Dominican Republic Property Market
If you have been trying to sell a Dominican Republic property for a while you might be wondering why you are still not seeing much activity. Property market conditions could not be better and yet many owners don’t seem to have noticed any change. So why is that?
Well, let’s look at the market to start with. In the past, one of the reasons for not buying a resale property was that new builds were less expensive, at least on the face of it. So a potential buyer was more inclined to buy direct from a developer, often at a discount.
Another incentive was the comparable cost of buying a plot and having a property built to the buyer’s own specifications in a location of their choosing, rather than buying a resale that might need reforming or redesigning to meet a buyer’s preferences.
Both of these options have suffered as a result of Covid and now have been exacerbated by the war in Ukraine. Material costs have exploded. No matter what constituent you look at, cement, rebar, wood, cabling, right down to the cost of nails and screws prices have risen dramatically. Wages in the construction industry have also risen and will do so again from the 1st of May when a new 24% minimum wage increase comes into effect. Developers are now concerned that properties sold off-plan may cost them more to complete than the price they were sold at and that raises a risk of some developers failing to complete projects altogether.
So, you may be asking, why has my property, which has been on the market for months, or maybe years, still not attracted a buyer? The likely reason is complex, and maybe the subject of another article, but it comes down to the question of what is the market value of any property anywhere in the world. Property is an asset that like any other is affected by market conditions. That means its value can both rise and fall depending on a variety of circumstances. If you bought when the market was high but want to sell when it is depressed you will likely suffer a loss and if you need to sell you will have to accept a price below the amount you originally paid.
If you have any understanding of how a market works then you will surely have heard the expression that market value is the amount a willing seller is prepared to accept and a willing buyer is prepared to pay. And that, more often than not, depends on the market conditions at the time a sale takes place.
Unfortunately, in the Dominican Republic, most real estate agents are not qualified professionals, and when asked to value a property they just follow the examples of others. That means that they will look at similar properties currently on the market, both by their own agency and competitors, and recommend a comparable price. There is a reason for this. Properties are their “stock in trade” so they want to encourage you to list your property with them. Their fear is that if they were honest, and suggested a figure that might attract a buyer that is less than other similar properties advertised elsewhere, you might not list with them. So to keep you onboard they go with the flow and list your property at a price that will encourage you to give them the listing.
The major problem with that basis for valuation is that as soon as one agent lists at an inflated price every other agent follows suit so all properties in that category may then be overpriced and unsaleable!
This, however, is not the only factor that can distort a perceived market value. There are sellers who will list a property for sale that they have no real intention to sell. They will ask an agent to list their property at an unrealistic price just in case there is someone out there who (is silly enough) to offer them the asking price even though they know, as does the agent, that it is overpriced. The problem with this is that another seller, with a similar property, seeing this assumes his property should achieve the same price and that causes the market to become distorted with overpriced properties.
The bottom line here is that if you have a property for sale in the Dominican Republic and you really do want to sell it you need to take control of the marketing and ignore the pricing structure maintained by real estate agents. It is in your interests to decide what price you are prepared to sell at, even if that does mean a loss. Capital tied up for years in a property that is not increasing in value is wasted and if those funds can be released they could be reinvested in an alternative vehicle that can recover any loss in a reasonable period of time.
You could tell your agent to reduce the advertised price but they won’t be happy to do so and will try to persuade you otherwise. The reason for that is that reducing your price affects every other similar property they have listed and other vendors will want to know why their property has, effectively, been downvalued.
The alternative is to advertise your property for sale direct on https://dominican-republic-properties-fsbo.com We have hundreds of potential buyers, mainly from the US visiting the website every month looking for properties. Maybe yours if it was listed?
There are many buyers who don’t want to purchase through an agent. For one reason they don’t trust them and secondly, although in theory, it is the vendor who pays the commission on a sale, astute buyers know full well it is really part of the price they pay. If they buy direct the price they have paid is a real market value.
Another reason is that despite what agents will tell you, to encourage you to list with them, they are only interested in selling “a property”. It doesn’t matter to them if it is yours or someone else’s. They will try to sell the property they think the buyer will purchase and if that means turning them off from buying yours they will happily do that to get the sale.
Listing your property on https://dominican-republic-properties-fsbo.com is free. No commission, no listing fee, and no cost to the buyer either. So you have nothing to lose and can still keep your property for sale with your agent. In fact, if they know you are trying to sell privately it might even encourage them to put more effort into finding a buyer for you.
Oh! One question often asked is how can we offer free listings when agents are charging anything between 5% and 10%. The simple and honest answer is advertising. So the more properties we have listed and the more visitors we have improves the likelihood of finding you a buyer and increasing our advertising revenue to keep the site free.