A Look Back How We Got Ourselves into This

While searching for something else, I came across the first email Kevin sent that proposed that we build new rather than buy an existing house and improve it.

This email came as we were trying to firm up what houses we’d see on our June 2016 trip.

He eased into it …

Thinking about this completely differently.

Then he proposed his alternative. He was right that we were expecting that we’d have to do some work, but we weren’t looking for a complete restoration …

Instead of spending all or most of the budget and given that you are open to a project requiring some work, we approach this completely differently.

Here’s the pitch …

Attached is an article set to appear in ITALIA MAGAZINE. The subject is right-sized houses. Places that are done in a smaller overall volume but deliver all the beauty and function of larger houses, WITHOUT the cost and maintenance. There’s a house, CASA IDEALE, with great views, privacy, proximity to town, an open plan architecture and three spacious bedrooms, all done in a roughly 140 sqm format for around €300k. It’s even designed so if it’s just two people, they can live entirely on the ground floor. Projected construction time is 10-12 months. I attach the designs.

And his close …

This sort of approach could be excellent.

magazine article about a small Italian house
Advertorial
Click to Enlarge

Now, it turns out that the “article” was really advertorial, but the idea was a sound one. I was trying to keep the size of the house and the cost down.

Since our spec list really focused on buying an existing house in pretty good shape and doing only minor improvements, I might have rejected the idea out of hand if I hadn’t worked with Kevin in 2015. I felt he had a good sense of what we wanted and what was available.

The size and floorplan referred to in the article aren’t very close to the plan we are building today, but we did bite on his concept. And here we are, not with Casa Ideale, but our own Casa Avventura.

Source:
Image: Copyright © Our Big Italian Adventure

Let’s Play Hide and Go Seek, Italian Style How Buying Real Estate in Italy is Different From the US

It’s not as easy to identify potential houses in Italy as it is here in the US. We have a “multiple listing service” or MLS, where essentially all properties for sale are in one big database. It doesn’t matter who the selling agent is. If it’s on the market, it in the MLS. And from that, on Zillow, Trulia, realtor.com, etc.

This makes it easy for a buyer. You just access this data and see what you can find. It’s all there. You can also see what has sold for what price. All this leads to a pretty efficient market, in economics-speak.

Needles in Haystacks?

Not so in Italy. There is no equivalent system. It does matter who the selling agent(s) are, because it only shows up on their websites(s). And you have no history or way to compare prices.

imageNote that I’m saying it might be agents, plural, not just agent, singular. The same property can be listed by multiple agents. It all depends on the seller, and it’s generally in the seller’s interest to have multiple agents on the job. (Twice, on my original trip, I was taken to see a house that, when arriving, I realized I’d seen with another agent. The descriptions and pictures were different, so I thought it was just two houses in the same general area.)

So to identify properties you need to identify agents. As you expect, you do this by web search. You can search for “Marche real estate”, for example. You’ll find a number of agents and you’ll discover the portals, Gateaway.com and Rightmove.com. (These sites take what I believe are paid listing from agents and kind of simulate an MLS system. But not very well.) From the properties listed, you identify agents. Then you go to the individual websites and see what they have for sale.

There is another way to find a house, but it’s not easy. You try to identify a house on your own, offered by a private seller without an agent. If you have good connections in the expat community, you might find a house another expat wants to sell. Or, if you’re fluent in Italian and lucky, you might hear about a house by asking around in local villages.

It’s Gonna Cost Ya

The total real estate commission on a sale is similar to the US, usually somewhere in the range of 4%-6%. But, instead of all being paid by the seller, as is our practice, it’s split by the buyer and seller, with what you pay based on the rate charged by your agent. In our case, our agent Kevin charges buyers 4%, with a minimum commission of €7500. (Also, on the commission you pay the IVA value-added tax of 22%.)

I’ll admit to not being fully aware that Kevin’s rate was above average when we started working with him last year, so we didn’t try to negotiate the rate. Maybe he wouldn’t have negotiated, anyway, since we would have been in a weak position: say “no” to his rate and then we’d not have access to his listings or have to work hard to identify another agent who had the properties. And of our list of 39 properties last year, Kevin represented more than any other agent, about 8 if I recall correctly. So, we might have missed out on some good choices.

What Will It Take To Put You In This House Today?

Finally, when evaluating prices and what you “should” pay, you’re in the dark without knowing what similar properties have sold for. Your data is just the houses you’ve seen and the asking prices. And asking prices seem to be all over the map. It’s not uncommon for a house to be reduced dramatically in price, by fifty, a hundred, two hundred thousand euro all at once. Is it now a good deal? Or if they were off on the price by that much before? Are they still too high?

(When I was getting a feel for the market at various price points last year, I saw a house in Tuscany listed at €750,000. I liked it, but told the agent it was at least €200,000 too high for us. She then asked, “If I can get them to sell it at €550,000, will you buy it?” I think she thought that it was a real possibility that they would take that price.)

So, with “hidden” inventory, buyer commissions, and “shot in the dark” prices, you could say the Italian free-for-all system makes it harder on a buyer all around.

Image source: www.pixabay.com License: CC0 Public domain. Free for commercial use. No attribution required.

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Target Region: Le Marche

During the spring of 2015, when we got geared up on our house search, we identified a list of 91 potential houses. These were selected from hundreds online, based on our initial “wish list” of must-have/nice-to-have features. From this list, on my exploratory trip in May 2015, I saw 39 houses. These were in four regions — Marche, Abruzzo, Umbria, Tuscany — and involved 9 real estate agents Based on the trip, I formed two conclusions: I knew much better just what we wanted and might be able to get, and Marche offered the best potential to find it.

Let me say a few words about, “Why Marche?” I’ll also share our revised “wish list” for 2016.

Why Le Marche?

When reading about Italian regions, either to visit or live, you’ll often see Marche described as “Italy’s secret region” or “Italy’s little known gem.” Those descriptions are at least 10 years out-of-date, at least among property seekers, but they do indicate that Marche is seen as a bit out of the mainstream.

question mark symbolI found Marche appealing because of the terrain, the multitude of small — many hilltop — towns and villages, its location relative to the rest of Italy and places we might want to visit, the relative ease of getting to both the beach and mountains, and what I perceived as a good balance of house quality and price. And I like “out of the mainstream.”

Each of the other regions has its strengths on these measures: Abruzzo offers a lot of house for your money, Tuscany is perfectly located, and Umbria has a great location within Italy and is less expensive than Tuscany. But each also has weaknesses: Abruzzo’s terrain is a bit stark, Tuscany is expensive and overrun with foreigners, and Umbria, as the only region of Italy without a sea coast … far from the beach. And overrun.

I came out of the trip “thumbs up” on Marche. I could see living there.

What Kind of House We Want to Find

clipboard checklistI also came away with a fairly detailed specification list to work from in 2016. I’ll copy it here just as we sent it to three agents this spring. They each had some Marche properties, and, interestingly, were the only ones of the 9 agents to keep in-touch after the first trip.

It will be interesting to compare our list to how we sort out in 2016.

Specification/Wish List, Based on Last Year’s Trip

General thinking

  • Must haves are those fixed elements that can’t be addressed with a reasonable amount of time and money. This includes location relative to roads and services, setting, and basic interior layout
  • Are willing and expecting to make some upgrades/updates
  • Specific house more important than the region/province/specific nearby towns, but need to be in place that isn’t just foreigners and tourists

Here’s what the ideal house should have, once all needed improvements are made. If some items are exceptionally good, we may be able to make some trade offs on price or features.

Price, including key upgrades and improvements: pool, kitchen and bathrooms, landscape. When all costs, including transaction costs, are counted, probably should be under 600,000 euro, ideally under 550,000.

Layout/interior: items that are impossible/harder/more expensive to fix

  • Existence of guest suite or at least bedroom and private/designated bathroom in main house or outbuilding. Kitchen not needed as part of guest space.
  • Master bedroom suite
  • Minimum of two additional bedrooms, counting guest bedroom
  • Office/studio space (which could be also used as a bedroom)
  • Minimum of one additional bathroom for each two other bedrooms, with this bathroom on same level
  • Good flow of public spaces (LR, DR, kitchen) on main floor. Not too separate or connected poorly, property that is currently multiple apartments is unlikely to work (except guest apartment OK)
  • Good flow of bedroom spaces. No awkward stairway placement or room connections
  • At least a half bath on main floor
  • Interior stairways between levels
  • Open, bright, airy feel

Layout/interior: likely fixable. Issue is cost

  • Good quality of windows, doors, flooring
  • Good quality and appearance of kitchen and bathrooms
  • High quality, fast broadband connection

Exterior/Location: mostly impossible/harder/more expensive to fix

  • Outside appearance: stone and/or brick exterior. Stone preferred
  • Property/land: needs to feel private. Owned property minimum about 4000-5000m2. Larger unless surrounded by agricultural land.
  • Convenient location relative to a village with basic services (5-10 minutes) and a town with full services (15-30 minutes)
  • Access from paved road that is relatively easy and short
  • Ability to drive to and park next to house, without a long walk from car to house
  • Good location for pool

Exterior/location: fixable

  • Pool
  • Olive and fruit trees, vines, but mature would be preferred
  • Nice landscaping
  • Pergola (could be loggia or portico if exists), ideally something on multiple sides (east, south, west)

Other factors/critical

  • Annual operating costs, including utilities, maintenance, gardening/land upkeep

Other less important factors

  • View type: hills, mountains, lake, etc.
  • View “quality”
  • Rental potential

Source of images: www.pixabay.com License: CC0 Public domain. Free for commercial use. No attribution required.