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Selling Real Estate in Russia? Are You Crazy?

Rogue Valley

Lead or get out of the way
DP Veteran
Apr 18, 2013
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Selling Real Estate in Russia? Are You Crazy?


MOSCOW — Elena Y. Kotova’s one-room apartment on the outskirts of Moscow had started to feel cramped. Her son was almost 4 years old. She and her husband had solid jobs, she as an economist and he as a manager of a construction company. It was time to buy a new home. “We just need the space,” she said. They found a two-bedroom apartment and secured a mortgage as well as a buyer for their former home. As closing day approached, the couple had one task to complete. Each would need a certificate of sanity from a psychologist. “They will look at our psychological state,” she explained. “If everything is normal, they will give us the document.” Ms. Kotova, and tens of thousands of other Russians who are required to produce such a document to sell property, have no history of mental illness. The certificate, which must be signed and stamped by a doctor, is a legal defense against a pervasive problem in Moscow real estate deals: rampant fraud and weak courts. This is the state of a real estate market plagued by “black realtors,” unscrupulous sales agents who use a variety of ploys to separate Muscovites from their money or property in the largest city in Europe. Russian media coined the phrase and described the agents as akin to criminals working a real estate black market, in a city where $29 billion in residential property is sold every year. This fraud is prevalent enough that nearly all of the roughly 140,000 transactions annually in Moscow have required sellers to show certificates of sanity in recent years, real estate agents say.

Most fraud involves buildings that are still under construction, where builders offer discounts for pre-purchases but often steal the money and declare bankruptcy. The Ministry of Construction reported in August that it has 34,085 open complaints from such transactions. This fall, one group of real estate agents, as all agents do, followed a cardinal rule of the property market: location, location, location. They were looking for a quiet spot with few neighbors and good waterfront access — to dispose of the bodies of customers who had gotten in the way of their making, well, a killing in the market. Over a span of five years ending this August, the group killed nine customers and dumped some bodies in a picturesque lake in the woods outside Moscow, the Russian police said in a statement. There are people who lived to tell of harrowing Moscow real estate transactions. Last year, state television reported that a gang of brokers kidnapped about 30 Moscow apartment sellers over eight years and then kept their properties. The former owners, mostly alcoholic single men, were put to work as slave laborers on a remote farm.

Perhaps nowhere else is "Buyer beware" to be taken so literally.
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