Home buyers in a ‘terrible situation’

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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.”

Norway's housing prices are hitting sky-high levels, and rising debt levels are causing major concern. PHOTO: Views and News

Sky-high prices and quick, sometimes hasty, sales aren’t just a result of a hot real estate market but also the pressure that the real estate brokers’ system puts on buyers, according to Norway’s consumer council. Many buyers spend less than 30 minutes viewing homes that are on the market, because of short showings, before they need to commit to a purchase. A new survey shows that most homes now sell within 16 days in Oslo, and 29 days on average nationwide. PHOTO: newsinenglish.no

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

  • frenk

    There is one thing about Norway that is certainly becoming more apparent to me – a GREED factor…where the consumer/buyer is always treated like a CHILD…..

    • DK1984

      Don’t forget ENVY as well. “I see there are two new Teslas on the block, how come I don’t make enough money to buy one of those?”

      When we bought our home the broker called me the morning of the “auction” at 10:00 asking if I wanted to bid against the 1 other person bidding. I did. The broker then called back less than 15 minutes later with a counter bid and tried to get more out of me. I told them I would call back with a counter bid if I wanted to counter. They called me 2-3 more times trying to fuel the bidding. They were so persistent I had to tell them to stop calling. At 11:55 I called and gave the winning bid for the home. Thus taking all power away from the agent who was quite assertively trying to get us to bid way more than the place was worth.

      This is a very flawed system that should be changed. Estate agents get paid WAY too much money for being auctioneers, and not actually SELLING properties.

      • inquisitor

        Some of the safeguards of how real estate is sold should be adopted from the US. The buyer should always have a competent home inspector look at the place in its entirety and unacceptable deficiencies are either fixed by the owner or the cost is subtracted from the sales price before the sale. There is no excuse to act like there is no time for this process. I realize there are some rules in Norway where a seller can be held accountable for deficiencies after a sale, but taking care of this before a sale is completed is ideal for the buyer. Question is if there are any competent home inspectors out there.

        • frenk

          This, ‘Terrible Situation’ must be addressed and remedied!

          • Saiyma

            I just came across this website and have been trying to leave a comment. I am re-selling my property as we could not move inn due to practical reasons. Brand new property with 5 years “new home garantee” , close to the main airport Gardemoen and 25 min drive to Oslo. 3 bedrooms, 2 living rooms, 2 bathrooms, carport, terrace and great location. Close to buss, train and all facilities. Perfect. to live selv or rent. Selling for the same fixed price we bought it for so no bidding. Contact me on email if interested. [email protected] http://m.finn.no/realestate/homes/ad.html?finnkode=71663047

  • Johan Åsenheim

    Had a chat with a real estate agent about selling my flat, he charges 2,400 NOK per hour or has a package “deal” for 100,000 NOK. What is so valuable about his skill-set that he can charge such an absurdly high hourly rate? What is his contribution to the economy? Homes sell themselves in Oslo, you could be a meth addict and not show up to the viewing and still sell it above asking price.

    My car mechanic charges 1,100 NOK per hour too, what’s up with that? Well, at least he’s doing something useful.

    Top software developers, you know, the few people actually producing something of value in this country, get paid much less than that.

    This is precisely what’s wrong with Norway, in a nutshell.

    • frenk

      Think 25% VAT, 28% Corporation Tax…etc…etc….

      • inquisitor

        What do you think is the minimum going rate to hire an accountant to do the taxes for a self-employed, one person business that does no more than 250,000 NOK per year?

        • inquisitor

          My neighbors wife started a new business and she made some inquiries, it would seem for even the simplest of tax filings that the fee starts at about 10,000 NOK.

    • Andy AUS

      This is a great comment. It is exactly what is wrong. I had a plumber visit me on a weekend and charged 4,000kr per hour. I could of flown in a team of Thai plumbers and they would of done it for less. It’s astonishing.

      • Ja_ja

        I got charged 1000 nok by a guy in order to fix a few parts onto my bike. It’s these sorts of small jobs which would cost a small amount elsewhere that add up here to a ridiculous amount.

        It’s unfortunate as I am in no way practical and nor do I wish to spend my time doing shitty DIY jobs. And unfortunately that costs.

        I got a new dishwasher the other day too. Suffice to say it cost about 7000 nok to put it in!

  • Rama Bangera

    I lived in Tromsø from 2009 to 2015, April, where I have seen prices of apartments almost doubled. These may not be actual demand, but the prices are sadly set by builder who built the new apartments every year and the brokers who sell the apartments – the consumers are forced to pay!!!!. Though many who can can still afford such prices with high prices where parents pay for the 20% and rest 80% will be paid by the bank- it is becoming extremely difficult for the first time buyers. Sadly, government is doing little on this issue. At the end of the month, you earn and spend allmost everything on bank installment, and other monthly expenses. Also, the renting market is not regulated. You have to pay very high prices, equal or more than the equivalent bank monthly installment, and mostly you get basement in a house to rent ! Government Should do something to control this real estate “boom”, otherwise life of youngsters will be difficult !

    • Jen

      This is the trend in most developed countries. Young people in Japan are no longer able to purchase their own home without the help of their parents. I agree that it should be “controlled” but unfortunately I doubt the politicians will do anything.

      • frenk

        Free market economics?

  • elcapullosueco

    Don’t forget about the high price of the land which makes impossible for first buyers to build their own house. Young couples don’t have any option but to get an enormous debt to buy overpriced houses that most of the time they need to refresh. Speculators also speculate with the high prices of renting. Norway is digging its own grave and condemning a whole generation to huge debts. Government does nothing and the housing market is a joke.

  • Ja_ja

    What gets me about the house buying auction system is that the seller has all the benefits of time pressure etc of an auction but none of the potential risks. Ie. If they don’t like the amount they don’t sell. The seller should be bound to sell above a minimum reserve which should be in actual fact the value/taskt of the property.

    A few years ago I was buying a flat and there were no bids except mine. The agent tried to induce some sort of bidding war where I was bidding against myself. I told him it made no sense and that no one else is bidding so your counter offers are ridiculous.

    I offered the asking price and eventually went above before I called it quits and walked away. If my suggestion was the case you would get more realistic pricing reflecting what the seller actually will accept in order to sell

    • Andy AUS

      Same happened to me, I was also the only one bidding. I offered the asking price and the real estate agent said he would put the home up for another open inspection to get the price up. So unbelievably greedy. Strangely as a consumer if I try to do basic negotiating on furniture for example at a store I get blank expressions. It’s asking price or its nothing.

      Are Norwegians going to take a stand on this?? Is there hope?

      • Jen

        It might not be the agent but the seller who wanted another open inspection. My friend encountered such situation once. The owner put up a lower asking price to attract bidders but when the winning bid is the asking price, he has the right to refuse the sale.

        • Ja_ja

          Yea, I think in my case it was the seller wanting more, as I think I had direct contact with him after a while. But no doubt the agent was playing devils advocate telling me one thing and the seller another.

          The right to refuse sale seems unfair to me – if the asking price has been met, and of course the actual price they want is way above the asking price. But for me the right to refuse sale opens up the system to being exploited by having ‘friends’ bidding on your apartment to edge the price up – and what if they are successful, and the last ones left standing – just refuse to sell and hold the auction again.

          Also, in my naivety at buying my first flat, (in another bidding round on a different flat) I was the only one bidding and thought I put in a decent offer, the agent played me, telling me just a bit more might do it. I had reached my max, and couldn’t go anymore, and she said the sellers were interested and wanted a night to think about it. In the UK, this is quite normal and didn’t seem strange to me so I agreed. I thought it was better than nothing and could hope it was enough. What she was infact doing was using my bid to leverage other interested parties an succeeded as a bidding war commenced the day after and the flat was sold – I believe to someone that hadn’t even viewed it.

          Well played on her part, I must say, but I learnt from this and newcomers to Norway should be aware of being exploited in this way.