Trust Me! …Now Where's the Money?

Agatha Christie is quoted as having once said , “Where large sums of money are concerned, it is advisable to trust nobody.” Unfortunately, many people selling flats and homes in Poland seem to disagree.

My wife and I recently decided that we wanted to move out of our 39m2 flat at the edge of Nowa Huta in Krakow and into something a bit bigger in a slightly nicer neighbourhood. We’ve looked a number of places and have made (or tried to make) a few offers. None of those  have worked out very well, though.

Trust is earned, not given, unless you're trying to sell your flat.  Then it's expected, along with a LOT of your money up front.

Trust is earned, not given, unless someone is trying to sell you a flat. Then trust is expected along with a LOT of your cash.

Offer #1: Beautiful place, recently remodelled, 420,000 PLN. The catch? The sellers wanted us to give them 100,000 PLN up front. Not in an escrow account, not for the Pope to hold on to, not even to be frozen in our bank account – they just wanted a LOT of cash up front. My immediate reaction wasn’t even an expletive explosively uttered – it was more along the lines of, “…Huh?” The concept of someone asking for roughly a quarter of the cost of a home or flat up front was a concept so foreign to me that the sellers might as well have been from Mars or beyond. There was absolutely no way we had this kind of cash so it was a moot point and we decided to move on.

Offer #2: Nice place, great location. The guy had been trying to sell it for two years – he originally started out at 600,000 PLN and had, over time, dropped the price down to 470,000 PLN. We told the real estate guy that we wouldn’t bother looking at it unless the seller dropped it further to 450,000. The real estate guy talked to the seller and, huzzah, the seller agreed. We went, we looked, we liked. On the spot, we made an offer – 450,000 PLN – and asked how much he wanted up front. The seller, with a slightly confused look on his face, said “Up front, uhhhh… I don’t know.” …Long pause… “I’ll have to think about it.” I assumed that he was so shocked that someone had finally made an offer after two years that he’d never thought about the second step. A few days passed and finally later the real estate guy came back and said, “he wants 30,000 PLN up front.”

This time the expletives were flying fast and furious. After a great deal of ranting, fist shaking and yet more cursing, I took a very deep breath and decided that I would pursue a logical line of inquiry. My wife and I questioned the real estate agent about this request a bit further:

Us: surely the seller means he wants 30,000 PLN in an escrow (trusted, independent, third party) account, yes?
Real estate guy: no. Cash or in his bank account.
Us: What’s to prevent him from taking our cash to France and having a nice weekend?
Real estate guy: Uh… you could sue him. In court.
Us: We’ve seen how fast the courts move here. Is there anything that physically prevents him from running with the cash?
Real estate guy: …No.
Me: [expletive]

What is it about selling a home or flat in Poland that makes someone think that they are suddenly as trustworthy as, say, Jesus H. Christ himself? I don’t even think I’d give The Pope (note capitalised “T” (meaning JP2)) 30,000 PLN up front for a place, much less 100,000 PLN so why does some random person I met yesterday for 30 minutes assume that I implicitly trust them with my cash? What would make ANYONE here think that the courts are a reasonable barrier against abuse/misuse of that money? And what, in any god’s name, possesses anyone to ask for that kind of cash up front? What are they hoping to prevent and/or do with that cash?

These are questions to which I do not have answers. Polandian readers and commenters, I seek your council and I issue the following challenge: using logic and fact, explain why asking for anything more than one or two percent of the cost of a flat/home is reasonable. Any answers that involve “that’s how it’s always been”, “communism” or “alcohol” will not be be kindly looked upon.

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26 thoughts on “Trust Me! …Now Where's the Money?

  1. scatts says:

    Strangely enough, there is actually a lot more trust asked for and given here than I’m used to. It’s sort of normal to be transferring money to people you hardly know before the “stuff” arrives in your hands. Still, that’s not normally 100,000 PLN.

    I think your first mistake is asking what anyone wants, to be honest. I’d go in and say “this what I’m prepared to do” and let them make the decision if they want to sell on those terms or waste another two years.

    There’s normally a deposit to pay, if the parties don’t already know and trust each other. I’m having trouble getting my head around the possibility of your average Pole understanding Escrow accounts, or frozen accounts or anything other than “the money is in my account or in my hands”. I’d actually be more prepared to take the risk here than in the UK, far more prepared to do that. Maybe I’m stupid. Both sides might trust a lawyer or a notary, can you use somebody like that as an intermediary?

    There’s also a (SPIT – PUKE!!) agent’s fee, that they don’t deserve and should be paid by the seller – but they ask anyway.

    Anyway, I didn’t buy anything here yet so don’t listen to me. I’m certain there’s a very good Polish way to do this that works for everyone (except perhaps a nervous American?) ;-)

  2. tandrasz says:

    Strange, isn’t it? I think that this law custom may be rooted in the last 60 years of history. People were paying for flats, cars, or other things “sold” by the state in advance. Sometimes many years in advance. Full amount. If you were buying something from a private owner, you were paying cash and buying it on the spot. You were lucky to get what you wanted. No “escrow”, no credit. It was a seller’s market.

    I see “zadatek” – earnest money – as a mechanism that protects the buyer. In a seller’s market, once the buyer takes the earnest money, he is not allowed to break the deal. If he does, he has to pay the buyer double the amount of the earnest money. If you are not worried that the seller will change his mind, but are worried what they do with earnest money, you can skip the “pre” agreement and just buy it.

  3. Kuba says:

    My experience in buying property is that you may have to pay a portion of the house cost up front. Usually in an escrow account until the deal is closed. Somtimes itis 5% and sometimes it is 0%. But never given to the seller. And most real estate salesmen take a 6% cut but it also can be negotiated down. If he is hungry it will come down. If time are good it won’t come down. Mostly a function of weather it is a buyers or sellers market.

  4. Bartek says:

    Brad, I don’t understand the point. When my parents were selling our previous flat (for 170,000 PLN then) they demanded that buyers made a down payment of 10,000 PLN and drew up a preliminary sale agreement. The 10,000 PLN paid in advance was meant to secure my parents’ interest in case the buyers wanted to back down. It’s a very common thing and you need it prepare the preliminary agreement in writing or, to feel safer at a notary’s. And at the same time, when they were buying a house, they also made a down payment of around 40,000 PLN, signed an agreement and paid the rest the day the notarial deed was sgined.

    If the seller makes off with your money, the case indeed has to be settled in court, but I haven’t heard of any case of such an ending.

    But I heard one story when buyers made a down payment of 80,000 PLN (a house cost 780,000 PLN) and didn’t manage to sell their flat and get a mortgage and they lost the money.

    And yes, if s seller backs out, they usually have to pay more than a down payment they received.

    Escrow accounts? At that time (2004/2005) they weren’t popular in Poland. Allegro.pl Escrow system made Poles familiar with it

  5. The point is: no one buying anything for any substantial amount of money will walk away from more than about 1,500 PLN. Therefore, it is stupid for a seller to ask for more than that. That cash is not meant to be a short-term investment for the seller or grocery money or to pay back gambling debts. It’s ONLY purpose is to say “I am very interested in buying your home, here is some money to prove that.”

    I don’t know what Polish people think it is for but the real estate market here has become deeply warped. My wife and I are now considering buying new just so we don’t have to deal with joe sixpack.

  6. scatts says:

    The real estate market here is definitely deeply warped, which is why I remain surprised at how many people still want to invest 100’s of 1,000’s into it.

  7. ania says:

    Even if you buy in a new build you will have to pay a 10% deposit which goes to the developer not an escrew account.
    What’s the prob? – you need to secure your dream buggy to your pram and then contact babcia

  8. Peter says:

    “I don’t even think I’d give The Pope (note capitalised “T” (meaning JP2))”

    Had to laugh at this… Good stuff!

  9. bob says:

    Good topic. We got around it when we bought real estate by handing our cows over as earnest money. (but only the old sick ones)

    Actually, we did not put anything upfront at all (and it was a seller’s market at the time). We used a pre-prepared ‘heads of agreement’ that I prepared with a specific performance clause for sale (on the seller’s side) and some outs on my side if certain things happened. We agreed that the transaction would happen by a certain date and outlined the steps and dates – seemed to work for us. (but if you do, have a lawyer draw it up or at least review it. The key is to show sincerity by actions and being prepared – it did shake the seller a bit but better than than money lost on our side.

  10. Wait a minute… you mean you really don’t have savings stashed away somewhere?

    This is still shocking to me. 100 000PLN is not really a lot of money… but I guess $30 000 or £20 000 is a whole lot of money. People don’t usually have that much here in Britain, unless you mean a credit line.

    The question to ask for this to be changed is: how much that credit money costs? Po czemu te pieniądze?

    (So much for ‘rich west’ mythology)

  11. scatts says:

    A valid point, polka, and one worthy of a post in its own right sometime. Poles are poor people and yet they are always able to lay their hands on 100,000 PLN at the drop of a hat. Anyone from a ‘Western country’ is rich and yet most can’t lay their hands on 20,000 quid, aside from a credit card.

    How very true.

  12. zarazek says:

    “This is still shocking to me. 100 000PLN is not really a lot of money” – she must be having a laugh!

  13. scatts says:

    Come on zarazek, lift that mattress, look in that old cookie jar, call a friend….there’s a 100k there somewhere!

  14. In this case babcia doesn’t have the money. We need to sell our flat first to have the kind of money to secure the deposit. So it will take time between our buyer makes an offer to when we have the money to buy a new one.

    About the developer – it’s usually a big company that has many flats to sell. If they screw us on one flat, the public opinion will hear about it and they’re screwed on the rest of their ‘merchandise’. The private person can get away with murder much more easily.

  15. Jeannie says:

    I would be interested in a post about this. If they’re poor, how could they get their hands on 100,000 PLN, and how much is that in $? I get the basic concept about poor people saving, but there is a limit to the term “poor” and how are they able to get this amount of cash to draw from and still be called poor? Sorry, just a bit confused :-).

    Thanks,

  16. zarazek says:

    Looked high and low, didn’t find a single penny :(

  17. Pires says:

    I’ve payed ~ 1% of whole price up front so It’s quite shocking to me that they wanted that kind of money. It’s normal here (Grudziądz) that seller want about 1%-2% to be sure that You really want to make a deal.

  18. Pawel says:

    Pires, Grudziądz is not far from Torun, and here 10-20% are “normal”.

    This is how its being done in this country, I never even gave it a second thought.
    “zadatek” and “zaliczka” have always been there in kodeks cywilny
    But indeed its not in your interest if you’re buyer… Unless you’re afraid someone else will snatch that property before you…

  19. Łukasz says:

    I must say I’m surprised with ignorance of the author of that article. If you live in a different country you need to get the basic knowledge about how things work out here and then start to criticize.

    So the basic knowledge in that case is : if you ask the polish person “how much at front” that would be understood how big is a sum of money you need to pay after signing an agreement at a notary burro. It is usually 10 % you need to pay at front but after you sign a contract. That means you have already bought a place and your money are secured. If the seller will change his mind he is obliged to pay you back double the money you gave him “at front”.

    I understand you have hired a property agency with a very poor service, otherwise you would know that and maybe, but only maybe, you wouldn’t talk about communism and alcohol ! And that my friend, says a lot about you. I’m sure quite a lot of people were offended by this article the same way as me…

    Łukasz

  20. Lukasz: You missed the point of the article. The point of the article is: the act of asking for, say, 10-20-30 percent of the cost of an item is stupid.

    Your justification for this is, “that’s how we do it!” Fair enough. My response is: “That’s goddamned stupid.”

    I don’t really give a rat’s ass what a piece of paper says someone has to do because, quite frankly, if someone feels like being a jerk they can and then drag it out through the courts which will take a million years.

    I would be fine if it was the custom here to ask for 10% and then have that money go into an escrow account (go look it up, ok?) but that’s not what is done.

    Not to belabour the point, but if escrow accounts are somehow “commie” and thus bad, I would also be fine with asking for, say, 1-2% up front. No one would walk away from 1%, so why ask for any more?

    It’s unnecessary …get it?

  21. Michael says:

    I am curious why you asked and opened up the question anyways. He was eager to sell, had it on the market for some time, and you asked him if he wanted the up front money. A mistake, I would say. As for zadatek or zaliczka, this is where my agent helped when leasing in Legnica. The owner had hired him and had to trust him, I also had to trust him but now professional reputation is on the line. I put the money into an account with a contract with him holding the money. When we took possession, he transferred the money to the owner.

    Regards!

  22. Stamp says:

    I dont’t understand. When you want to buy a property in Poland then you go to notary office to sign the agreement and to pay the money to the seller. I bought and sold property (land) in that way. It’s quite simple and easy. What is that “up front payment”? I never heard about “up front payment”. If someone would ask me to pay him the money without the signing agreement in notary office I would have a thought he/she is mentally ill. Of course, you can pay “zaliczka” or “zadatek” (two different things!), but you always have to sign the agreement in notary office before that.

  23. Why is this hard to understand? Handshakes and stamped papers do not and can not prevent someone from fleeing with your money. Escrow accounts do. Simple.

  24. Waldemar says:

    simple misunderstanding! In Poland when buying a property, it is a norm to sign a preliminary agreement and give the seller 10-20% (sometimes less or more) of the agreed price. From this moment, if buyer wants to withdraw from the deal then he loses the “zaliczka”, and if it is the seller who wants to do so, then he must repay double of the “zaliczka” taken. The whole concept of zaliczka comes from the fact, that most propertys are bought using a bank loan, and bank needs to now exactly what property is it before it can grant a loan, and it also takes time on the bank side. When you finaly find a house you like, it may take a month or two before you can actually finalise the deal (bank+notary). The higher the zaliczka, the lesser is the probability, that during this time the seller withdraws from the deal beacuse he found another buyer offering higher price. Preliminary agreement confirmed by a notary + a bank statement make a short work in polish court in case of dishonest seller (who can run away with your money, of course, but he wont take the property with him ;-). Notary`s responsibility is to check if the property really belongs to the person that you give the zaliczka. It works.

  25. Mark says:

    The retarded poles just WON’T get it.

  26. fiercefarce says:

    I must say I don’t get why foreigners don’t get it – it’s all social contract.

    In Britain or the US, how do you (or rather “did one”) know when one write’s a cheque (which were quite skipped by the Polish, right into the electronic era) that it’s valid and will clear? Especially when e.g. renting a car (to keep up with flat values) for example? And even with money up front he could have drove off, couldn’t he? Yet rentals persevered. Unthinkable.

    Getting to the bottom of it all – what about money itself? It’s all paper (well…), just as the notary authenticated agreement (and notaries are also government-backed) – what’s the REAL difference?

    On the other hand, when you go for escrow, how do you know whether the escrow agent can be trusted? …in Poland?

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