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By Antonis Loizou F.R.I.C.S. – Antonis Loizou & Associates Ltd – Real Estate Valuers & Estate Agents
Although real estate development is a major contribution to foreign earnings in Cyprus, we are well behind in the methods and procedures adopted for sale of real estate from other more advanced economies.
· For Sale Sign
Placing a sign for sale on the spot is an effective way to advertise and potential buyers can actually see what is all about. Yet, being a small country and since more or less everybody knows everybody else, agents do not place such signs to a large extent, since other agents pick up this information and take their own clients directly to the sellers leaving in the cold the agent who has spent money and effort to advertise the property. In addition, interested parties can just knock at the door, again leaving out the agent. The solution is, of course, for the agent to have an exclusivity on the property for sale at least for six months, so whoever sells he will be entitled to a commission. Such exclusivities however are not common practice in Cyprus and it is looked upon with suspicion even if the agent on an exclusive basis charges (usually) a reduced sales commission.
· Internet
The most effective way to promote a property especially regarding foreign buyers is via the Internet. The same problem as above exist, however, i.e. people going directly to the owner, as such agents do not provide external photos which can identify the property and do not provide full address. With this the chance of sale is restricted (the exclusivity here could help as well).
· Dishonest Clients
Upon inspection, the interested buyer may get in touch with the seller directly in the hope to have the agent out and thus save of the commission. This is common mind you and if the agent is lucky enough to find out the scam and places a memo on the sale, he will have to go to Court, prove this case and seek compensation and all these if he wins the case and after spending EUR 1.500 in legal fees and time. For this reason some agents similarly want a commitment by the buyer (not on). In one of our cases we waited for the last four years for a case to be heard in Court.
· Illegal Agents (cowboys)
That is something unique, I would say, for Cyprus and these agents range from restauranteurs and barmen to tax drivers and others. A point to remember is that if an agent is not a registered one, his commission is not tax deductible from the capital gains tax etc. There are ways to bypass this however, since the illegal agent issues a bill either for advertising/ promotion and not as a sales commission, or he can use the services of a registered agent with an invoice on his name with the latter getting “something” for “his services”.
· Lawyers and Accountants
This is most shocking since accountants and even the international auditing firms, want to climb onto the sales wagon not being satisfied with their receivership and management distress sales fees, but want a cut in sales commissions as well. Similarly, lawyers even adopt website advertising of the properties they have in their possession/representing owners for sale. This situation is nowadays getting worse with the visa/passports deals, since foreign buyers usually go through international auditing firms and lawyers, who handle such deals with agents sales being minimal (in one case our client once agreed to the sale and wanting to be vetted by an auditor, the latter asked for a 50% commission of our own – their charge for vetting).
· Commission level
The sales commission presently is between 3% and 5% (+ VAT) on the concluded sales price, unless otherwise agreed in writing. The law provides a 3% commission if no written agreement is in place, but if an agent requires a higher commission, he must provide a written agreement with the seller (similarly if the seller agrees less than the 3%).
Bear in mind that in Cyprus commission is paid by the seller, whereas abroad depending on the country, the commission could be paid by both (splitting the amount) – this unless otherwise agreed.
· Exhibitions
By projection local and international exhibitions meet with similar problems and as such agents rarely embark in such efforts leaving the market wide open to the developers and direct sales.
· Energy Certificate
For each and every sale/let the owner is to provide the buyer/tenant with an energy certificate of the unit. Not practical for older buildings especially since securing such a certificate by the owner costs around EUR 2.0/sq.m. and this, plus the agent’s commission, plus other costs, etc.
· Under-the-Table deals
More of a national sport to underdeclare the sales price with mutual benefits (buyer lower transfer fees and seller less tax). It is getting better nowadays but this sort of situation has many side effects against both (the illegality of the deal apart).
These and other obstacles make the promotion and sale of real estate more difficult to dispose properties than otherwise and until and unless we all behave in a correct way this situation will not get better.
