Wednesday, February 13, 2013
I’m currently property-hunting in Panama’s historic district, Casco Viejo. It’s not easy, for three very different reasons. Firstly, the Casco is undergoing a massive renovation of its brick-paved streets, an upgrade to the water and sewage system and placing the electric and telephone wiring underground. Once it’s finished, the neighborhood will look much better. But right now, it looks a mess. It’s not the best time to sell a property. So there isn’t a lot for sale at the moment. That’s making my search really tough.
Secondly, I’ve lived in the Casco long enough to know the noisy streets – the streets with lots of traffic, the streets with clubs and bars, the spots where neighbors party into the wee hours. I won’t buy on those streets. Because of street noise, I don’t want bedrooms facing the street– which rules out a lot of the renovated apartments in the Casco. And I don’t want a loft-style unit. So I’m an incredibly picky buyer: a real estate agent’s nightmare.
Finally, I’m all about the price per square meter. That’s where it gets tricky. Sellers in the Casco fall into two markets. The first prices their unit to sell, because they want to sell. But the second group doesn’t really want to sell. They price their units at sky-high prices…in the hope they’ll catch an unwary buyer who isn’t savvy about pricing in the area.
I won’t over-pay. I’ll wait it out until the right unit at the right price per square meter comes along. And when it does, I’ll check to make sure I’m getting every single square meter that I’m paying for.
I was reminded of the importance of this when I caught up with a friend a few weeks ago. He’d made an offer on a city condo. It was 125 square meters (1345 square feet) according to the seller. The price was good - around 25%-30% below market pricing for the neighborhood.
The buyer got excited, looked at the unit, figured it was move-in ready and made an offer. But when he checked the property out in the public registry, the excitement faded. The property deed only showed 85 square meters (915 square feet) – a third smaller than the seller’s estimate.
And that size difference cut out the 30% savings on current market values, placing the unit at the top end of the local price scale.
When he contacted the seller, they had an explanation. The missing square meters translated to a narrow internal courtyard just off the living space. It was strictly speaking common space, but only accessible from the apartment, the seller pointed out.
The buyer was not convinced. He didn’t think the outside space was terribly big, certainly not 40 square meters in size. He didn’t want other apartment owners in the building using it if they needed to carry out repairs on the outside of the building. Plus, when it came to resale, he reckoned he’d have to list it for what it was – an 85-square-meter unit. He didn’t want to pay top-dollar now and risk losing money if he needed to re-sell.
It highlights the importance of knowing the actual size of properties that you’re looking at. It’s the only way you can consistently compare the value of one property to another and decide fair market value.
Ask sellers what’s included in the total square meter or square foot size of a property. In some countries, the listed property size includes a share of common areas such as halls and stairways. Ask if the seller took the interior measurement from the inside or outside wall.
Does it include balconies, terraces, storage areas, or outside patio space? In some places, that outside space counts towards the size of your unit.
Some markets count outside areas, but at a different value, perhaps half the average price per square foot. It costs significantly less to construct a patio or balcony than a bedroom or kitchen, after all.
I’ve heard of sellers that added the unit’s parking space to bump up the size of a small condo…and another small condo where the developer’s ambitious unit size in the brochure included a share of the elevator, entryway and the building’s garbage area.
The point is, don’t take the property size you’re given at face value. The best way is to measure the space yourself. That way you’ll know for sure what you’re paying for.
And yes, you need to know. Overpay now and when it comes to selling it you could pay a penalty. Let’s say sale values average $200 per square foot in the area you’re buying in. You find a condo that’s described as 1,000 square feet and pay $200,000 for it. But the condo’s actually only 900 square feet. And that’s likely all the market will credit you for when it comes to re-sale. That would leave a big hole in your profit margin.
I’m continuing my property search. I’ll let you know how it goes. But know this: when I find the right apartment, I’ll get the tape measure out before I make an offer.
P.S. I visited Panama twice before moving here and I knew the city’s historic district was the right place for me. The easy way for you to test-drive a location overseas is on a Pathfinder chill weekend. And they won’t cost the earth. Find out how you can check out Costa Rica for $299 or Tulum for only $180.