There’s something rotten about how Norway’s residential real estate market functions, according to a new study that shows how many buyers are subjected to extreme time and price pressure. Norway’s consumer council is now blaming real estate brokers for the limited property showings and heated bidding rounds that put prospective buyers into “a terrible situation.”
Supply and demand aren’t the only factors behind Norway’s high housing prices, soaring debt levels and all the complaints filed later when buyers discover serious problems with the homes they bought, according to consumer advocates. “We are extremely critical about the way home purchases occur today,” Thomas Bartholdsen, a director of Norway’s consumer council Forbruketrådet who specializes in housing issues, told newspaper Dagens Næringsliv (DN) on Friday. “There’s a shortage of time (built into the residential real estate market when properties are put up for sale) that can only be to the advantage of the real estate brokerages.”
There’s no question that Norway’s strong economy in recent years created a strong real estate market that has seen prices quadruple or more in the past 20 years. Prices in Oslo, for example, have recently risen at a rate of around 8 percent per year, and while there are signs the market is flattening out because of the oil industry slowdown, prospective buyers still flock to property showings and bid up prices.
‘No logic’
It’s the system attached to a showing itself, known as a visning in Norwegian, that is setting off protests from the consumer advocates. Showings typically last only an hour, and are often packed with rival buyers. Many brokers now also charge sellers for each showing in addition to their standard commission. That has led to single showings of many properties that in turn allow interested buyers very little time, in less-than-relaxed circumstances, to inspect the subject of what may be the biggest investment of their lives.
DN reported earlier this week on a new study conducted by research firm InFact for the real estate brokerage Privatemegleren. It showed that fully 20 percent of buyers spent less than 30 minutes actually viewing the property they later bought. “We actually use less time to look at a house than we use to evaluate new kitchen appliances or a new car,” Privatmegleren broker Grethe W Meier admitted to DN. “There’s no logic in that.”
Bartholdsen contends it’s the brokers themselves who have heated up the market, by cutting back on showings and then calling buyers to urge them to bid by deadlines set at noon on the first workday after an advertised showing. DN reported that brokers aren’t allowed to present sellers with bids before the deadline, a restriction aimed at calming down the frenetic bidding process, but Bartholdsen doesn’t think it’s helped.
‘Just incredible’
“If you haven’t delivered a bid by noon, you’re out of luck,” he told DN. “It’s just incredible that one of the most important purchases in a person’s life should be conducted in this manner.” Brokers have contributed, he said, to reducing the time consumers have in connection with a residential real estate purchase.
“It’s easy to understand that the real estate brokers have an enormous advantage when the process goes so quickly,” Bartholdsen told DN. “They can sell more properties, but it’s a terrible situation for homebuyers.”
The brokers’ clients can benefit too, from the high prices for sellers that often result from bidding rounds. The vast majority of residential sales in Oslo, for example, have yielded prices well above appraisal. The problem for both buyer and seller, though, is that many sales are later disputed, after buyers discover serious deficiencies in the condition of the property. Meier of Privatmegleren herself noted that the risk of unpleasant discoveries after the conclusion of a sale rises when buyers have had too little time to properly examine a property.
Defending the practice
Christian V Dreyer of the brokers’ trade association Eiendom Norge defended current practice, contending that he thinks most buyers (who rarely if ever are represented by their own broker in Norway) are “well-prepared” when they arrive at a showing. Most, he said, have already read the prospectus, acquainted themselves with the neighbourhood and arrived with questions to pose to the broker. “For a normal flat in the city, you can see a lot in the course of an hour,” Dreyer told DN. “A larger house can demand more time, but you can hardly ever be thorough enough.” He told DN he had no statistics showing whether fewer showings were now being held.
There’s rarely time for independent assessments of a property by technical experts, before bidding takes off and a property is sold. “It can go very quickly when someone finds their dream house,” Hildegunn Sande, another broker for Privatmegleren told DN. “It’s easy to forget important things.”
Most see little likelihood of more state regulation of the real estate market, of introduction of the much lengthier sale and purchase processes found in other countries such as the US. That leaves Bartholdsen worried that buyers in Norway will continue to have poor possibilities to investigate, question, read documents and otherwise evaluate a home purchase. The speedy process means they risk the property being snapped up by someone else before they felt ready to make an offer.
newsinenglish.no/Nina Berglund
