Realtor Thursday

A Special Interview

Dale Robyn Siegel sits down with RE/Max Business Development Manager, Kathrin Wagner-Leuschner at the Berlin HQ of RE/Max – Germany

For part one of the interview please click here.

I recently had the pleasure of visiting Berlin for a working vacation this past summer. Of course, I covered all the tourist highlights such as visiting the opera, going on a Fat Tire Bike Tour, and wandering the state museums rebuilt after the war. I also set up several city walks and interviews with professionals to get a flavor and understanding of the real estate market in this European metropolis. The city was fascinating on so many levels, and their take on the economy, the banking sector, and real estate are quite different from the United States.

Berlin, the capital of Germany, is a city that has been through many changes since its birth in the 12^th century. It is currently one of Europe’s most cosmopolitan and expensive cities to both live in and visit as a tourist. It is a sprawling city of approximately 892 kilometers broken down into 23 districts or neighborhoods. The old and new architecture mix surprisingly well among the expansive green areas on either side of the Spree River and beyond. With a population of well over three million, the city has easy access to most other European areas by air or train.

During my trip I was pleased to have an extensive interview with two top RE/Max representatives: Kathrin Wagner-Leuschner, head of Franchise Development and Marketing in Berlin, and her colleague Dr. Norbert Ritter, also a Regional Director of RE/Max Germany. They met me at the main offices in Berlin.  They were both informative and quite patient while I drilled them on an assortment of subjects as only a New Yorker would. In an hour long interview recorded via my Blackberry on August 30, 2010, they had a plethora of important details to share. I preserved their voices because their ideas definitely rang clear.

This interview is posted in two parts as it exceeds recommended word counts for blogs and there are two distinct topics covered here. Part I will cover information about living in the coty and the city itself. Part II leans towards the process of buying a home and the participation of the real estate agent with this. Both very interesting!

The following is an uncut transcription of the second part of my interview

Do most people own their own homes in Berlin?

More than eighty percent of Berliners rent their homes. Within the inner city, the residences are typically condominium apartments owned by large international companies from Denmark and other neighboring countries that purchased them from the German government. In the past two years, the real estate market has collapsed from the global economy, bringing down these large commercial landlords and leaving hundreds of empty flats throughout the city. Still, it is more difficult to buy by financing and easier to rent here, so regardless of the low prices offered, Berliners still prefer to rent.

Tell me about the process of buying residential real estate.

For an average person to buy a house, they need financing. It is very difficult to get this financing and a long ordeal. A lot of documentation must be provided, and a large down payment must be procured. Interest rates are low, but try and get the money; it is nearly impossible for the working person. The banks that normally do real estate loans for residences are very picky who they lend to. There are not many of them out there, and they require the borrowers to hand over assets and investments as security—things like savings accounts and life insurance. The banks are big German banks and not local lenders or international lenders. Business owners can sometimes go to their business bankers for residential loans (doctors, lawyers, and the like) same as anywhere else. Self-employed buyers are harder to obtain mortgages; if they cannot prove a long history of solid income and convince the bank they had longevity in their career, they would not get financing.

Do the big developers and individual sellers typically use real estate agents to sell their homes?

There is new construction in the city, or renovation of old war-torn building which are being designed and sold as condos to individuals, but again it is difficult to obtain financing. The developers opt to sell the units themselves without the use of realtors: no commission is due.

Why do you think sellers do not use the services of realtors more?

Less than 40-50 percent of the sales utilize the services of a realtor. Sellers prefer to advertise in the local papers and on the internet platform to sell their homes – people have no idea how hard or expensive or difficult to see their home.

This frustrates me! How can you sell your house on your own. Do you cut your own hair? Sellers believe that they know their home best. Realtors are trying to educate the seller that they cannot represent themselves as a third person with the most expensive asset they have. You cannot mix emotion with profession. First we need to explain they need a realtor, and then they have to do the best job. More than 60% of realtors are not very good in Berlin. Re/Max has five offices in Berlin—in Germany they are the third largest. There are 800 realtors in Berlin—less than half produce the sales—the sales agent receives 80% of the gross commission on the sale. This is a lot of money, but there is much time and expense that goes into it first. Often, after this time and expense, the property does not sell.

Typically the buyer pays the commission; however, the seller has to get them [the buyer] to agree to do it. The realtor is working for the seller, closing a contract with the seller, providing services, and then a third person the buyer that they do not know yet has to pay for it. They are agreeing but are not obligated to pay it. Re/Max is trying to get the seller to agree to make the commission. [For example, a] 6% buyer pays half, and [a] seller pays half, or the seller must pay the entire commission. Out of the 6%, about 1/3 of the total commission is spent on marketing costs even before the deal closes. Marketing costs increase with the prices of the house. Commissions are only in case of success, and marketing costs on a 3 million Euro flat can be 20-30 thousand Euros [Approximately 45,000 US Dollars]. You need to market heavily for properties and show customers many things.

Realtors in Germany are not used as much as in the U.S. Sellers feel they can do it themselves; the level of realtor in Germany is low standard. Anybody that is not a criminal can become a realtor. All over the world there are exams and courses, but not in Germany, so it is a very part time job.

Re/Max is very progressive in the industry: they do open house for realtors and buyers, they provide marketing material, [and] are in constant contact with sellers offering printed reports of the activity. This has brought them to a greater level. It is the Re/Max model, and it works. It is hard to price out a house, what is realistic in themarket. We make sure the seller is ready, willing, and realistic before we take the job.

Elaborate on your use of the words, “Ready, willing, and realistic.”

We ask sellers three questions before we take a listing contract. If one question is answered with no, then the RE/Max model says not to take the listing.

1. Are you able to sell your house, meaning do you own it, or do you have someone else on the ownership with you that you need to ask?

2. Are you ready to be realistic with your price, or do you expect to make a great windfall?

3. Are you willing to sell—really willing to do it, sell it? If I find you a buyer, will you sign over the title?

I myself, abide by this model implicitly. I might throw away a potential listing, but if the seller is not solid, then I cannot take that chance. I work very hard and have to put out an investment of money. On occasion I take a risk and lose. As time goes by, you begin to know who is honest and who is not.

What is the new area to come?

In the southwest area of Berlin, they are building a new airport. It is replacing Tegel Airport. When the new airport opens, it will create over 30,000 new jobs. This is a tremendous amount of jobs and movement to the area. In addition, Tegel Airport is closing, and workers from there will be moved to the new airport. They cannot drive to the new location; it would take two hours. There is a new highway which was built going through the city, but it would still take two hours. Where the old airport will sit, there are plans to keep the building and structures and create technology centers and office complexes. This too will move people to this area, a new people of perhaps young and educated workers. Again, the area will be enhanced by the new families, which we hope would bring a building of stores, restaurants, and other businesses that are needed for these new neighborhoods. It is all a very exciting changes to come.

—

This was my first live interview outside of the United States. It was wonderfully exciting, and I was lucky to have such a knowledgeable person to speak with. Originally, I was concerned by the language barrier, the differences in the real estate industry, and the cultural differences and wanted to be well prepared for the interview. I had done a lot of research ahead of time and sent over the list of questions I would be covering. Amazingly, Kathrin was just as prepared as I! She had done her own research and had supporting data waiting for me. The conversation flowed outside of our question regiment, and it turned out to be a very pleasant meeting. In addition to our details, we chatted about IPhone vs. Blackberry, restaurants in town, biking, and the overall difficulty of being a realtor. As I left the Berlin HQ of RE/Max, I felt that it had gone well and could produce a solid article on living in Berlin. My stay in the city was much more than I had asked for, and, yes, I will go back within the next few years to check in with Kathrin and RE/Max on the progress of the new airport districts, the health of the real estate market, and the trying times of being a realtor in Berlin.

Dale Robyn Siegel is a financial writer and author of the award winning book, The New Rules for Mortgages. She is an expert on residential real estate and writes about the changes in the industry. Dale is often quoted in national publications on residential finance. She is an avid traveler, and writes a series of articles on her city visits called Four Days in……. Places she has visited and written about in the past year are Dublin, London, Montreal and Berlin. Most recently, Dale has been to Cairo, Egypt to understand real estate and finance as it was during the Pyramid Age. She can be reached at dale (at) dalesiegel.com