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Last updated: August 3, 2022 • Real Estate Market

International Real Estate Practices that Exceed US Standards

The real estate industry is an industry that spreads across the planet and is not limited to one geographical area. This allows real estate professionals to extend their portfolio and revenues, but dealing with the real estate practices from other countries requires them to understand what these real estate practices are, as they differ from the standards in the US.

In general, real estate practices vary based on the country’s law and legislation. Developed countries apply modern real estate practices, while unethical real estate practices can occur in less developed countries. This can happen as they might not be as supervised. 

For international real estate agents, it is vital to understand and be educated in the real estate practices of the country in which they operate so they can better serve their clients regardless of where they are from. Maintaining a close relationship with the associations or agents from those countries will limit the chance that they violate any laws or regulations. This is why co-marketing or co-brokering relationships are the best way to go when real estate agents decide to extend their business in other countries. 

The National Association of Realtors (NAR) makes sure to provide US real estate agents with as much information as possible when it comes to international real estate practices. Recently, they put together a list of general guidelines for international real estate practices from their Cooperation Association partners for a large number of countries. With this data, US real estate agents that want to extend their practices can evaluate the real estate practices in various countries and get prepared for what to expect when they get there.

Real Estate Practices Around the World

silhouette real estate industry

Discussions about how real estate agents should be paid across the US have the industry in the country look to real estate practices around the world. Some countries stand out either as examples that we should apply for US real estate agents or systems that would never work in the US and could never be applied. Still, whether we talk about commissions and how they are split between the seller and buyer agent or different legislation, the US real estate practices work because of the way the market is formed. 

Applying any changes to how commissions are structured in the US will affect millions of homeowners and buyer’s agents. Let’s look at how things work both in the US and in other thriving real estate markets to better understand how the market would be affected if any change is applied.

Real Estate Practices in the US

real estate usa realtor

The real estate industry in the US is among the most developed real estate markets in the world. When it comes to how real estate transactions work in our country, those working in the industry know that, in general, a home sale involves two agents. One real estate agent takes care of the buyer’s interests and represents the buyer, while the other represents the seller’s interests. Bother real estate agents receive a percentage of the sale price of the home. This is the commission and the home seller pays it. The value of the commission is somewhere between 2.5 and 3 percent of the home’s sale price for each buyer and seller agent or is given to a dual agent.

While the home seller is the one that decides how much commission to offer their agent, as mentioned above, they are the ones who pay the commission of the buyer’s agent. Due to this, the buyer’s agent is required to work with the homebuyer’s interest at heart. The buyer’s agent is not allowed to steer the buyer in the direction of another house based on a higher commission. The reason for which it isn’t the buyer who decides the commission or pays the commission is that the cost might motivate them to decrease it in their favor. This could, in turn, lead to a lower quality of service as a lower commission could demotivate real estate agents to offer the best quality of service. 

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Real Estate Practices in the UK

new english estate

When it comes to the real estate practices in the UK, things are quite different as each seller and buyer are responsible for the commission they pay their respective agents when two agents are used. In general, only seller real estate agents are used. While there are buyer agents, they are only used in the upper end of the market’s price range or by people who are too busy to deal with the real estate transaction process.

The increased cost of real estate decreases the commission received by agents. In general, the seller’s real estate agent is the one used, and they get somewhere between 0.5 and 3.5 percent of the home sale price. This commission is subject to government tax through the value-added tax (VAT), representing 20% of the commission. This means that if the commission is 1.5% of the home sale price, the seller will end up paying in total between 1.75 to 1.8 percent of the home sale price. This commission eroded in time as seller agents used to get a steady 2.5 percent commission. However, when commissions were a steady 2.5%, home prices averaged at 100,000 pounds, while nowadays they average at 7 million pounds.

Due to the lack of buyer representation, the US market might think that the buyer could be taken advantage of in the UK real estate market. This is unlikely to happen as the duties of care in the UK real estate market protects the customer (the buyer). Additionally, UK residents often appoint a lawyer to ensure that they understand the terms and conditions specified within the contract when it comes to the paperwork. But unless the buyer targets properties from the high-end price range of the real estate market, UK homebuyers don’t use real estate agents.

Real Estate Practices in France

paris panoramic view

Similar to the UK real estate market, the real estate market in France rarely uses buyer agents. However, the big difference is that the real estate commission commanded by the seller’s real estate agents is a standard 5%. This is more than what seller real estate agents make in the US. Still, on the rare occasions when buyer’s real estate agents are used, that 5% commission is split between the buyer and seller real estate agents. When this happens, there needs to be a high level of trust between the two agents, as while the buyer’s real estate agent has a contract signed with the buyer, the seller’s real estate agent is motivated to work without a buyer agent.

Real Estate Practices in Australia

The biggest difference between the countries we chose to compare real estate practices comes from Australia. For those that are interested in extending their real estate practice in the land down under, they should be aware of the fact that real estate auctions are very common there. Home sellers hold these auctions, usually on Saturdays as that gives more people the chance to attend and they are held in front of the home. This gives way to very outgoing and vocal auctioneers, which can make the whole ordeal rather stressful for everyone involved.

While there are also real estate auctions in the US, in Australia, once you say you will pay a certain amount, you will not be able to negotiate down from that amount. The home inspection takes place before the auction starts and the price you auction is the price you pay. However, these home inspections aren’t necessary. You can just bid for the property without seeing it, but everyone that comes to a house auction is allowed to do a home inspection before they start bidding.

Other real estate practices in Australia or a more traditional listing process is quite different from the US practices as well. In the country down under, the advertising is covered by the seller themselves. Real estate agents are used but mostly for the seller and they get on average a 2.8% commission from the home sale price.

Real Estate Practices in Mexico

property for sale mexico concept

The real estate practices in Mexico are the most similar to the US real estate market practices as they guarantee an average brokerage commission of between 5 and 6 percent. This commission is split, just like in the US, between the seller’s and buyer’s commission. However, seeing as the real estate market is a local market and depends on the demand in each area, we have something nicknamed the paradise of real estate agents in Mexico. While general real estate practices are the ones stated above, certain areas work differently. When it comes to Los Cabos, San Miguel de Allende, Puerto Vallarta and Lago de Chapala, strict MLS agreements are in place to protect both buyer’s and seller’s agents. Also, in these areas, commissions are usually between 8 and 10%. Brokers that offer lower commission rates to motivate sellers to choose them are discouraged from such practices as they can affect the market.

Best Country to Work as a Real Estate Agent

wooden house models on coins

Aside from specific areas in Mexico that are highly popular with American buyers interested in international real estate speculation, determining which is the best country to work as a real estate agent depends on a variety of factors. Firstly, the most important thing is the overall economy and its stability in any given country. Secondly, as a real estate agent, you must understand the laws and regulations that govern the real estate industry in those countries. But as countries that experience emerging economies are more appealing, we, sadly, can not say that North America is a good market for real estate agents. In both the US and Canada there have been economic problems that impact the buyer’s accessibility to home purchases. For similar reasons, Europe and the Middle East are a no go for those that want to start expanding their real estate business. We will, however, stick to South East Asia as some of those countries are promising candidates for thriving real estate markets based on their successful economies.
If you want to start your international real estate business in markets that are likely to bring you success and increase your commission, focus on Singapore, Indonesia and Malaysia. The NAR can help you with the laws and regulations governing the real estate practices in these countries and the certifications necessary. The second step would be to get in contact with real estate brokerage companies and see if they are interested in working with you. As long as your portfolio is promising, you are very likely to succeed in either of these countries and fast-track your real estate career to new heights.

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