Nothing down, everything to gain

INEVITABLY, the average expatriate living in Slovakia will be asked to explain "Why Slovakia?" to curious friends and acquaintances whenever he or she travels abroad. These days I convince my American compatriots back home with the soundness of my choice by uttering two words: "Investment opportunities".

INEVITABLY, the average expatriate living in Slovakia will be asked to explain "Why Slovakia?" to curious friends and acquaintances whenever he or she travels abroad. These days I convince my American compatriots back home with the soundness of my choice by uttering two words: "Investment opportunities".

The truth is entirely different, of course. My husband and I moved to Slovakia a year ago for reasons that had nothing to do with real estate prospecting. But after living and working in Bratislava and being exposed to the unique business climate, we could see why big corporate investors from abroad were showing keen interest in the country. It wasn't until recently, however, that we realized that foreigners like us - non-business types with modest incomes and meagre savings - could play the investment game, too.

Homeownership, here we come

Becoming a homeowner in a former Communist country is ironic to someone who grew up in the United States during the Cold War. But the reality is that the Slovak Republic is more accessible than the US when it comes to buying residential property with no down payment. With the various mortgage products on the Slovak financial market, potential homebuyers can apply for as much as 100 percent financing - this includes foreigners with temporary Slovak work permits! Mortgages are being offered at favourable rates - currently below 5 percent - by an assortment of banks. It's no wonder that the European Central Bank recently reported that Slovakia leads the EU in mortgage loan growth.

That's not to say that the process of looking for a flat, negotiating with the owners and applying for a mortgage in Slovakia is easy. Old habits die hard, and Communist-era bureaucracy plagues the process. Even those who speak Slovak will find themselves facing challenges, as the business of buying and selling and financing residential property in Slovakia is still young.

Although the National Association of Real Estates Offices of Slovakia (NARKS) is trying to promote professional business practices and educate its network of members on a code of ethics, they have a long way to go to raise the level of sophistication to reach that of the West. In the West, realtors assist their clients at all stages in the process, from flat viewing to sale negotiation to mortgage services. And because the work is commission base, the realtor is motivated to provide exceptional service.

Real estate services: a field in flux

Realtors in Slovakia play a far more limited role than their Western counterparts. According to NARKS, the average Slovak realtor usually represents a client in the process of finding a buyer or seller, offers some law and tax advisory services, and works out a proposal to change ownership in the government land registry.

My experience is that a Slovak realtor is often a keeper of keys - actually something less - since few Slovaks will entrust their keys to an estate agent. (This makes viewing cumbersome, as the schedules of buyer, seller and realtor must be coordinated, a situation made worse by the fact that Slovak realtors do not work nights or weekends.)

Since real estate is not a licensed profession in Slovakia, few agents possess knowledge of the buying and selling process. Many cannot play the advisory role that Westerners are accustomed to finding in agents. If you decide to go with an agency, my advice is to seek out an organization that can describe its services in detail. Better to have a firm grasp of what you will receive before you commit yourself to a fee.

Keep in mind that Slovak realtors are at a disadvantage compared to agents in the West. In the US and Britain, for example, the real estate community follows standardized business practices. Professionals have access to a register of property listed for sale. This common database, available only to licensed realtors, includes all the information associated with a listed property, from sale price to the real estate agent attached to the property. The register is updated regularly to include final sale prices and in this way, the community is aware of market trends. Speculation is kept at a minimum and banks have a better idea of property values, thus making the lending process easier.

Such a register does not et exist in Slovakia. NARKS is cooperating with the National Bank of Slovakia to create a common register but it says

that politics, a shortage of money and an inadequate IT infrastructure are slowing down its efforts. In the meantime, potential buyers can browse for a peek at some of the residential property on the Slovak market. But since many real estate agencies are not wired, many sale properties are not advertised beyond the local paper or store window. This is the downside to choosing a sophisticated real estate agency. While such firms may be able to support a foreign buyer's needs, the lack of a common database means that they will have difficulty accessing some of the more obscure bargains on the market (i.e. fixer uppers). If the agency is up market, you can expect their properties to be as well.

The adventure of it all

One must be open to risk in order to invest in residential real estate overseas. It also helps to have local friends and associates. Thanks to the consistent generosity of our Slovak friend Eva and the services provided by Hypocentrum, a mortgage services company in Bratislava, my husband and I found ourselves signing a "Contract for Future Purchase Contract" in triplicate. This contract obligates us to sign a contract for the future purchase of a two-room flat in Bratislava's city centre, provided all contract terms are met.

The Contract for Future Purchase Contract is one example among many of the bureaucracy involved in the purchase process. The Contract for Future Purchase Contract is designed to protect the buyer from an opportunistic seller willing to sell the property to a higher bidder while financing is being secured. (In the capitalist West, no one would blame the seller for accepting a better offer in cash!)

The Contract for Future Purchase Contract also protects the seller in case the buyer finds a better deal at the last minute. The stress is gone - but so are the chances for a better opportunity.

Culture shock is part of the fun of buying a home in a foreign country, and it can certainly teach you something about yourself. My husband and I were surprised to learn that a nice Slovak couple, whose flat we had viewed and liked, had been waiting on our "decision" for two weeks. They had refused to show their flat to anyone until we said definitively that we did, or did not want, the flat.

"The sellers are being polite by reserving the merchandise for you," our translator assured us, "but they are running out of patience and would like you to decide please." If it had been my home, I would have held an open house and sold to the highest bidder. Sitting on the seller's soft couch, looking into their friendly eyes, I acknowledged my predatory nature. They wanted us to have their home because they liked us and we were first. In the end, my husband and I were unable to suppress our American business instincts and we offered them significantly less than their asking price. Their faces registered shock.

Shortly thereafter, we made an appointment with Hypocentrum and received some much needed support. Fluent in English, our agent had a broad knowledge of the real estate market and the basic legal issues involved. She provided invaluable advisory services free of charge, and filled us in on cultural matters. (At present, counter offers are almost unheard of in residential real estate deals.) In addition to being a liaison between buyer and seller, our mortgage broker explained the various financing models available to us. She knew which banks would meet our lending criteria, and which branches would provide the best chances for approval. When my husband and I were ready to apply for a mortgage, Hypocentrum managed it all for a reasonable flat fee. The company's close cooperation not only with banks but also with real estate agencies, property appraisers, notary republics and others made what would have been a Herculean task on our own possible.

Buying property feels a little bit like gambling. I don't think where you buy change that - perhaps it just alters the stakes. Here, like anywhere, investing in real estate, while considered one of the safer investments, is no guarantee. Vladimir Mečiar, Slovakia's former prime minister, could take the country back into economic isolation. The European Union could collapse. Then again, property values could rise and Bratislava could be the next Prague. We could sell this property for twice as much as we paid for it. With a 100 percent mortgage, however, the worst that can happen is that the bank forecloses on our property and we leave the country poorer but wiser. One hopes that Slovaks, in addition to foreigners, take advantage of this window of opportunity, before it closes.

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