Buying overseas real estate often comes with increased responsibilities. Hence you need an efficient local real estate agent

While you might be a real estate guru in your home country, buying real estate in a foreign country can get messy without a knowledgeable local real estate agents

Here are just three ways things could go wrong when buying overseas property:

Over-the-top valuations: A foreign buyer probably doesn't have the stats on comps and recent sales that would help him make the best decisions on pricing. Locals might see this as a chance to price the property above market value. Without an agent on your side and banking on exchange rate advantages, sellers might feel justified to charge you more.

Taxes and paperwork omissions: In countries like Spain where there could be local rules and taxes regarding foreign home ownership, it's easy to ignore a few details. Not having the necessary licenses and permissions can be very costly.

Lopsided Communication: Sure your developer wants to come to terms quickly, which you find appealing as you don't want to hang around too long. However, you don't want to sign any form or contract without understanding what it entails. It's always important to get expert advice before signing on the dotted line.

You should have two people on your side when buying foreign real estate, a lawyer, to help with legal complications, taxes and paperwork and a real estate agent to guide you through the home buying process. You might want to ignore an agent's services as a way to save on agent charges. But here are six reasons why hiring a real estate agent for foreign property purchases is vital:

1. Full access to the market: Buyers in North America who work with agents have a full access to the Multiple Listing Service (A service that offers access to information regarding market value, comps and properties on the market). While some countries do not have a property listing service, a good agent will likely have a slew of properties and connections with other agents. This ensures he can secure a property that fits your criteria.

2. Detect overpriced properties: Where there is no MLS to set pricing, sellers and their agent often pad the asking price on their properties. Especially when the buyer has no agent on their side. Even in countries with MLS, ignorance can be a justification for an agent to charge you up to 40% above asking price. You can take advantage of an agent's market knowledge in this case. An agent has comps and data coupled with market experience and should be able to tell you instantly when a property is overpriced. However, do not neglect to do your own research about properties that catch your fancy. This will help you keep unethical agents in check.

3. Help with securing mortgage: One of the risky aspects of buying property abroad is getting financing. When considering going for a mortgage, your real estate agent can give you the low-down on mortgages for foreigners. He or she might also be able to connect you with bankers. An agent can also facilitate your loan by helping you with the necessary paperwork. This is one major reason why the services of a real estate agent are invaluable when you're buying a house overseas.

4. Negotiating and drawing up an offer: Negotiating tactics you have mastered in the US might fail to work when negotiating with sellers in Japan. The reason is that there are culture and language differences which can be difficult to fathom. So instead of trying confrontation or hard sell tactics, it is usually best to hire a professional agent who understands your situation and can persuasively represent this to a seller.

5. Help with finding good deals: You're probably trying to scoop up a good deal on a property. However, it's unlikely you'll find great deals by driving around a neighborhood. Agents have connections with other agents and access to a lot of properties. Hence it's much easier to find great deals by working with them.

6. Recommend trusted professionals: A trusted real estate agent would probably have a number of reputable service professionals in his network from inspectors, lawyers, handymen, mortgage lenders etc... This would be highly beneficial since you have little experience in the neighborhood and might be susceptible to pseudo professionals.

Caveat: When choosing agents to work with, work with vetted professionals. Don't just go with the agent down the street as that might turn out costly. This is why we periodically recommend agents in select communities who are vetted and have significant market experience to make your foreign property dream come true.

A combination of cheap mortgages and plunging prices have triggered and are still triggering investments in foreign property. 5.4 million Britons consider buying a property abroad. But buying foreign property is not easy. Many of the British folks who bought Spanish properties before the financial crisis now contend with legal battles, touting to pull their foreign property down and that dream of foreign property ownership with it. Many of those who rushed into foreign property investing have sad stories to tell. The most important advice when making an international property investment is still to take your time, do careful research and get legal advice.

Buying property abroad, where currency value favors you is a lucrative arrangement. Currently, the Pound leads the Euro by 10%, so British property buyers looking to buy in Italy, Spain, Portugal etc. would have to pay 10% less on comparable properties. It might not be worth it if you consider travel costs and other expenses. Hence, apart from knowing legal and property rules in your destination country, you should also consider how much you're going to spend and if the expenses would justify itself.

Moreover, there could be scrupulous characters you have to deal with. In property buying, you have to let your head make the decisions. More so, when buying abroad. Let's explore the five common mistakes international property investors make and how they can be avoided.

MISTAKES INVESTORS MAKE WHEN MAKING INTERNATIONAL PROPERTY INVESTMENT

1.      Lack of information.

You can easily get burned when you are not aware of the nuances and trends of your chosen real estate market. It's not just enough to research and find out the particulars of making an investment in a specific country, be aware of the mistakes specific to foreign property investors in that country. If the eager Brits of the pre-recession had been well-informed, they wouldn't have fallen into legal traps.

2.      Planning on the move.

Don't buy a house, then put together a plan later. Have a plan before you buy. This is all the more important for investors. It is the most common mistake made by newbie investors. You might spot a good deal and be prompted to make an offer quick. Don't. Make sure you form a plan beforehand and get a property that fits your investment strategy. This will keep you focused.

3.      Trying to make money quickly. Real estate, unlike stocks, is usually a long term investment. If you think you'll make a load of profit on your property within a short time, you might be setting yourself up to be disappointed.

4.      Flying solo. Professional investors always have a team. The team usually comprises of real estate agent, an appraiser, an attorney and a lender. If you want to achieve success in overseas real estate investing, don't fly solo.

5.      Paying too much. Flying solo and inadequate research most times will lead to paying too much on a property. New investors abroad usually goof up by paying too much on the properties they buy. Making this mistake will leave you working with less if you plan on buying for investment.

As much as it is lucrative, buying a home abroad is risk bound. It is always important to exercise caution when making an overseas investment deal and learn the fundamentals.

You don’t want to pay excess on a property. So, it’s important to know what a home really costs on the equity scale

Real estate whether home or abroad is a substantial, long-term investment. It is therefore imperative that you research various countries and neighborhoods before choosing one to invest in because economists agree that there is an opportunity cost to investing in a particular property.

Your research should include the existence of changing political and economic scenarios, as these would have profound impact on the housing market, especially influencing central bank rates and lending policies.

Factors Affecting Market Value of Foreign Real Estate

Location is critical. Apart from the real estate conditions existent in the country, you don't want a place with high crime rate and bad transport system. But looking ahead, you have to examine the profitability of your investment. Home appraisers looking at homes consider features like property age, lot size, internal square footage, number of bedrooms and bathrooms, amenities and overall condition. Hence the first step in determining your home's market value is taking an appraiser’s glasses and looking at the home objectively, writing down the principal features of your home.

How to Determine Market Value of Foreign Real Estate

Valuing a home is not an exact science but here are some things you can do to make a ‘scientific’ guess on the fair market value of a property abroad.

1. Check out comps.

Find four or five comparable homes in the area that have sold within the past six months. A local agent should be able to help you with that data. Your research on comparable homes (comps) will give you a good indication of what your intended property might be worth. Comparable homes should be roughly the same size, construction, age and style with the same number of rooms, layout and other features. You want to identify the prices at which these properties sold and how fast they left the market.

2. Calculate the rate per square foot.

For each of your comps, divide the selling price by the square footage of the property. This gives you a price per square foot or PPSF. Find the average value of these homes by adding the PPSF figures and dividing by the number of comps you are using. For example, suppose it has the following compositions:

Property A is 2,000 square feet and sells for $ 420,000. The PPSF is $ 210.

Property B is 2,200 square feet and sells for $ 480,000. The PPSF is $ 218.

Property C is 1,900 square feet and sells for $ 390,000. The PPSF is $ 205.

Property D is 2,000 square feet and sells for $ 475,000. The PPSF is $ 237.

The average price per square foot is $ 217. Multiply this figure by the number of square feet of your home to get a rough idea of ??the market value of your home.

3. Consider the special qualities of your home.

While the PPSF gives a benchmark, it does not take into account the unique features that could raise or lower the value of your home. Improvements like a new bathroom, kitchen or siding tend to add value; On the contrary, it is likely that a home in poor condition will have a lower value than a well-maintained property. There is usually a wide variety of prices per square foot based on these factors. Ultimately, you have to decide if your home is worth more or less than the average PPSF in your neighborhood.