Turkish Property Help

Monday, May 15, 2006

۩ Guide: Estate Agents in Turkey (part 2)

Following our article on web searches for agents, here we assume that you have identified which area you would like to buy in, and have made a shortlist of agents who you feel have fulfilled the criteria which were discussed in the previous article. In this article, we aren't covering the agent subsidised inspection trips as they need an analysis all of their own!

The first decision is the time of year you visit Turkey to approach agents in your quest to find a property. There are benefits and drawbacks to different seasons and the opportunity to combine a house-hunting trip with a holiday can affect the process significantly.

If you choose to go in the summer season (May - September), then care must be taken to deal with staff who have not been recruited just to deal with the summer rush. Of course, many agents will employ staff with good local knowledge but make sure this is the case. Also, be aware that agents are very busy during the peak holiday months of July and August and so can appear to be a little rushed. You can find yourself being escorted from one property to the next with little opportunity to ask questions and take things in. You need to be in control here and you should let the agent know if you feel uncomfortable at the speed of events. On the other hand, bear in mind that good agents have to tolerate a lot of time-wasters during summer and while this does not excuse an overly fast pace, a good relationship with the agent is a mutual affair. A key issue in summer is the 'silly season' mentality. This takes the form of inflated prices where some vendors (and agents) place unrealistic asking prices on properties in the hope of catching a holidaymaker unawares.

The low season months are, in our opinion, a better proposition. The 'hard-core' genuine agents will still be in the resorts and will have more time to dedicate to clients. You are, therefore, less likely to be rushed and will have more time to see your selection of properties. April, and particularly, late September offer a chance of lovely weather for a viewing trip. Two things to check though, whichever time of year you choose. The first is flight availability and cost. This is becoming less of a problem in the winter months with more services to resorts beginning all the time and we'll run a story on this shortly. Secondly, many of the main overseas property exhibitions take place in the low season so make sure you can attend one or more before you go (again a piece on these is on the way).

Prior to travelling, if you have selected particular properties from an agent's website, make sure that these properties are for sale on your departure. Unfortunately, as we mentioned in our previous agent article, many properties are on offer from multiple agencies (far more than in the UK) and are sold by one agent without any notification to others. If your chosen properties are unavailable, insist on an up-to-date availability list but be prepared not to see everything you would like to.

Here are some tips to help you with agents when you are there:

Check that your web search has yielded a genuine agent. Ask around in the area for (independent) ex-pats who might know.

Let the agent know that you are serious and have done your research. This will start the relationship on a firm footing.

Come clean. Let the agent know your specific requirements. After this, if they try to insist on viewings of inappropriate property (or property the agent seems to be unusually keen to sell), walk away.

Agents (as with people in general) in Turkey are extremely good hosts and will offer you refreshments and sometimes food. This is quite normal and should not be taken in the wrong spirit.

Ask questions. Does the property/land have good title? Are there any restrictions on foreigners buying in the area? (see article on law)

Don't succumb to pressure tactics and flannel.

Do not sign anything without understanding exactly what it is.

We have come across agents who you to sign a contract in which you agree to pay their 3% commission if you buy the property before you even have a viewing as they are (unusually) the sole agent. This is, of course, standard in most countries for vendors, but may come as a shock for the first time buyer in Turkey. In fact, we think this is a good sign. While the combined 6% fee the agent will receive from the buyer and seller is steep by European standards, this is a sign of an agent who is trying to stamp out the practice of unscrupulous 'agents' trying to sell the property from under the genuine agent's nose. The legality of such a contract is questionable but the sentiment is, we feel, correct. Here is an example of how a sale process in Turkey might happen:

A vendor is selling a property and approaches agent B to advertise the property (as sole agent). Agent B does this but 'agent' C (who we will refer to as the 'fake' and may be an agent or not ) sees the property on the website and duplicates the details on his/her site. Agent B is set for a commission on a sale until the 'fake' agent approaches the vendor with a client and offers to take only 1% for a sale. The vendor agrees and the buyer pays the 'fake' agent the full 3%, meaning the pseudo-agent receives 4% commission by 'stealing' a sale. The vendor informs the genuine agent B that they are withdrawing the property from sale leaving agent B with marketing costs and time spent showing the property for no return.

There are variations on this theme and while we understand that everyone needs to make a living, if you are a buyer, you need to be aware of the mechanisms which may be at play behind the scenes. Admittedly, the agent who asks you to sign an agreement promising to pay a commission regardless, is attempting to safeguard their interests, but at the same time is improving the transparency of the process. We think that this is key in any developing market as experiences buyers have had in other countries in the past confirms.

Again, we must state that this is not an exhaustive guide, and may state the obvious to seasoned investors but we hope it will provide a starting point. Please check back for additions to this piece or subscribe so that you don't miss future articles.

Tags: real estate agents Turkey, tips on buying property Turkey

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۩ Turkish Property Help FAQs

This is a request to all our readers: We are writing an FAQ page and would welcome questions from you to ensure that we don't miss anything out. We hope our articles will soon provide most answers to queries, but the Turkish property market is so dynamic that constant vigilance is needed to stay on top of the latest developments. Please send any questions you may have to us via our new contact form. You can also send any supporting documents/articles you feel are relevant by using the upload facility on the form. We hope to hear from you soon. Turkish Property Help
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۩Turkish Lira Slides: Implications

The Turkish Lira has devalued by approximately 10% over the last 2 weeks so those with major currency investments in the lira, or anyone in the process of arranging a currency exchange to buy their Turkish property in Turkish lira, is well advised to think carefully before acting. Good news for potential purchasers, not so for savers of lira.

A little over 10 days ago the Turkish Central Bank rates for Sterling stood at YTL2.35 (New Turkish Lira), today the rate was YTL2.63 (rates on the 'Tools' page). Their has been speculation for about a year now that the currency was over-valued and this seems to have translated into action. Dow Jones News Wires report that large investors are dumping the currency with concerns over the country's ability to repay loans on time to the International Monetary Fund (IMF). Other concerns seem to be higher than expected inflation figures for April - driven by oil prices. More in our forum on future speculation or here for a Reuters report

Time to Panic?

In short- no. Our simple advice is to spread your investments and if you have large deposits in Lira, perhaps think about moving some elsewhere. The primary concern should be the reason for any currency investment in Turkey. If you live in Turkey, it makes sense to have more of your money invested there as costs of continual exchanges can add up in commissions. If you are a speculator, this probably isn't the right article for you to be reading but if you are planning to buy a Turkish property, you really need to understand the process even if the recent exchange rate movement means that the overseas (sterling) buyer actually benefits .

Imagine if you had arranged a transfer the equivalent in sterling to YTL1,300,000 today, to pay the agreed price for a re-sale property in Turkey (we use (£) to illustrate but the principal applies to any currency) . The following worked example, based on using a traditional bank, will demonstrate the point but please remember that no bank charges are included here:

If we take the exchange rate today as £1.00=YTL2.60, then the YTL1,300,000 exchange would be equivalent to £50,000 (minus bank commission)

Two weeks ago, when the transaction was arranged, the exchange rate stood at £1.00= 2.35YTL. The YTL1,3000,000 exchange would have been equivalent to £55,319 (minus bank commission)

It is easy to see that the Turkish property has dropped in sterling price simply because of a currency adjustment but it is important to remember that the opposite would apply if the Turkish Lira strengthened.

This model assumes that the vendor of the property does not increase the price, knowing that this currency movement has taken place. This is an extremely underhand tactic and you are advised to walk away if this happens.

Removing the Uncertainty?

Essentially, there are two methods but both will involve using a specialist currency broker and while this might be useful for residents exchanging living expenses to Turkey, it is primarily for large exchanges. Currency brokers can remove some of the uncertainty of an exchange into Turkish Lira. The first method is known as a 'spot trade'. With this method, you buy all of your currency in advance at a fixed rate, which is fine if you have the money available to do this. If you do not have all the funds available in advance, you can use a second method known as a 'forward trade'. Usually, these trades are commission free and the following is an example of how this works:

You take out a contract with a currency broker to buy £50,000 of Turkish lira in 3 months from 15th May at a fixed rate of £1.00=YTL2.60. Total you will receive=YTL1,300,000

You pay a deposit of 10% on the contract for £5,000 (the broker holds this)

In 3 months (15th August) you buy the remaining £45,000 of Turkish lira at the rate you agreed on 15th May. Total you actually receive=YTL1,300,000

With this scenario, you know how much you will have in Turkish currency on a fixed date in the future and if this security appeals and you have signed a contract with a vendor/developer for a fixed price, it is a sensible method to employ. The forward contract can be extended significantly if you purchase is an off-plan development with staged payments and you could take out more than one contract at different rates. One thing to remember is that while the brokers might claim that their contracts are commission free, in reality they will accrue interest on your deposit. They will also gain from making large trades using your and other people's contracts combined on the same day and while this is not to say that their service is a bad one, it should be taken into account.

Above all, remember that you are at the biggest risk if you agree a sale price for a property in Turkey, in advance and then wait to exchange the money until the day it is required. You may be fortunate and find that, as in recent days, you gain, but equally you may lose significantly. However, if using a bank on the day still appeals to you, check in advance how much their commission will be as this varies considerably.

Tags: Turkish Lira foreign exchange, Turkish property

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Friday, May 05, 2006

۩ Brits Lead Buying

21,000 HOMES BOUGHT BY FOREIGNERS IN AEGEAN

In the last two years 21,000 houses have been bought by foreigners in the Aegean Region according to government statistics. British citizens are taking the lead and the most popular area is Didim. The estate market gained an acceleration in the Aegean region after new laws came into force earlier this year relating to the terms and procedures for foreigners to purchase freehold property and land in Turkey. Continue reading in The Fethiye Times.......

Tags: Buy Turkish Property

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Sunday, April 23, 2006

۩ Guide: Earthquake Risk in Turkey

Sign up using a valid e-mail to receive our news and articles via Feedblitz and we'll send you a comprehensive article covering the risks of earthquakes in Turkey and details about the insurance scheme for Turkish property owners. Above you can see a lower quality jpeg (photo) sample of the article to give you a preview of the content - click on it twice for a larger view. We think it's something you should not miss as it is often disregarded as an unimportant detail. Please don't worry, we aren't scare mongering (and we don't want to sell you insurance!) but we feel you should be aware of the risk levels.

Most Turkish people will tell you from their experiences of quakes that they are terrifying, whereas most overseas buyers can't really comprehend how frightening it is. We would love to hear from people who can offer practical advice on being prepared - please e-mail us if you can help.

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Tags: Earthquake Turkey

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Thursday, April 20, 2006

۩ Guide: Web Searches for Real Estate Agents?

Choosing an agent for your Turkish property purchase is one of the key decisions you will make. A glance at the directory listing sites shows that after the more established overseas markets like Spain and France, Turkey has a burgeoning number of real estate agents competing for your business. Whilst competition might be a good thing, it can seem an overwhelming task to separate the good from the mediocre and the plain incompetent. Here we deal with the initial web searches and phone contact but upcoming articles will expand the theme.

An agent in Bodrum said to me in 2005 that she estimated there were some 3000 people calling themselves estate agents in the busy summer period! Whether this is accurate or not, it gives you an idea of the scale of your problem. Most people will begin their search on the Internet, which is a great tool for initial sorting before you travel to Turkey. At this point I would like to state the obvious - think how you would rate an agent in your country and apply those criteria to the Turkish agents.

The first questions might be: who runs the agency and where is this agent based? Remember that (officially, at least) all Turkish agents must have passed the government approved scheme for real estate brokers (more in a later article) so if your agent is, for example, a 'wholly British owned and run', you should check that somebody at the agency is qualified to work as an agent. In reality, this usually means that the agent employs Turkish nationals to satisfy the regulations. This is not necessarily a bad thing - just something to be aware of, but it can mean that the overseas agent is merely 'piggybacking' on the local knowledge of the Turkish employee rather than having put the time and effort in to acquire the knowledge themselves.

You should also be aware of the location of your agent with regard to your choice of property as you really want an agent who has specialist local know-how. Bodrum and Altinkum are worlds apart in property terms so why would an agent have a detailed understanding of both markets? On a related subject, look out for freephone numbers, and in the UK, numbers with prefixes like '0702'. These are non-geographic and anyone can forward them to a Turkish number ( usually at the agent's expense) to give the appearance that they are based in your country. For instance, we have a non-geographic fax number of +44 (0) 870 912 7207 which sends faxes to our e-mail if when we are in Turkey so this may not be sinister, but if the website makes a big play on being local but you suspect otherwise, ask questions!

Websites themselves can appear slick but can also hide the truth so try to cross-reference the site to see if anyone has commented on the agent. Look for clearly presented information with verification from 'official' sources. You want an agent to let you decide based on good website content - not inflated sales talk.

On the site, look for:

A track record . If there isn't one, ask why but remember that not all new agents are bad

Contact details, including a physical location and land line (an office) in the area of your choice - not just trying to cover all areas without knowing them and not simply a foreign subsidiary with no experience in Turkey

Check the basic facts on the site: some agents who operate sites dedicated to Turkey make elementary mistakes but others, who claim to offer portal services covering many countries, can pay liitle attention to the specifics of the Turkish market. Here is an example of this where both the factual dates and future political developments are simply wrong.

The level of service on offer (Ask what you get for your commission as it's high by UK standards and Sole Agent status is practically unheard of). Importantly, confirm whether the agent will organise the necessary certificates and permissions (more soon).

Lots of freely available information not just quick summaries making everything seem a breeze. Has the agent taken care & time over their site or is the information limited, incomplete or contradictory.

High quality language usage - not sloppy translations. This is not difficult to achieve and is an indicator of attention to detail.

Check that the site is not one of many, which all track back to one individual offering the same properties at different prices (e--mail us if you are unsure how to do this). Similarly, look out for identical wording on sites. This may be a sign of a duplicate site, but may simply be the sign of laziness or a distinct lack of knowledge.

Also, look for customer recommendations. If these are displayed on the site, ask the agent if any former customers is happy to be contacted by you - if not, alarm bells should ring. Additionally, run some checks on ex pat forums to see what people are saying about agents BUT, be warned, agents sometimes masquerade as happy clients in forums. Usually, they are easy to spot but ask a moderator of the site if you suspect underhand behaviour. Similarly, some agents (or their representatives) are hell bent on discrediting others so all remarks you find regarding agents should be thoroughly investigated. Agents' may have banners on their sites stating that they are members of trade organisations so do some homework on these to see if they are anything other than meaningless, self-serving bodies . We will post an article on some of these organisations soon so please check back for details.

Finally, ask the agent what company status their agency has. Is it incorporated in Turkey/your country and can they prove this? Remember that limited companies are not a guarantee of trustworthiness but do offer you a paper trail to check. In Turkey they must display a certificate on the premises which proves that they are a registered company and that they are tax payers. In the UK, you can check limited companies online to see if they are actually trading and for a small fee, check their accounts. This is probably true of other countries and we will update this information when we have it. Visit the Companies House website (for UK limited companies) and type in the name of the firm. The key mistake not to make, is to negotiate a property purchase from a barman or waiter, no matter how charming they are.

This is not an exhaustive guide but it should set you on your way. Please be cautious in selecting an agent and remember that you are contemplating a major investment. We will cover agent's relationships with developers shortly as this is also a key concern but for now we hope you feel more confident searching on the web.

Tags: estate agent Turkey

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!Turkish Property Rental Alert !

We have received information which directly affects overseas buyers who are letting their properties in Turkey

It seems that the regional tax office responsible for the Kalkan area is targetting foreign investors for spot checks to establish exactly who is staying at their properties in Turkey. This signals a move by the Turkish authorities to clamp down on a previously lax area of revenue collection. Many overseas owners are unaware of their obligations regarding filing personal income tax returns on rental income whilst others have ignored the law as it had not been enforced.

Tax Inspectors are apparently visiting properties and asking for proof of ownership/residency, which of course many renters cannot provide. Unless family ties with the owner can be proved, the possibility of punitive fines being imposed is very real. It must be added that a Double Taxation Agreement between the UK and Turkey is in operation but that the landlord is responsible for ensuring that they comply with the taxation laws of both countries.

This development may be seen as negative, not least by those caught out by inspectors, but it does offer real evidence that the Turkish property/taxation systems are developing. Jones Lang LaSalle ranked Turkey 46th of the 51 countries surveyed in their 2004 Global Real Estate Transparency Index, stating that it is an "opaque" market (more on this in an upcoming post). Some might argue that the Turkish authorities are going after soft targets for rich pickings in the Turkish property market but other developments in the Turkish tax system detract from this point of view. One example is the new automated online income tax filing system, which seems as if it will be at least as good as comparable EU versions and is an attempt to tackle the large 'black economy'.

In any case, the warning shots have been fired. If you are renting your Turkish property, now might be a good time to sort out your Turkish tax affairs (and how they relate to your country). See our previous post on Turkish property taxes for more and visit here and check section 7.3.10 for Turkish income tax rates, which are used to determine your rental tax liability in Turkey. If the lessee is a Turkish tax payer, they are reponsible for withholding this amount but if you let to a non-Turkish tax payer, you must file an Income Tax Return. For more background information, you can go to the Turkish Revenue Administration site. We will publish the 2006 tax rates which are relevant to rentals (and some worked examples) in a syndicated article, shortly.

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Tags: property tax Turkey

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Wednesday, April 19, 2006

۩ Guide: Turkish Purchase Costs

We have already posted an article on Turkish property taxes so here we will cover all the costs associated with buying a Turkish property. Please remember that some of these costs will vary depending on your choices (e.g. legal representation) and some again due to the area you purchase in, so these figures are intended as a guide. You should carefully calculate these costs and add them to the basic purchase price (and any ongoing costs and taxes) to reach an accurate figure for the total cost of your Turkish home and check the latest exchange rates. Don't be sidetracked by the developers headline figures - be savvy!

1. Search fees: up to €1150.00 (£800.00), although this can be much less

2. If you are at the signing of the title deeds (tapu) and do not speak fluent Turkish, you must use a certified translator: up to €115.00 (£80.00)

3. If you are buying a resale property (not new build) and you buy through an agent, the agent will charge: 6% of the purchase price (3% each from buyer and seller). This is not variable (as in the UK) but it can be worth trying to negotiate.

4. Solicitors/legal fees: ca 1% of purchase cost + €215.00 (£150.00) for a power of attorney to sign the title deeds on your behalf. In addition, the Turkish Notary, who must witness the deed signing process and the power of attorney, must be paid €90.00 (£60.00)

5. For UK buyers, the power of attorney must be certified by the UK Foreign and Commonwealth Office (FCO) and this currently costs £19.00 + £5.00 for return postage. You can go to the public counter in person for immediate validations. Visit the FCO link for more information

Summary

The total of the associated purchase costs will be somewhere between 5% and 7% of the purchase price so a €100,000 property will actually cost €105 - 107,000 + taxes

Tags: Turkey property conveyancing

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Wednesday, April 12, 2006

۩ Turkish Law in English!

For people concerned with the legal side of buying property in Turkey, we hope that our article will be a good starting point but if you need to ask a legal question which won't cost the earth, you could try this site. They have taken the time to start an English language forum where you can find property related threads. Apologies to speakers of other languages but we think this is probably easier for most than Turkish. See our quick translator for simple tasks. Thanks to Expats of Turkey for this information.

Tags: Turkish property law

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Tuesday, April 11, 2006

۩ Who Can Buy Turkish Property?

The following*is a list of countries which have full reciprocal agreements with Turkey on buying property. You should check with your country's embassy for precise details ( we know that there are some conditions applied to some of the countries in the main list below) general terms, if you are a citizen of one of these countries, you can own a Turkish property:

Andorra, Argentina, Australia, Austria, Bahamas, Bangladesh, Barbados, Belgium, Belize, Benin, Bolivia, Bosnia-Herzegovina, Botswana, Brazil, Cameroon, Canada, Central African Republic, Chile, Colombia, Costa Rica, Cote D'Ivoire, Croatia, Cyprus (northern), Denmark, Dominican Republic, Ecuador, El Salvador, Estonia, Finland, France, Gabon, Germany, Ghana, Grenada, Guatemala, Guinea, Guyana, Haiti, Honduras, Hungary, Ireland, Israel, Italy, Jamaica, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malawi, Malaysia, Mali, Malta, Mauritius, Mexico, Monaco, Moritania, Mozambique, Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Panama, Paraguay, Peru, Philippines, Poland, Portugal, San Marino, Senegal, Serbia and Montenegro, Singapore, Somalia, South Africa, South Korea, Spain, Sri Lanka, Swaziland, Sweden,Tanzania, United Kingdom , Uruguay, USA, Venezuela.

In addition, citizens of the following countries may buy properties but not land: Azerbaijan, Bahrain, Belarus, Chad, China, Egypt, Georgia, Iran, Jordan, Kazakhstan, Kenya, Kyrgyzstan, Macedonia, Moldova, Morocco, Namibia, Romania, Russian Federation, Slovenia, Tajikistan, Turkmenistan, Uganda, Ukraine, Uzbekistan.

*As far as we can ascertain See also: Turkish Property Law, Turkish Property Taxes

Tags: Turkey reciprocal property agreement

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