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Lessons from four property horror stories

Imagine that a close friend of yours is forced to go to court. Days later, she explains:

The person that took me to court offered to share his lawyer with me and said we could split the lawyer’s fees. It seemed like such a good deal, I said yes!

You shake your head at your friend. Pure madness, isn’t it? “What were you thinking!”. Yet many people who wouldn’t dream of going to court without their own lawyer think it is normal not pick their own agent when buying a property. Knowing that a shared agent makes more money the more you pay for a property, why would they haggle down the price for you, or steer you away from a bad deal?

There are many traditional agents that will try to manage the conflict of interest between being paid by the seller and opening doors for the buyer (one of our partners was doing exactly that, before joining us in founding the first buyer’s agency in the country). Our clients come to us because they understand the benefit of having an agent negotiate in their best interest. Here are four horror stories from the not so lucky.

The house that would never be yours

Leaseholds – properties that are not truly bought, but rented against upfront payment for a long period like 100 or 300 years – are quite common in the UK and many former UK colonies. In Malta, they are called emphytheuses (singular: emphytheusis). In principle, an emphytheusis goes back – “reverts” – to the owner once the lease period expires (more details in this excellent overview by Chetcuti Cauchi).

In this case, a buyer came to us for advice after seeing a townhouse in need of renovation – a townhouse we are familiar with, and chose not to put on our books. The price would not be bad for a freehold, but the lease only has 70 years left on it.

“Don’t worry, you can buy the full title of the property for cheap from the government!”

Agent and seller played down how difficult it would be to buy back the full title to the property from the government. And it would be difficult. Buyers have no easy way to buy the groundrent – as it is called – and no automatic right to do so. If it were so easy, the present “owner” would have done it already and increased the asking price. They saw the chance to offload a lemon to an unsuspecting buyer, and went for it.

The “easy renovation” – if only!

Someone from the Big Agencies was giving a tour of a property in an Urban Conservation Area – which is also on our books for €10,000 less – and we were passing by in time to hear about the “easy renovation” and “good structural state”. We are talking about a property that needs at least €50,000 in structural repairs before we start talking about finishings, and is located in an alley where access is problematic. Everything is a good buy at the right price, but don’t tell people that it is an “easy renovation”.

When was the last time an agent told you: this will be an expensive renovation? It is not in their interest to put you off and they have no accountability after keys change hands. When you buy an old property, you buy it “as is” (tale quale), and then it is your responsibility to deal with. Get independent professional advice before committing to buying – it can save you a fortune.

The “bargain” with an inflated price from the village broker

Some buyers, spooked by the standard 5% + VAT commission that traditional agencies charge, try to avoid paying it by contacting the owners directly. Facebook Marketplace and other local Maltese websites are the go-to places for that kind of sport. And while there are hundreds of listings to be found, here’s a question for you: how do you tell an owner from a middleman? And how do you know what is the actual price the owner wants?

Case in point, we found a Facebook post by a local sensara (AKA “village broker”) advertising a property we also have on our books – for EUR 15,000 more. Let’s do the maths. A EUR 15,000 markup on a EUR 220,000 property is a whopping 6.8% commission. You thought you were getting a better deal by going to the small-time broker, perhaps even the owner (how do you know?) on Facebook. And suddenly, you’re fifteen grand out of pocket. And it happens often, probably more often than you think, that people who have no relationship whatsoever with a seller advertise their property for inflated prices – and when the unsuspecting buyer bites, they call the seller: “Do you want to split the difference?”. It’s your money they are splitting.

This is why we advertise all direct-from-owner properties at the price the owner wants in hand, and very transparently add our commission on top.

“No fee? No advice!”

Which takes us to the next step – list-it-yourself websites. “Surely I cannot be scammed if I buy directly from the owner!”. This is not always the case for a number of reasons. First of all, it is very rare that properties are not already listed with several brokers. You will find a price on the “DIY listings” website – and it may very well be the same, or higher, than agencies will list.

If you do decide to go direct to a “no fees” listing, this advice applies:

  1. Ensure the contact you are given is the actual owner.
  2. If not, ask the question: “Are you an agent for the owner, and what is your commission?”. This will cut out the random Facebook posters who make a living by jacking up prices without actually being agents.
  3. Still ensure you get professional advice on the actual property. Issues with the property may cost you ten times what you think you saved in fees.
  4. Scrutinise and double check any partisan claims regarding the property and especially regarding: “guaranteed views”, “the neighbours cannot build”, possibility to expand, demolish or amend an existing building, existence of servitudes in favour of third parties, existence of loans, liens or unpaid bills, and whether all the sellers actually want to sell (it happens that properties are on the market and the sellers have not actually agreed on the price, or whether to sell at all).
  5. See, touch, view, do your due diligence on the property before any money changes hands. No deal is so great on the surface that you can afford to skimp on doing your homework.

We had a buyer come to us after finding a property on a “no fees” website – only to find out that the person who listed was not actually the owner but an exclusive agent, that the price listed was a red herring as the actual tag was about EUR 50,000 higher (as the “interest in the property had gone up in the meantime”) and at the end of the day there was already an accepted offer on the property, and new interested parties were only being brought in as a trick to leverage up the price with the couple who had been first in line.

Our overall view is that making one of the biggest financial decisions of your life without an expert’s guidance is like going to court without a lawyer so you can save on the lawyer’s fees. And if it is our advice you want when you look for a property, you know that our pricing ensures we try to get the buyer the best price. Even if you choose not to work with us, always do your homework before you buy.

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