The biggest problems of Real Estate market: Mentality, no laws and the 2008’s artificial prices

This articles was published on 11.05.2010

My company continues operating in the market, despite the difficulties which all serious companies face. But as time goes by, it is getting clear that the biggest problem we have is not the… never ending world economic crisis. Neither the blocked local economy nor the endless mistakes of all the market players. Not even the huge "bubbles" that several local banks still try to hide in between their balance sheets, pretending that everything is ok.

The biggest problems we face
The time is passing by and the things get worse. Everyone blames the others, but the situation does not improve. And the biggest issues are not the above mentioned ones.  "Then why is the market blocked nowadays?" many people ask in daily basis. I think the problems are deeper and unfortunately people like to pretend that they don't see them, even if they fight with them in daily basis. Despite the crisis, the biggest problems wefight against are:

• The wrong mentality
• The absence of a complete legal frame
• The 2008's artificial prices, which are still dominating the memories of millions of people.

Wrong mentality
You are free to choose the correct % (and if you disagree, I am here to discuss this with you):

• 60 – 80% of owners try to trick the sellers
• 40 – 60% of owners try to trick both the sellers and the Real Estate consultants
• 70 – 90% of Real Estate consultants try to trick the buyers
• 50 – 70% of Real Estate consultants try to trick both the sellers and the buyers.
• 50 – 70% of the buyers try to trick the Real Estate consultants
• 30 – 50% of the buyers try to trick both sellers and Real Estate consultants.

Now tell me… what is this??? Until when we will continue with this mentality of "smecheri", who prove their "talent" by tricking each other?

How can we move on as society when most of us try to trick the others? We still did not get rid of many crooks, who continue earning money destroying the market in all possible ways.

The absence of a complete legal frame
I entered into Romanian Real Estate business like all the rest: Without any serious control of my knowledge, my capabilities and my background. Noone cared if:

• I was serious, or not (yeah, I signed some typical declarations, so what?).

• I had a huge criminal record in my country or not.
• I am mentally healthy or not.
• I work in daily basis following some rules, or I behave like a wolf in the forest.

Why is that? Simple:

• The rights and obligations of a Real Estate consultant are not clear.
• Clients can not defend themselves in case someone tries to trick them,
• There are several… unions of Real Estate companies, plus smaller groups. None strong enough to impose "rules".
• "Real Estate Law" allows to several law firms to live happily, as there is "too much space for maneuvers".
• In the name of freedom, almost everything is possible. Sometimes this reaches the limits of anarchy but…

Properties are the most expensive "deals" that 90% of people will deal with during their lives. And this fortune of billions relays on the good intentions of the market players. "Many other countries do this too" you might comment. Well many other countries do NOT do this, I would reply.

The 2008's artificial prices
The market has been frozen since autumn 2007. There were very few transactions during 2008 and since then we keep on declining comparing to the previous year. But this is not enough. People's minds are stuck in the "golden year", 2008. When they felt rich, when all their dreams could come true. What if…

• The market changed?
• The (desperate to invest) clients have disappeared?
• The properties in Western Europe are much cheaper than they used to be?
• The banks keep their doors closed for the second consecutive year?
• The Romanian economy has been contracting for 6 consecutive quarters, the unemployment rate is almost double (than 2008) and the bankrupsies are 5 times up?

Sadly too many people still remember these prices and they keep on trying to convince us that they are the point of reference. But the reality is different. In most of the cases there were no transactions, just asked prices. So we don't talk about prices being established by deals, but about what someone asked and another one followed him. Also 2008 has become an "ideal" period in the people's memories. "All clients were serious, all of them had endless money to invest, any price was possible to be obtained…"

My solution: Back to basics
The prices of 2008 will be forgotten during the following years. Plus whoever will not forget them, will simply suffer or wait for many more years.

But the insufficient legal frame and the mentality must change together. We need a new description of who does what, who controls whom, who pays and how much. New, strict rules, in order to solve the problem to its roots. And please don't start with "people should be free to do whatever they want". When we let Real Estate market 100% free, it becomes uncontrolled and many people remain unprotected.

We need simple, clear rules, easy to follow and to be crosschecked. I know that many "sweet thiefs" will not like the idea (because they make more money being in the "myst") but I think that the time has come to protect:

• The owners
• The clients
• The serious Real Estate consultants
• All the rest of people involved in this business.

Real Estate represents one of the strongest market segments in Romania, with excellent potential. While the economic problems will be solved somehow, it is the time to start the reforming of the market. If not, we will lose much more time waiting. And I don't think we have too much time available anymore…