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How to find and secure an apartment block

To secure an apartment block is not easy, read here what you have to know about the market and the way houses are sold.

The Berlin Real Estate Market Places

the market is highly fragmented and the rules are quite pro brokers.
the seller offers his property either through a listing in a newspaper (“Berliner Morgenpost” is the biggest market place for multi-family-housing), or put up online-listings in the one of the big MLS (Multi-Listing-Services). (See separate post about MLS in Germany).
Sooner or later a seller will give one or more brokers the data for his house. Sometimes the broker collects (read: steals) the data pretending to be a buyer.
If you really want to secure a deal, talking to the 20 big multi-family-house broker is crucial.
We recommend to talk to as many brokers as possible.
Whom you should definitely talk to you can find here.

Why work with brokers

Its more or less the only way to secure a deal, especially if you don’t have local expertise and a limited German. But its not enough to call one broker, because in most cases he will only show his direct listings. To share a deal among brokers is not easy, even risk for the brokers. As well as for the buyer. The best way is the sellers talks directly to the broker, who directly talks to the sellers (best case).

What to expect from a broker

The best is you expect nothing. They often deliver very limited services. Don’t take your experience from your home country and hope its the same here. Its not. Brokers are more expensive, and service quality is limited. (nice!) Yes there are exceptions, but as the broker is mainly focused to sell what he has in his portfolio, the buyer is not so important for him as it might look from your buyer perspective.

How to check if the house is ok or not

You might be surprised, but there is no institutionalized way to buy a house in Germany, there are customs and habits, but often sellers and brokers have their own ideas. Be patient and get a good advisor, this should not be the broker (!). The phase were you check the building and legal stuff (due diligence) is often just pure good will from the seller or his broker, they could even sell to someone else or walk away from the deal for what ever reason. And don’t expect to see all the building, typically you are only able to see 2-4 flats out of 20 or 30 in the house. Its a little bit of buying “blind”.

What you need to know

1. not everything on the market is really for sale in the end.

2. writing a letter of interest (LOI) doesn’t mean you get a fast answer or an answer at all.

2. most (if not all) broker don’t have a contract with the seller, and the offering broker doesn’t have to be the one talking directly to the seller. This is fatal in the current market, as closing is not easy. Communication with the sellers is often limited or impossible.
Therefore if the seller shows up during a property viewing it is a very good sign.

3. the buyer pays the full commission, but that doesn’t mean the broker is on your side, in fact the seller is more important to him than the buyer as we have tons of buyers and very less sellers.

4. the commission is always advertised with 6% (plus VAT) of the buying price payable by the buyer. This is subject of negotiation. But don’t start this discussion to early, if at all. My long term average is 6% above 1 Mio, and 4% up to 4 Mio. But pay attention in the current sellers market the broker might not even want to talk about a reduction.

4. don’t expect the broker to be a good advisor or consultant
the broker is a salesman an (only) interested in closing, brokers typically know less about (the particular) property than you might guess.

5. having the right advisors is crucial
as I am an advisor this might be logical that I tell you this, but I bought several building in my life and in most cases, we found problems during the due diligence. If I am a buyer I always have an engeneer and a lawyer on my side, and my own 15 years of on ground Berlin Real Estate experience.

Read on: What you can do to secure a good deal.

About the author: Alexander Korte is a Berlin based residential property developer and active real estate investor and co-owner of a brokerage & advisory firm.