A real estate lesson from thousands of miles away.(real estate brokerage in Albania)
Real Estate Today
April 01, 1995 | Matthews, Roderick |
It's a long day at the office for Artan Dervishi, a 35-year-old native of Tirane, Albania, who until three years ago was the manager of the Tirane opera house. In 1992 he established Immobiliari Agency Tirane, one of the few real estate companies in the country's capital and largest city.
Dervishi's company, whose office overlooks Tirane's main square, offers a range of real estate services, including residential and commercial leasing and the sale of property, especially apartments. Dervishi works from 8:30 A.M. to 7:00 P.M., with an afternoon break from 3:00 to 4:30. He does his job in a four-room office with his brother-in-law, sister-in-law, and the part-time help of his wife, all of whom are self-designated brokers and salespeople, since there are no real estate licensing laws in Albania. Few people have telephones, so those who want to buy, sell, or lease property must go to a real estate office. Each day about 50 people come to Dervishi's office to talk with him.
Under Communism, the Albanian government owned kill the land in the country. It's a tough job to be a broker in a country that has never known brokers in the modern sense and is unfamiliar with the important role they perform in the economy. Dervishi's work is further complicated by the uncertainty of the property laws and the other realities of a small country in the process of making the shift from a highly centralized Communist state to a free-market economy.
A Country in Real Estate Transition
Under current Albanian law,, people who own land within city boundaries may be able to convey their title, but people who own property outside city boundaries generally aren't permitted to sell their land. Former property have been given rights to assert claims that certainly cloud, if not defeat, the title of the city proper owners. There's no modern system of real estate record keeping, and there's no mortgage system.
Most of the building stock is dated and has much deferred maintenance. Generally, remodeling materials are imported and taxed at a 40 percent rate, so remodeling is expensive. New construction is even more difficult to achieve because of the problems of getting building materials and a building license. Those problems are compounded by the large numbers of people who've constructed small buildings on vacant property. Stretches of vacant farmland surrounding Tirane that's well suited for commercial and residential development are peppered with squatters' homes. Small parcels of vacant commercial property, such as grassy spaces in front of downtown buildings, are filled with hastily constructed retail shops. Kiosks for sidewalk vendors litter public parks and are even adjacent to sidewalks in front of the
On top of all that, Dervishi doesn't have the advantage of working together with other members of a real estate community. Software That's Uniquely Albanian With all those problems, the most practical service a broker can offer is apartment leasing. Dervishi spends about 90 percent of his time on leasing, though it generates only 50 percent of his revenue. He has created the only computer database of apartment information in Albania. But since that had never been done in the count before, and since the Albanian language is so different from the languages in which real estate software is typically written, Dervishi had to have his software specially designed. To categorize apartments with his software, Dervishi had to incorporate uniquely Albanian criteria. For example, most apartment buildings in Tirane are five stories. First-story apartments are less secure than fifth-story apartments, but fifth-story apartments require tenants to walk up many flights of stairs. Dervishi's software sorts apartments according to the categories of 1, 2-4, or 5 floors.
In addition, some apartments have good telephone service, others have party-line service, and still others aren't easily serviced by telephones. So Dervishi's software also categorizes apartments according to their level of telephone service.
Rental Rates: Is This the Chaos Theory?
An owner who wants to list an apartment will come to Immobiliari Agency Tirane and give Dervishi or an associate information to enter into the computer. Unemployment in Albania is approximately 35 percent, and prices are rising, so many owners will rent their apartment and move in with a relative for the rental term. Most owners A411 rent their apartment for any period, from just a few days to two years.
Even though tenants can negotiate rental rates, variations from the listed and actual rental prices are usually small. And the most difficult task is deciding the rent the owner should ask. Dervishi plays an important role in setting the market value of apartments, because owners generally accept his recommendation on the rental listing price. For instance, one owner loudly proclaimed that her apartment would be worth $1,200 per month in Vienna, but after Dervishi reminded her that they were in Tirane, she adjusted her request to $500 per month. Dervishi told another apartment owner that his property would have been worth 20 percent more if it had been in good condition.
When Dervishi started out, he asked owners to sign a listing contract that stated he would be paid a 40 percent commission on the first month's rent for a 12-month lease. For shorter-term leases, the commission is 5 percent of the monthly rent for the lease term. But Dervishi's contract didn't deter some people from simply leasing the apartment and not paying a commission. Dervishi says that happened in about 10 percent of his transactions. Today he has given up on having owners sign listing contracts; he settles for a handshake.
Apartment Leasing Is Another World Altogether
People interested in renting an apartment come to Immobiliari Agency Tirane and describe the features they want in an apartment and the rent they'd like to pay. Dervishi or an associate will scrutinize the list of more than 1,000 apartments to narrow the search and then arrange a showing. But that's not easy because of the few telephones and relatively few cars in Albania. Most apartment construction in Tirane was standardized, so when Dervishi spells out the various listing categories to prospective renters, Tirane natives typically have a good mental picture of the apartment. Usually renters decide quickly, and then Dervishi prepares the lease, without, of course, the benefit of a formal credit check.
After the owner and the renter have agreed on the lease terms, Dervishi drafts the final document. It's simple and straightforward. It spells out the apartment's location and rental rate and states that renters are responsible for any damage they cause and that any disagreements between the parties mill be resolved in court. When Dervishi deals with foreign renters, leasing becomes more complicated. For instance, a person from the German Embassy wanted Dervishi to insert a provision in the lease that if any legal issues arose between the owner and the renter, the parties would be bound by German law. But since Albanian judges don't always have all the current Albanian law at hand, it's unlikely they'd have access to German law. Dervishi had to explain that even if he included the provision in the lease, it probably wouldn't be honored by an Albanian court.
In addition, as part of a lease for an Italian bank, Dervishi was asked to help hire ten secretaries. He posted a job notice, had 400 applicants, and hired 10. After the lease had been signed and the rent paid, the owner, the renter, and Dervishi sat down together and savored the transaction over a Coca-Cola, which is now produced in Tirane in the new Coca-Cola bottling plant, one of the first examples of foreign investment in Albania.
Revenue from house sales and commercial transactions comes much more slowly than that from apartments. There's still so much uncertainty about the market that sellers don't want to set realistic prices, and buyers don't want to buy at high prices. But nobody has a firm grasp of the market value of real estate.
Again Dervishi skips the signing of a formal listing contract but explains that if the property is sold, the seller owes him 2 percent of the price and the buyer owes him 1 percent. These days, it's rare for owners to sell their home and turn around and buy another, so most sales are isolated transactions. Dervishi is responsible for making sure owners have "good title," though buyers typically consult an attorney before closing to determine the status of the title. That process costs about $20. Never Underestimate the Value of Real Estate to an Economy
It's through Dervishi's efforts and those of a few other brokers that Albanians can buy, sell, and lease real estate and thus create a real estate market for the country. And a real estate market is a critical element in Albania's move to a free-market economy.
RELATED ARTICLE: ALBANIA
Area: 1,100 square miles (slightly larger than Maryland) Population: 3.3 million Geography: Located on the eastern shore of the Adriatic Sea, with Greece to the south and Macedonia to the east Capital: Tirane, with 238,000 people; Tirane is also the largest city Monetary unit: Lek, worth about 87 cents Languages: Albanian, Greek Politics: Formerly a Communist-bloc country: In 1991 the Communist Party of Labor denounced its past ideology and renamed itself the Socialist Party. In 1992 the Democratic Party won by a landslide in national elections Religion: 70 percent Sunni Muslim, 20 percent Easter Orthodox, 10 percent Roman Catholic Major products: Textiles, timber, construction materials, fuels, semiprocessed minerals Source: 1994 Information Please Almanac Mr. Matthews is a senior lecturer and the assistant director of international programs at the Center for Urban Land Economics Research at the University of Wisconsin, 5261 Grainger Hall, Madison, WI 53706; 608/262-877-5.