Navigating Foreign Property Markets

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Here's the first and most important thing to understand about most real estate markets beyond North American borders: They don't come with multiple listing services.

[See The 10 Best Places to Retire in 2012.]

In the U.S., if you want to shop for a house, you can walk into any real estate agency and dictate your criteria for the purchase. The agent types those details into the Multiple Listing Service (MLS) system, which immediately provides the agent with matches. Within a matter of minutes, you're presented with every piece of property currently listed for sale that matches your purchase parameters.

But this model of efficiency is nearly impossible in most of the rest of the world. With a handful of localized exceptions including regions of Mexico and Buenos Aires, in most of the world, you're going to have to meet with every agent in town to get a full picture of what's available for sale or for rent. This is true not only in emerging markets in Latin America and the Caribbean, but in Europe as well. Outside North America, real estate listings are proprietary, not shared. Agents do not cooperate and will look at you as though you've lost your mind if you suggest to them the idea that they might split commissions with each other and all make more money in the long run.

[See How to Choose an Overseas Retirement Haven.]

Outside North America it's common to find the same property listed with more than one agent--not because the agents are sharing the listing, but because the seller gave the listing to each agent individually, sometimes at different prices. Between the lack of a MLS and the possibility that the same property is listed twice, it's next to impossible to estimate what a particular size and type of property should cost.

When we moved to Ireland 14 years ago, I had already been covering the retire overseas beat for over a decade. I was familiar with how the real estate industries work in the emerging, unregulated markets of Latin America and the Caribbean. But I thought Europe would be different. Naively, I expected the real estate industry in Ireland to operate like the real estate industry in the United States. When we arrived in Waterford, my husband and I went to the offices of the biggest real estate agency in town. We explained what kind of house we were interested in buying (Georgian and old). The agent took us to see two houses. "Neither of these suits us," I explained. "What else is available?" The agent replied, "That's all I have."

Could there really be only two old Georgian houses for sale in all of County Waterford? In fact, no, there were others. But the agent we were speaking with had only two on his books. Then it struck us. The Irish property market doesn't operate like the one in the United States. It operates more like the emerging markets of Latin America. We reconciled ourselves to the consequence of this and made appointments to sit down with every agent in Waterford City to review the listings each carried. In the course of these meetings, we encountered more than one case of the same property being listed with different agencies at different prices.

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Here's the second thing to understand about many real estate markets outside the United States, especially the unregulated ones south of the Rio Grande: The real estate agent you meet with doesn't work for you, and he doesn't really work for the seller either. He works for the commission, which he wants to be as big as possible. In some markets, this can lead to what's called "net pricing," whereby the agent will promise the seller a fixed amount for his property. The agent then sells for whatever he can sell for and pockets the difference. Maybe he walks away with a reasonable commission, or maybe he makes 20 percent or more on the deal. You, as the buyer, never know. I make this point not to alarm, but to prepare you. Don't take for granted that your real estate agent works for you.

When you meet initially with local property agents, you're trying to get a lay of the land and a read on the market, to find out what's available at what price. You're not necessarily preparing to buy. You're not ready to make that commitment yet. First you want to take your chosen haven for a test spin. Once you've narrowed your list of dream havens to one, and you're thinking you've found your ideal match, plan to spend at least six months living in the place.

During that period, rent. Maybe your chosen haven won't turn out to be all you imagined it to be. Or maybe you'll find that the country suits you fine, but the neighborhood where you've settled for your trial living experience doesn't. I've yet to meet a single expat retiree who regrets having made the move overseas. However, I have known some people who weren't happy with their initial location choices. Moving is no problem as long as you haven't invested in the purchase of a home, which is why it's a good idea to rent first.

In both Ireland and Paris, we rented for nearly a year before buying, and in both cases we were glad we did. In Ireland, at first we thought that we wanted to be in Waterford City center. We rented a small house on the river within walking distance of our daughter's school. But we realized quickly that Waterford City living wasn't for us, and we began looking for a place in the country. When our lease in town ran out, we were ready to take up more permanent residence in the old Georgian farmhouse we'd found twenty minutes outside the city, with fields of sheep and cows and low stone walls all around. Lahardan House, as the place is known, was our comfortable and cozy Irish country home for more than six years.

Likewise, in Paris, we'd always thought we wanted to settle in the fifth arrondissement, in the heart of the city. A few months in a rental apartment across the Seine from Notre Dame cured us of that mistaken idea. We realized that in fact we wanted something a little quieter and more removed from the tourist throngs.

We found and purchased an early 18th-century apartment on a narrow street in the seventh arrondissement that few tourists ever find. We were tucked away from the beaten path, yet only one block from the river and a five minute walk from the Louvre.

[See The Most Tax-Friendly Places to Retire Abroad.]

In some cases, you may want to rent indefinitely. Property, especially land, can be a sensible place to invest your money. But renting rather than owning your retirement dream home overseas has long-term advantages. Renters face no maintenance worries or expense, no property upkeep, and no property taxes. Renting also keeps you mobile. When you're ready for your next adventure, you need to wait only until the term of your lease is up.

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas--Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

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