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
Click to Enlarge

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.

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Casa Avventura

We’ve been using “Casa Ideale” as the working name for our house. It’s the name Kevin used when he was marketing the property and the house concept.

AdventureWe hope the house will turn out to be “Ideal”, but we know getting it built and moving in will be an adventure, so I’m going to use “Casa Avventura” as our working name from now on.

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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.

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An Italian “Negotiation”

After we had seen the Casa Ideale property a second time, we felt that it was our top choice, though in our talks with Kevin and in our heads we were still considering the house near Pergola (Casa Col di Luce). We loved that house and property. Our concern there was purely location: could we get integrated at all in the local life from that location? We asked the seller’s agent to “sell” us on the area and its opportunities for us.

After more thinking, and no response to our request, we decided to proceed with the Ideale property. So it was time to try and reach a reasonable deal.

Arm wrestling to suggest negotiationThe “negotiation” to reach a preliminary purchase agreement proceeded differently than I expected. Despite being aware of the significant differences in the way the home search process works in Italy versus the US (see this post), I guess I thought negotiation on a price and terms would be a back and forth between us as the buyers and the seller, with the real estate agent, Kevin, in the middle.

Recall that there is only one agent involved here on the Ideale property. Kevin has the property listing, or the right to offer it the market and he has us, as potential buyers. (Neither of these relationships is exclusive.) This “dual agency”, with only agent involved who has brought buyer and seller together, is not legal in many parts of the US. But because of the structure of the Italian system, I think it’s the norm.

The property is listed for €79,500 on Kevin’s site. (I don’t know if this property is listed on other sites, but in the cases where I’ve seen the same property listed on multiple sites the price was always the same on all.) As part of the total project cost projection Kevin had given us, he said that he thought we could get the property for €62K-€65K.

Kevin asked me what we wanted to offer. My first thought was that I didn’t want to offend the seller, who I thought was one of the adjacent landowners. That would be getting started in the community on a very bad foot. Kevin told me it was someone else, and he really wanted to sell. It was an Italian who had bought the property intending to build a house for his daughter. She had no interest, so he thought he might make a quick buck selling to some foreigners.

As a starting number, I suggested €50K. Kevin told me he thought we’d meet near the middle and suggested €48K, so I agreed. I figured we’d hear back with a counter offer and we’d go from there.

When I talked to Kevin the next day, rather than asking for a counter, he said he had a deal at €62K. Did we want it? He had told the seller we didn’t want to go beyond €60K and had reached a somewhat complicated deal at €62K. So, after our original offer of €48K, our next step was to say yes or no to this deal at €62K. Nice and neat, right where we wanted to end up. I’m glad we followed his advise on our first bid.

Signing the preliminary agreement and any payment of deposit would happen after we checked some basics. In addition to the survey, land title, and related issues, we needed to have a “positive opinion” from the town planning official that we could build what we wanted on the property. Not a final approval, which would take some months, so this introduced a little twist: might we end up with a plot of land that couldn’t be built on?

Kevin assured us that approval had been given for a house on the property, just not one at the 20% larger size and with a pool. But even the larger house was still at or below the limit for the size of the house that should be allowed under the rules.

Risk and reward. After sorting through the proposed transaction, Anne and I decided it made sense to go forward. Now what?

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House Hunting in Le Marche – Day 3

There were a couple of houses we were interested in that were listed by another agent, Richard, so on Day 3 we went to see them.

La Perla Segreta (The Secret Pearl)

La Perla SegredaOne of the nice features of this house was that it was walking distance to the town of Mogliani, while still being very private. It was a good-sized house, with five bedrooms and five baths and a pool. It also had 80 olive trees and a small vineyard, a plus from my point of view.

But it didn’t show well, as it was totally overgrown and it would be quite a big project to clear the property. But its biggest unfixable drawback was that the living room was rather small and was down a long, narrow hall on the opposite end of the house from the kitchen. We quickly decided to pass on this one.

Casa Tranquilla

Case Tranquilla, Le MarcheCasa Tranquilla sits below the town of Penna San Giovanni, but still high enough to have panoramic views of the whole valley. We were met by the owners Trud and Udo and their two dogs as we drove up the driveway, and they showed us around both the main house and the apartment in back, as well as the extensive grounds (about 7.5 acres).

Casa Tranquilla poolThe house itself was a charming country cottage that had been thoughtfully restored to maintain its character and vintage details. It had a wonderful loggia in front, where I could picture enjoying all our meals in good weather. Inside, the floor plan was a bit quirky and chopped up. The master suite was on the ground floor and there was another bedroom upstairs, but without a bath. The upstairs hallway had a door leading to the apartment, which could be closed off or left open and integrated into the main house. The apartment itself was great, and provided a Casa Tranquilla interiornice rental income in summer for Trudi and Udo. It had a bedroom, bathroom, kitchen and living room, plus a large, partially covered terrazza with incredible views.

The property was awesome. Besides the pool and the views, it had lots of olive and fruit trees as well as a bocce court. There was also a barn in back, where Udo had his art studio and workshop.

It was hard not to love this place, but we decided the inside space was too awkward and didn’t have the right rooms in the right places, so it probably wouldn’t work for us.

Casa Ideale (Redux)

After we returned from seeing these two houses, we decided to go back to Casa Ideale (the ruin) to have another look at the property and discuss whether the option of building a new house was something we would really consider taking on.

The neighboring farmer had blocked the lane with his truck so we had to stop short of the property and trudge through the fields to get there. But what a view.

Ideale_view1      View from Casa Ideale, Marche

We discussed the size of the house we could build, how and where it might be sited to take advantage of the views, where the pool would go, etc. Most importantly, could we actually pull off building a house in Italy while living in Chicago. This would have been a non-starter if it were not for the fact that Kevin, in addition to being a real estate agent, also worked as a general contractor, overseeing restoration projects. He had a team of architects, builders and other tradespeople who could do this for us, and he would be in constant communication with us to give us progress updates and get our feedback. We were intrigued with the notion of building something to our own specifications and not having to live with awkward floor plans or someone else’s taste in interior finishes.

We also felt it was a plus that the property was close to two towns: Colmurano and Urbisaglia. We really want to get involved in local life, so this was important to us.

We had a lot to think about, and our decision was made all the more confusing by the fact that we were comparing apples, oranges and grapefruits when it came to what property to buy. We had two fully finished houses in contention, a couple of partially reconstructed houses and a ruin.

That night we had a long discussion over dinner, helped along by a couple of bottles of local wine.

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