Real Estate Investing In Georgia Country: The Most Common Pitfalls

Real Estate Investing In Georgia Country: The Most Common Pitfalls
Real Estate Investing In Georgia Country: The Most Common Pitfalls
Real Estate Investing In Georgia Country may seem easy. Georgia is known for its ease of doing business and its quick and easy real estate transactions. But you shall know that it’s an unregulated market. Basing Georgian real estate environment on Western standards would 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 Georgian real estate market has its set of pitfalls. Real estate investing in Georgia Country 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 as Real Estate Hunters gives you the Essentials to avoid being scammed. But also to allow you to recognize a good deal even if it doesn’t seem good at first glance, whether it is for buying real estate or the rental market.

Real Estate Investing In Georgia Country Pitfall#1: Competence And Confidence

In a deregulated market like Georgia’s real estate market, you only need 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, controlling what they sell and knowing the problems inherent in certain real estate properties. 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. Real estate investing in Georgia Country needs two prerequisites: Honest and Trustworthy real agents. We put these two prerequisites at the top.

Real Estate Investing In Georgia Country Pitfall#2: Limited Portfolio

Even if you find a good real estate agent, competent and trustworthy, you will encounter another problem. Most of these agents have a portfolio limited to a few dozen properties. This limited portfolio is an inherent problem linked to 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 as the beginning of a change in mentality. Progressively, agents understand that sharing information among themselves is a big Plus.

Real estate investing in Georgia Country: Find the good Hunters Estate Agent

Happy Georgia, through her real estate branch Colchis Estate, has an honest, open, and shared system with all the agents we work with to obtain and find properties that meet our client’s 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 many agents in the Georgian market. To avoid all the pitfalls and scams you may encounter, we 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 resolving legal issues. Real estate investing in Georgia Country involves a good experience in the Georgian market. The article below presents other pitfalls in Georgia when buying or renting real estate. Based on our experience, the contents presented here are part of our process of protecting our clients from bad experiences and real estate investments while saving them much time since we handle the entire process for them.

Real Estate Investing In Georgia Country 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. But, 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 provide you with many less good properties and more expensive offers that do not match your criteria. It becomes very annoying when you have contacted several agents.

Real estate investing in Georgia Country: No Exclusivity

There is no practice of exclusivity in Georgia. You will discover during your research that 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 or months.

Real estate investing in Georgia Country 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, texts, and photos, increase the price and broadcast a new ad and make it look like it is their ads. 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. In short, this is a very unpleasant practice for the real agents trying to do their job properly and for you, who will pay more for a property. Watch out! If you see an ad on one of the Georgian 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 it from another « colleague.»

Real estate investing in Georgia Country 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. Usually, 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 terrace 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, and the building is stuck between other buildings. Of course, the « nice view » does not exist except in the agent’s imagination. Unfortunately, small or big lies, real incompetence, and greed are some inconveniences you will face.

Real Estate Investing In Georgia Country Pitfall: Measurements Not Accurate

Another pitfall, 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 100m2. You shall always check the size of the property as it appears on the official documents provided by the official Georgian Registry. Always ask to see the original cadastral documents of the property, which are registered in the national register. They are reliable.

Real Estate Investing In Georgia Country Pitfall: Terrace And Balcony Count As Indoor Space

Outdoor areas, balconies, and terraces are “almost” always included in the indoor space. In Georgia, adding the terrace/balcony to the total property size is common 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 seller will sell “outdoor” m2 at the same price as the “indoor” m2. In mature markets, we used to pay half the price for the outdoor m2. It’s a convention. In Georgia, it is a negotiating tool for us when a purchase occurs. We hope that this will become a norm in the years to come.

Real Estate Investing In Georgia Country 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 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 often higher than the “real agents.” If they get interesting contacts, they bring the potential buyers to the seller or the owner to conclude the sale for a commission fee. They frequently promote a property at a higher price to convince the seller to share the commission.

Real Estate Investing In Georgia Country Pitfall: Fake Low Prices To Attract Your Curiosity

Similarly, they promote the property at a lower price to attract your attention. If you call these indelicate agents, they will contact the official agent to convince him to sell at that price and make a quick sale (and, of course, breaking the official agent’s commission fee), and at the owner’s expense, who will accept if he is in a rush. Actuality, in this case, the “fake agent” is negotiating against the seller and the official agent. It is a fact that there are many unscrupulous agents in the Georgia real estate market. Real Estate Investing In Georgia Country involves constant attention to all these details.

Real Estate Investing In Georgia Country Pitfall #7: Quality And Building Standards

It is essential to consider quality construction when investing in real estate in Georgia Country. 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. In the past, some companies have not been very careful about the quality of new construction. You shall be aware of this.

Real Estate Investing In Georgia Country Advice: Buy A Professional Real Estate Inspection

So, consider buying from a high-end developer/builder. The price per square foot is higher than average, but at least you can rest in complete peace of mind. It would be best if you only buy 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. 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 price. This report, which costs a few hundred dollars, is well-spent money. It can be very useful to negotiate the price down or to show you that you should not buy the property.

Real Estate Investing In Georgia Country 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 crucial. Too often, an unscrupulous seller hides problems associated with the property. You will inherit these problems unless the sales contract stipulates that the responsibility lies with the seller.

Real Estate Investing In Georgia Country Advice: Make A Due Diligence On The Property Systematically

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 owner’s hidden debts, mortgages on the property, problems with the title deeds and cadastral codes, or problems related to the building permit, an extension built illegally or without the proper authorization…these hidden problems can be numerous. But thorough due diligence conducted by a lawyer expert in real estate investment will clarify all the uncertainties.

Real Estate Investing In Georgia Country Pitfall #9: Buying Real Estate In Usd Or Euros In Cash

When you plan to invest in real estate in Georgia Country, you must know that 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 common and tolerated in Georgia. Real estate purchases are an exception. They are allowed in a currency other than GEL. In theory, the buyer is, at the time of purchase, shall be a 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 and subject to interpretation. In practice, many transactions are done in cash and USD. 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.

Real Estate Investing In Georgia Country Pitfall, Our Advice: Take An Attorney With You To Handle This Cash Transaction

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. In practice, such cash transactions are tolerated. However, for this type of transaction with cash, it is necessary to take all precautions and be accompanied by an attorney who will legally oversee the entire procedure of this cash payment.

Can You Be Cheated When Buying Real Estate With Cash In Georgia Country?

If you don’t follow the correct procedure, anyone can be scammed. We recommend hiring a good real estate attorney to oversee the purchase and ensure 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.

Real Estate Investing In Georgia Country, Our Advice If You Pay In Cash

Negotiate payment by a legal method if you reside in Georgia or if you wish to become a resident. Bank transfer payments are recommended or in cash in GEL, not 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 witnessing the dynamic return of the Georgian post-covid economy daily.

Real Estate Investing In Georgia Country, Our Advice: Make The Deed Of Purchase With An Attorney

The Deed of Purchase is the legal document you will sign showing 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 draft of this purchase agreement to protect you from any unpleasant surprises, 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.

Real Estate Investing In Georgia Country Pitfall #10: Unexpected Price Increase

Some sellers increase the price during or even after the negotiations. And the reasons are very diverse.
  • Some will say that they have misjudged the real cost 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 someone else has made them a better offer, etc.
These problems happen sometimes. If it happens, you will have the choice to give up the purchase or the rental, or you will have to re-evaluate you plan. Suppose, despite this increase, the property is still interesting, then don’t give up. It is good to have an experienced Georgian attorney to negotiate directly with the seller on your behalf, as they know the rules and can grasp the nuances.

Real Estate Investing In Georgia Country 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) to weigh this average. An asset (a nice view, a high floor, a magnificent historical building) can lead to a higher valuation (+5% to +20% depending on the characteristics). In contrast, a defect (noisy first floor, renovation work to be done) can lead to a lower valuation (also -5% to -20% depending on the importance of the defect).

Real Estate Investing In Georgia Country Our advice: Order A Professional Appraisal Of The Property

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, once again, 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. 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 the property’s real market value.

Real Estate Investing In Georgia Country 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 see properties on the market for years because the owner does not make the logical choice to lower the price. Usually, with this kind of owner, it’s better to give up and look elsewhere or pay if it is worth it. Don’t waste your time!

Real Estate Investing In Georgia Country Pitfall #13: Deal!

In Western countries, 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 such guarantees in Georgia. 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 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.

Real Estate Investing In Georgia Country, Our Advice: Make a Pre-Purchase Agreement

We usually propose making some pre-payment agreement before a notary to lock a deal if it is worth it. This agreement covers you if the owner decides not to sell you the property at the end. He will then have to pay you many penalties. You should note 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!

Real estate investing in Georgia Country: Our Conclusion

Real estate investing in Georgia Country involves many skills and acknowledges the Georgian market. Suppose you are not familiar with the intricacies of the Georgian real estate market. In that case, it can be a bit daunting as it is very different from the mature Western countries’ real estate markets. 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. Happy Georgia – Hunters Estate Agent in Tbilisi at the disposal of those who do not want to deal with the above issues and wish to have a real estate and legal expert to advise them throughout the process and catch all the nuances easy to miss.

Free Consultation

Are you thinking of Real estate investing in Georgia Country? We offer a free 30-minute consultation. Because we are a law firm and business consultant, not a real estate agency, our interests align with yours. Our consultation provides information and is not designed to sell you anything. Our Consultations are in English, French, Georgian, and Russian. Suppose you prefer to be free in the search and selection process. In that case, we can advise you on all essential legal aspects, including Due Diligence, which is strongly recommended, for any real estate purchase in Georgia, and guide you to our partners to inspect and audit your property.

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