and customs, the strange conventions, the sales tricks that unprofessional agents use to push you into selling, and the pure scams.
Our expertise at Colchis Estate, as Real Estate Hunters, gives you on this page the Essentials to avoid being scammed, but also to allow you to recognize a good deal even if it doesn’t seem to be a good deal at first glance, whether it is for buying real estate, but also for the rental market.
Georgia’s #1 Real Estate Pitfall: Competence And Confidence
In a deregulated market like Georgia’s real estate market, all you need is a business card to become a real estate agent (or pretend to be one). That’s all you need. No diplomas, no training, no license, no state control. This particular situation often causes big problems of competence and trust.
Too often, agents try to sell real estate without doing the normal job of an agent, namely controlling what they sell and knowing the problems inherent in certain real estate. At best, they minimize them, or most alarming, they hide them outright and have no qualms about selling properties with numerous hidden defects or exaggerating the qualities of the property.
Honesty and trust are two prerequisites that Colchis Estate puts at the top of our relationship with our clients. We represent the top 1% of trustworthy real estate agents in Georgia.
Even if you find the rare pearl, a good real estate agent, competent and trustworthy, you will encounter another problem. At best, most of these agents have a portfolio limited to a few dozen properties.
This limited portfolio is an inherent problem with the immaturity of the Georgian real estate market. Unlike the more mature Western markets, where agents have access to a huge shared portfolio of properties, this is not the case in Georgia. The sharing of properties and commissions has not yet become part of the agents’ business practices, even if we can perceive today the beginning of a change in mentality. Progressively, agents understand that sharing information among themselves is a plus.
Colchis Estate has an honest, open, and shared system with all the agents we work with to obtain and find properties that meet our clients’ criteria and specific requirements.
To save our clients time and find the property you are looking for quickly and efficiently, Colchis Estate offers to deal on your behalf with the multitude of agents in the Georgian market. To avoid all the pitfalls and even scams you may encounter, take care of the whole negotiation and verification process, which can be complicated and painful.
Our service is a Hunters Estate Agent service. We focus on buying real estate for our clients rather than selling real estate. We represent you and accompany you through the entire process of finding and purchasing a property, including the resolution of legal issues.
The article below presents a list of pitfalls to avoid in Georgia when buying or renting real estate. This list is based on our experience with Georgian agents and landlords. The various points presented here are part of our process of protecting our clients from bad real estate investments while saving them a lot of time since we handle the entire process for them.
Common Real Estate Pitfalls
Understanding and spotting the nuances of how things work in Georgia is the basis for making good decisions. Following your gut feeling can work, but our experience shows that to make a good deal, you have to be able to spot the pitfalls of the Georgia real estate market that are sometimes real scams.
Pitfall #3 Fake Ads
The greatest abuse is found on real estate websites. Unscrupulous agents publish professional photos of beautiful, well-furnished properties at very attractive prices. Still, when you contact the agent, he tells you that the property is already sold or rented – “but fortunately” – he has other interesting options. And then, they flood you with less good, more expensive offers that are mostly outside your criteria. It becomes very annoying when you have contacted several agents.
In short, agents post interesting properties only to get your attention and phone number and then harass you with products that don’t match your criteria.
Also, there is no practice of exclusivity in Georgia. Very often, several agents advertise the same property. As a result, the listings are often outdated, the properties already sold or rented. Once again, this shows the problem of competence of the vast majority of real estate agents in Georgia who continue to post properties that have disappeared from the market sometimes for several weeks.
Pitfall #4 Fake Agents
Fake agents are a special category of the Georgian real estate market. These “fake agents” collect the ads of their colleagues, copy the information and texts, and photos, increase the price and broadcast a new ad and make it look like it is theirs. If you are interested, you contact them, and they go to the “real agent” and tell him that they have found a buyer and share the commission and possibly the increase in value (since they offer the property for more than it is). In short, this is a very unpleasant practice for both the real agents who are trying to do their job properly and for you who will pay more for a property without knowing it.
Advice. If you see an ad on one of the real estate websites and if the pictures are tagged with the name of another website than the one you are on, beware, there is a very high chance that this ad is the work of a “fake agent” who just stole from another one.
Pitfall #5 Properties That Do Not Correspond To Your Expectations
The reality of a proposed property, the photos often not numerous enough, can lead to bad surprises. Often agents are not completely “honest .”They will try to make you come on-site to visit a property even if it does not correspond to your criteria. You wanted a big balcony with a nice view, “no problem, the apartment has one”. But when you arrive on-site, you realize that it is a very small balcony with a blocked view in the middle of other buildings. Small or big lies, real incompetence, and greed at the expense of your (wasted) time are some of the inconveniences you will face.
Perhaps most serious, the size of the property indicated is incorrect. Unscrupulous agents may tell you that the size of an apartment is 120m2, but actually, it is only 100. Always go by the size of the property as it appears on the official documents. Always ask to see the original copies of the property, which are registered in the national register. They are reliable.
Another tip. Outdoor areas, balconies, and terraces are “almost” always included in the indoor area. In Georgia, it is common to add the area of the terrace/balcony to the total size of the property rather than differentiating between them. It is particularly annoying if you are buying a property. For example, if a 160m2 apartment has a 40m2 terrace, the “outdoor” m2 will be sold at the same price as the “indoor” m2. In mature markets, we used to pay half of the price for the outdoor m2, and it is a convention. In short, in Georgia, it is a negotiating tool for us during a purchase. We hope that this will become a norm in the years to come.
Pitfall #6 Fake Prices
Suppose you do your research diligently and look at online listings on the major Georgia real estate websites. In that case, you will quite often discover several ads for the same property at different prices.
Fake agents (see above) list a property they do not represent at a price that is often higher than the “real agent’s”. If they get interesting contacts, they bring the potential buyers to the seller or the owner to conclude the sale for a fee. They frequently promote a property at a higher price to convince the seller to share the commission.
Similarly, they promote the property at a lower price to attract attention and trigger your call. They will then contact the official agent to convince him to sell at that price and make a quick sale, at the owner’s expense, who will accept if he is in a hurry. Actuality, the “fake agent” is negotiating against the seller by saying, “I have a buyer, but he wants to pay this lower price, so you better sell it to him”.
Commission discounts to break other agents’ prices. An agent’s commission is usually 3 to 5%, but sometimes agents will accept less to have the lowest sale price and be the agent who closes the sale.
It is a fact that there are many unscrupulous agents in the Georgia real estate market.
Pitfall #7 Quality And Building Standards
It is an essential element to consider when choosing to buy in Georgia.
Although in recent years, building standards have evolved very favorably, in the past, there were no regulations on strict building standards like those found in Europe or North America. As a result, many relatively recent constructions (between 10 and 15 years old) are of poor quality.
There are no collapsing apartment buildings, that’s not the problem, but some companies have not been very careful about the quality of new construction in the past. You need to be aware of this. Here are some TIPs to consider.
Consider buying from a high-end developer/builder. The price per square foot is higher than average, but at least you can rest easy.
It would be best if you only bought it when the construction of the building is completed. This way, you can see that the facility offers all the acceptable and good level guarantees.
To alleviate this concern, we advise you to have the property inspected by a professional service to have an objective report to help you decide if the property is in line with the asking price. This report, which costs a few hundred dollars, is money well spent and can be very useful to negotiate the price down or to show you that you should not buy the property.
Pitfall #8 Non-Disclosure Of Hidden Defects, Debts & Co.
We have enough experience to say that due diligence on a property you wish to buy is essential, whether new or old. Too often, an unscrupulous seller will have hidden the problems associated with the property you will be inheriting unless the sales contract stipulates otherwise, and the responsibility lies with the seller.
Security and peace of mind have a name in Georgia: Due Diligence! To protect yourself as much as possible and to avoid all the worries of hidden debts of the owner, likely mortgages on the property to be settled before the sale, problems with the title deeds and cadastral codes, or problems related to the building permit, of authorization of an extension built illegally or without the proper license…these hidden problems can be numerous. But thorough due diligence conducted by a real estate lawyer will clarify all the uncertainties that may be present in the property you wish to buy.
Pitfall #9 Buying Real Estate In Usd Or Eur Cash
It is common for a seller to want cash payment in USD or EUR. Although most domestic transactions must be legally done in GEL, this practice is quite common and tolerated in Georgia.
Real estate purchases are an exception. They are allowed in a currency other than GEL, provided that the buyer is, at the time of purchase, a non-resident of Georgia. And even if the buyer intends to reside in Georgia soon (that’s why he’s purchasing a real estate property), the law is not clear; in practice, many transactions are done in cash. However, for this type of transaction, it is necessary to take all precautions and be accompanied by an attorney who will legally oversee the entire procedure of this cash payment.
Today, our advice is as follows: if you reside elsewhere and have no tax or legal ties to Georgia and wish to pay for a property in cash, it is unlikely that you will have a problem. For others, there may be a risk, although in practice, it has been found that such cash transactions are very well tolerated. What will happen in the future? We don’t know. For now, in 2022, payments for real estate can be made in cash.
Can You Be Cheated When Buying With Cash?
If you don’t follow the correct procedure, anyone can be scammed. We recommend that you hire a good real estate attorney to oversee the purchase and ensure that everything is in order in the documents submitted during the process. It is very unlikely that you will find yourself in a situation where the seller disappears with your money without transferring the title to you.
Our Advice If You Choose To Buy Property
Negotiate payment by a legal method if you reside in Georgia or if you wish to become a resident. Payment by bank transfer is recommended or in cash in GEL and not in USD or Euros. Of course, you will pay a little more because of the exchange rate you will have determined in your purchase agreement (we advise you to refer to the National Bank of Georgia’s rates), but the tranquility has a price. Moreover, at the moment, the trend is to pay in GEL. The GEL appreciates day by day witnessing the dynamic return of the Georgian post-covid economy.
The Deed Of Purchase
The Deed of Purchase is the legal document you will sign that shows the movement of funds between two parties. It serves as proof that the payment is made to purchase the property. Your lawyer should supervise the drafting of this purchase agreement to protect you from any unpleasant surprises and especially the return of a possible reservation deposit and penalties for the seller if the sale is not made at the last moment. We recommend that this purchase agreement be signed before a notary.
Pitfall #10 Unexpected Price Increase
Some sellers increase the price during or even after the negotiations. And the reasons are very diverse and of more or less good faith. Some will say that they have misjudged the real price of their property; others will think that by the mere fact that you are a foreigner, the price should be increased; that you were late in agreeing to the negotiated price; that their children have decided to go and study in Europe; that someone else has made them a better offer, etc. In short, this can happen at any time, and although our buying agents cannot prevent this kind of behavior, we will advise you in this case. We will have the choice to give up the purchase or the rental, or we will evaluate with you if, despite this increase, the property is still interesting.
Our agents will deal directly with the sellers on your behalf to avoid having to. It is an excellent reason to have a good Georgian attorney negotiate on your behalf, as they know the rules and can grasp the nuances and advise you if the requests you make might not be well received.
Pitfall #11 Official Evaluation Of A Real Estate Property
Still, too few people use this tool, which should be systematic in a relatively unregulated market.
Unlike real estate agents, real estate appraisers must be accredited in Georgia. The property’s value is assessed based on sales statistics, neighborhood and location, size, and other general parameters. The audit will consider the average price per square meter of your building and other elements that characterize your home (general condition of the property, floor, room layout, amenities, square footage, etc.) to weight this average. An asset (an unobstructed view, a high floor, a magnificent historical building, etc.) can lead to a higher valuation (+5% to +20% depending on the characteristics). In contrast, a defect (noisy first floor, work to be done) can lead to a lower valuation (also -5% to -20% depending on the importance of the defect).
Although the appraisal process is often an important measure (and for Residency applications through real estate investment, it is legally required), you should not make your purchase decision based solely on the average market value (because, as we will show you in the next paragraph, the Georgian market is not yet mature and large price differences can be posted by owners selling the same type of property, in the same neighborhood, etc.)
A professional inspection and evaluation of the property, even if it does not convince the seller to reduce the price, will at least allow you to know if the contractual work has been done to an acceptable standard so that there are no unpleasant surprises along the way.
Pitfall #12 Lack Of Market Awareness
Many seller-owners in Georgia are not aware of the economics of the Georgia real estate market. The property price is based on one main factor: “How much do I want to sell” (without bothering to do a professional appraisal which is the most logical but least used).
Many seller-owners set a price outside the reality of the market, even if the property has defects,
whether it is much more expensive than other properties of equivalent quality in the same neighborhood. In short, the seller will not change his mind. He wants this price and is not ready to negotiate under any circumstances, even if you develop solid arguments to show him otherwise and where his interest lies.
We repeatedly see properties on the market for years because the owner does not make the logical choice to lower the price. Finally, after a lot of wasted time, we understand that this owner does not want to sell other than his price. It is better to give up and look elsewhere or pay if it is worth it.
Pitfall #13 Deal !
In Western countries, usually, once you make an offer and it is accepted, the deal is almost certain to be closed, and you only have to go through the next steps, such as property inspection and legal procedures.
There are no guarantees here. The deal can fall apart if someone else makes an offer, even if your proposal is already accepted. It is important to move quickly from making an offer to closing the deal, but not to rush into it. In Georgia, buying real estate is a good balance of due diligence and speed to close the deal quickly while protecting yourself.
It should be noted that property inspections and due diligence often uncover problems. Since real estate agents lose their commissions as soon as you know the property has issues, you should be wary of any agent who tells you an inspection is unnecessary and be cautious if they recommend an attorney. Find your own!
If you are not familiar with the intricacies of the Georgian real estate market, it can be a bit daunting as it is very different from the more mature Western countries. Nevertheless, real estate in Tbilisi (or Kutaisi, and Batumi, the second and third largest cities in Georgia) has huge growth potential. Its price is currently low compared to most European capitals.
The real estate market in Georgia is an interesting investment opportunity, provided that you know how to move in this market and understand its rules to make the best deal possible.
While the final decision to buy or rent always rests with our clients, our Hunter Agents are dedicated to providing you with the context, support, and objective advice necessary to ensure that you are informed enough to feel confident at every step of the process.
Combined with the comprehensive services of our real estate attorneys, we are here to make the process as safe and painless as possible. We are paid by you, regardless of what property you buy or rent, so we focus on representing your interests, not those of the owner-seller. In contrast, a normal Georgia real estate agent represents – and receives a commission from – the seller.
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