Legal Insights with Klein Law: Buying a Secondhand Flat in Georgia

This is the first Real Estate by Legal Columnist Daniel Klein. Next week’s Part 2 article will discuss buying an apartment in a new building and Part 3 will follow and focus on the basics of renting an apartment in Georgia.

This is the first Real Estate by Legal Columnist Daniel Klein. Next week’s Part 2 article will discuss buying an apartment in a new building and Part 3 will follow and focus on the basics of renting an apartment in Georgia.
Buying a flat in Georgia is quite simple and streamlined compared to most countries. Georgia has no shortage of properties for sale and, relative to almost any market in the region, every offer seems like a bargain-hunter’s paradise.

Unregulated Real Estate Brokers
Unlike most countries, there is no licensing board for RE brokers. In most countries, the RE Brokers are very strictly regulated, and anyone offering to sell a piece of real estate without a local license from the state (the US provides licenses on a state-by-state basis) or the countries’ licensing authorities could find themselves subject to fines and/or many years in prison: up to 5 years in the state of Florida, for example.
In Georgia, as there is no formal brokerage licensing system, anyone and everyone can be and seems to be a real estate agent. They are not bound by any laws of ethics and there is no realistic quick and inexpensive recourse for unscrupulous behavior. A visit to local brokerage sites is really a tell-tale of what the agency scene is like. If a search is made for, say, a particular unknown street in Tbilisi, there might be several offers with pictures and prices for properties available. However, when the agent is called, the response can be, for example: “I don’t know that street….there is no street with that name in Tbilisi.” When you inform that individual that they themselves put their name associated with a property on that street, they draw a blank, and again insist that such a street does not exist. It may require sending a screen shot from Google Maps to verify that such a street does indeed exist. Then sometimes when they realize the area you are interested in, they try to tell you that you don’t want to rent there because its supposedly noisy or dangerous, and they may then send a bunch of beautiful offers in a completely different region of the city. In most countries, a fake ad could result in a loss of license, fines etc., or charges of false advertising.
There are indeed many valid, honest and fantastic brokers in Tbilisi, but it is important to have someone in the know to find them.

Conflict of Interest of Real Estate Brokers
Real estate brokers usually work for sellers and not buyers, meaning they are interested in a speedy commission (this is the case around the world); their company may even have monthly sales quotas. They also steer potential buyers to properties where they get the biggest percent of commissions (brokers everywhere usually share fees from 0% to 80% with other brokers; varying depending from offering to offering). When they represent sellers, they also sometimes act unscrupulously, since they try to get the lowest price possible to get a speedy sale. At the end of the day, some (of course not all by any means) brokers are there only to make money without any interest in assisting the buyer with what they are looking for.

Bad Legal Advice offered by Agents
As speed and maximizing commissions is the priority for Agents, they often tell buyers that the broker will legally advise them about the validity of title and the legal fitness of transfer documents. In order to speed the transaction along, Agents often discourage buyers from hiring their own lawyer, since they will try to persuade buyers that it is a waste of money and time (actually of the broker’s time). They might even try to give some oral guarantee that the everything is legally valid; even without having a legal background, which is usually the case. Any third independent rep of the Buyer might be a spanner in the works which could delay the purchase; the last thing the Agent wants. Buyer beware! What if after the purchase there was a legal flaw? Not much recourse here. Suing in Georgia takes years.
If the transaction is north of 100K USD and that amount of money is significant for the buyer, perhaps proper independent (non-biased) legal advice might be in order.

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