However, the steady foreign demand for Latvian real estate may be harmed by the specifics of behaviour of luxury real estate owners rather than political collisions. As shown by results of the study conducted by the Latvian Fund for the Development of Competitiveness* in association with companies Baltic Sotheby’s International Realty, Real Estate Jurmala, and NIRA Fonds.

 The reason behind experts’ decision to conduct this study was the increased frequency of cases when potential buyers are forced to decline the deal.

 Example from professional life:

Investor is planning to buy a house in Jurmala (Jūrmala) at the beginning of March to make small repairs and then move in at the beginning of June. A suitable property has been found, the deal is almost closed and the new owner arrives at his “almost home” to check what repairs are necessary. Imagine his surprise when he sees a young woman with a baby there.

 Turns out those were tenants who were unpleasantly surprised by the fact that their home is put up for sale and the potential buyer is not planning to extend their tenancy agreement.

 The current owner of the house, who decided to sell it, did not realize that according to the agreement tenants may be evicted only by 6 months’ notice. In his case – not before September. However, that does not match the potential buyer’s wish to move at the beginning of summer.   

 Lack of care for documents and correct legal execution.

Despite the large number of offers the search for „one’s own” property takes quite a long time. Therefore, when the buyer has finally found the property, it is very annoying if the deal cannot be closed due to various “details” of legal nature.

 “Tenants with an effective tenancy agreement in hand is only one of many examples”, comments Vestards Rozenbergs, co-owner and Chairman of Board of Baltic Sotheby’s International Realty. “Other common obstacles: the object has not been put into operation; the owner is in the middle of divorce proceedings, there is no prenuptial agreement, the other party does not agree to the sale; there is a wish to receive tax relief for the sale but no wish to consider nuances in matters concerning declared persons. Failure to agree on the selling price with the bank has been quite common lately. Seller and buyer have agreed, however, the object has been pledged with bank and the bank does not allow selling it at the said price.”

 Historically real estate as such has no value. Specific mentality. 

 By making a decision to sell real estate one wants to fulfil certain tasks – change living conditions, gain maximum profit or get money fast. Understandable and reasonable wishes clash with the specific Latvian mentality. Latvians are always willing to tell everyone they have bought a property whereas the fact of selling is something they avoid sharing with their acquaintances. “There is a stereotype – if you are selling, it means you are not doing well. As a result the owner names an unrealistic price hoping that the property would not be sold after all”, points out Igors Danilevics (Igors Daņiļēvičs), Board Member of Real Estate Jurmala.

 Price of the real estate is set according to the principle “because I want so”.

 Upon making a decision to sell real estate the owner often already knows how much he wants for it. Numbers named out of thin air must be checked. Ad board on ss.lv is commonly used as a real estate market catalyst. There he sees that a property similar to his is being sold for a price he does not even dare to dream of.

 “On such websites 30% of ads are bluff where no one is responsible for anything. Because the information can be placed by any person or company – people hoping to earn millions, unprofessional brokers, basically anyone. Price of the real estate is always set according to the market situation – the deals closed rather than prices offered on the website. Practice shows that price of offers placed usually exceeds the “actual selling price” by 25-30%”, adds I. Danilevics.

 Costly repairs are included in the real estate price.

 Costly real estate bought for personal needs is usually arranged according to one’s individual sense of taste. A designer is outsourced, large-scale repairs are done, and exclusive stylish furniture is bought for this purpose. And there is nothing wrong with that until the owner decides to sell the property.

 “The sum he offers includes costs for furniture, design subtleties and repairs. And if the potential buyer has an option to refuse from taking the furniture, then the repairs are an extra. However, everyone has a personal sense of taste and colour. When buying a property the investors consider location, technical condition but in no way design subtleties – such nuances do not interest him as a buyer”, says Ilze Mazurenko, co-owner of Baltic Sotheby’s International Realty.

 Shift in the understanding of concepts of real estate “owner” and “seller”.

 Goods are distributed and sold around the world and across all industries by distributors and sellers, i. e., specialists and professionals rather than manufacturers. Despite information technology development, accessibility of information, including on the global markets, Latvian real estate market is predominated by mood and concepts of times long gone. Real estate is goods just as any other. Nevertheless, property owners still think they can offer their goods themselves. In some cases they outsource a specialist without concluding an agreement and cooperating based on a principle – “bring me a client and I will sign the contract”.

 “As a result neither the realtor nor the owner has clear obligations towards each other. No one is responsible for anything and the result usually equals zero”, points out Jevgenija Markova (Jevgēnija Markova), Board Member of NIRA Fonds. According to the expert, the only right decision is to contact a specialist. “The document [contract] should stipulate everything: contract price, deadlines as well as things the real estate owner might require from the seller”, suggests J. Markova.

 According to Vestards Rozenbergs, the situation is quite grave. “On the one hand there is demand, on the other – supply. However, deals collapse. If buyers face such problems repeatedly, they will be forced to search for investment objects in other countries. Decrease in demand will lead to stagnation and decline in real estate prices”, says V. Rozenbergs.

Resource: EXPERTS COME UP WITH A PORTRAIT OF A LATVIAN REAL ESTATE OWNER