Say you want to buy a second home in Newport Beach, California. You’re not from there, and have no family there or any local ties. You’re not familiar with the property market in Newport Beach…but you still know you’re paying a good price for your new condo.
That’s because you ran the comparables. You checked local multiple-listing services for current asking prices, and checked the prices of similar properties that sold recently in the neighborhood. And you did it all online, from the comfort of your armchair.
But when you’re buying a home overseas, it’s not so easy. There’s often no multiple-listing service to trawl through. And you can’t access sale prices at all. They’re kept private, between the buyer and seller. So how do you figure out if you’re paying a fair market value for your overseas home?
1. See the Property for Yourself. Advertising in much of the world isn’t strictly regulated. The only way to tell if the beach house in the glossy brochure is genuinely on the beach, is to see it with your own eyes. Visiting the area will also throw up other details the seller may “forget” to mention—the noisy neighbors, the garbage dump at the end of the street, or the shack next door. And visiting the location is the only way you can do proper research on comparables.
2. Do Your Research. You can check newspaper ads, online listings, and even handwritten ads posted in cafés and local stores to get a snapshot of the market. Ask your attorney if he handled any recent sales in that neighborhood, and the sale prices. Speak with as many real estate agents as you can, and see as many properties as you can. Plus, speak with neighbors, gardeners, doormen…as many locals as possible. It all helps you build an accurate picture of the local property market.
3. Run the Comps. Running the comparables means comparing similar properties. Compare a beachfront house to other beachfront houses, not to ocean-view houses or houses three blocks from the beach. Compare condos to condos and single-family homes to single-family homes. Compare properties of a similar size; smaller properties generally cost more on a per-square-foot basis. Compare properties in similar condition, with similar finishes. Your comparison properties should match the property you’re buying as closely as possible. Otherwise they’re not meaningful.
4. Do your Due Diligence. Make sure the property is titled and has all the permits and approvals it needs in place before you buy. Lack of clear freehold title with a property or a missing permit affects its value.
Editor’s note: For Margaret’s full 8-part guide to “buying right” overseas, see page 15 of the current issue of International Living magazine. Pick up an online version here. (Margaret Summerfield is a director of Pathfinder, IL’s preferred real estate advertiser.)