By Evgeniy Vorotnikov
Real estate services in Russia are undergoing big changes as the national government implements massive reform, with the aim of making real estate transactions closer to Western standards of business conduct.
The reform is expected to take place when a package of bills is adopted, which will raise the state control over the activities of Russian real estate brokers and tighten liability for illegal activities.
The Russian real estate services industry is very young – it has only been in existence since the mid-1990s. It features little competition (especially in the luxury real estate segment), a large number of unscrupulous real estate practitioners, and a lack of legal regulation of the market. Current Russian legislation does not establish an official definition of “real estate agent” and the scope of their activities.
The insufficient state control has resulted in the appearance of so-called “black brokers” – agents who do not guarantee the fulfillment of their obligations and are sometimes simple fraudsters.
However, much may change in the near future. In accordance with state plans, a new specialized law will officially establish a legal basis for the activities of real estate brokers in Russia. The new federal law, which is known as “On real estate activities”, is expected to come into force on Jan. 1, 2013. It will provide an impetus for further development of the Russian real estate services industry and limit the access of non-professionals and fraudsters in the market.
The government also plans to introduce compulsory licensing for all domestic brokers. Applicants will have to pass a special training course and a unified state exam. The practice of licensing was used in the 1990s, but it was abolished in 2001. This resulted in a significant increase of the number of real estate agencies in Russia.
According to sources close to the Russian government, in order to implement stricter control over domestic real estate brokers, a regulatory body like those in North America is required. It will have the ability to revoke licenses in the case of non-compliance of brokers’ activities with established state regulations and standards.
The government hopes that new laws will make the activities of brokers more specialized. Unlike Western countries, the majority of Russian real estate agents work in all segments of the market and have no specialization. Many brokers double-end, representing the interests of both the seller and the buyer.
Some brokers also provide legal services, but the Russian government is considering banning this practice in the proposed law.
Julia Kondratenko, general director of Berger & Partners, a Russian law firm specializing in real estate transactions, says, “There is a need to impose a ban on the provision of legal services by Russian real estate brokers to their customers. As in the Western countries, Russian real estate brokers should not act as lawyers and, conversely, lawyers should not provide any services in the domestic real estate market. It should be prohibited by the new law.”
In addition to plans to make the activities of Russian real estate brokers more specialized, the government plans to create conditions to boost their skill level, through the establishment of specialized universities and courses.
Ina Budnikova, head of the Moscow real estate agency Domostroy, one of Russia’s brokerages, says there are currently no universities in Russia that specialize in training real estate agents. Many brokerages are forced to hire people who have no experience.
Anna Lupasco, vice-president of the Moscow Association of Realtors (MAR), says up to 50 per cent of real estate transactions in Moscow are closed with the participation of unregistered brokers, 25 per cent of whom are “black brokers”. The same situation is observed in the majority of Russian regions.
One proposal to combat unscrupulous real estate agents might be the introduction of a guarantee for the transaction, in the form of the broker’s own funds as a means of security for the transaction.
All of the planned state measures are expected to make the Russian real estate industry more transparent and will contribute to its consolidation. According to some Russian analysts, during the next several years many small domestic real estate agencies will withdraw from the market as they are acquired by larger players.
This could also have negative consequences, as it will result in even less competition in the market.
Hi John M:
Your question is a very good one, appropriate for the times and for the current industry problems in general.
The number one obstacle faced by real estate people currently is…"reality" vs the pumped up visions of success within the business imagined by the vast majority of Realtors, being the 60% to 80% of licensed Realtors out there (take your pick re the actual numbers) who are only three years or less into the business, who are destined to fail…rising stars in their own minds who ultimately arch and are turned into falling meteorites. All believe that they will be the ones to make it big. This is a huge obstacle known as wishful thinking. All pin their hopes on the success stories, ignoring the reality of the statistics. This is an obstacle of unreasoned thinking…leaving one unprepared to deal effectively with reality when it bites. When reality bites, payments nevertheless have to be made, money is not being made, and potential therefore exists for unprofessional conduct to emerge in an attempt to stave off finacial ruin. Crooks are then made, or re emerge. Ergo, the need for R.E.C.O. and the courts. Ergo, the basis for the poor rating of real estate sales people by the public.
The second biggest obstacle faced by real estate people these days spins off from the first, being, the vast overpopulation of Realtors in the market place; not excellent Realtors, just Realtors in general. With the exception of the well established few (the survivors) who have earned, rightfully so, their successful hierarchical places within the system, the rest are nothing but ever revolving obtsacles to each other's chances of achieving a realistic opportunity to create a career for themselves; they simply flush each other out of the system via limited financial attrition. If these naive,overabundant, newbie wannabe real estate professionals had the good sense, and sufficient monies behind them, to go along with their good sense, they would not be entering the real estate business in the first place. Desparation rules the psychology of these folks in too many cases. Economic desparation is another huge obstacle to clear headed, rational, reality-based thinking.
The third biggest obstacle faced by real estate people right now, today, is real estate people themselves. I refer to their seemingly communal mindset regarding the apathetic acceptance of their so-called leaders' sense of what is right for Realtors' expectations of the future of organized real estate in Canada. Grass roots real estate people these days seem to have communally abdicated their responsibility to know what the hell has been going on in the halls and minds of their elected representatives' ivory towers and skulls respectively. Their leaders have been co-opted by socialistic leaning government agency bureaucratic group-think policies which run only down a one-way street toward consumer advocacy (which is a good thing for consumers, and their watch dogs) to the exclusion of Realtors' rights. Realtors don't count for much in the government agency's eyes and minds..that is not their concern after all. Thus, CREA is the result of the number three obstacle faced by real estate people now.
Some may want to re-jig the order.
These are my opinions for today.
Thanks for the opportunity to opine John.
Brian
Hi Brian and John,
"Opine" – the opiate of the masses…
As our world turns, although on what seems sometimes an elliptical galaxy orbit basis, we do see that for whatever reason, the industry seems to function on the old adage -survival of the fittest.
That doesn't mean the smartest will succeed, but rather those who can support themselves indefinitely while supporting the hierarchy of the industry, financially speaking – those in the ivory tower(s), for whose paycheques, we the masses are responsible. No?
Carolyne L http://www.Carolyne.com
Thank you very much Carolyne and Brian for your responses to my question.
As always, you Brian are a master at putting words together. You do it well and in a most meaningful way.
Carolyne, money will put gas in your car, but what good will that do if you're a bad driver. Sooner than later such driver will wind up in some ditch.
Sorry for being so brief with my responses, but I look forward to one day having a face to face meeting with both of you for a long, meaningful chat.
HAPPY CANADA DAY!
John
P.S. Brian will you be good enough in sending me your email address
Hi John:
Good thing your name's not Jack.
Thanks for your kind words vis a vis (just for you Alberta Legal) mine.
My new email address is:
brianfmartindale@hotmail.com
Look forward to hearing from you.
Brian
The key sentence in this article is "…as the national government implements massive reform…", with the key words being "…the national government…". The rules/regulations will be national in scope, and not a hodge-podge of regional/provincial rules/regulations as per the Canadian way thus far. That's a good thing in my opinion.
The sentence "Many brokerages are forced to hire people who have no experience." is an interesting one. Education is not experience. Here in Canada, most newbies have no experience within the industry at large, be it within construction, negotiation, appraisals, sales or legal. Some things will never change unless governments set the bar to entry higher, limiting future candidates to those people with at least some experience in the aforemtioned categories. Yes, some do become hot-dog sellers without the benefit of previous empirical experience within the real estate sector, but is that what the public wants, hot-dogs who can spin a sow's ear into a silk purse in the mind of a naive, trusting consumer without the benefit of having the knowledge to discern a charismatic spin-doctor from a down-to-earth, boring, knowledgeable, honest advocate type?
It's a two-way street after all.
Apparently, one eighth of current brokers in Russia are considered to be 'black' brokerages, or rogues. The numbers may very well be the same here in Canada, rules/regulations or not, as the numbers pertain to individual Realtors at large.
Unfortunately, the real estate business, no matter where on earth it is practiced, seems to attract a certain percentage of hopeful gold-diggers. Here in canada, CREA's strategy seems to uphold that strategy…keep 'em comin'!…we need the money!…there's always another sucker ready to buy into the dream of riches in real estate sales., thus the huge failure rate.
If I sound somewhat jaded…I am.
Maybe western/Canadian real estate folks will learn something from the Russians, who have the opportunity to learn from our mistakes without the problem of defending the fallout from the rank and file regarding the non-existant baggage of former, in their case, and CREA's, in our case, policies gone/going south, figuratively and geographically speaking.
Brian
Hello comrade Brian Martindale. I trust all is well with you.
I'd like your nput on the following:
In your opinion what are the 3 biggest biggest obstacles faced by real estate people now.