Liz Hogan hoped to fulfill a longtime dream of buying a place out West recently as she embarked on house tours through Jackson Hole, Wyoming; but the parade of charming properties, set against rolling mountain vistas and the unspoiled wildlife that her family had grown to love led only to red flags.
Wyoming is one of about a dozen non-disclosure states in the U.S., in which the final sales price of homes is not made public, and reliable market data is sometimes impossible to come by. To Ms. Hogan, who is a real estate agent back home in the Miami area and an adept public data sleuth, the lack of market transparency was a dealbreaker.
“You’ll have someone say that a home sold for $5 million and then the next guy will say that the same home sold for $3 million,” said Ms. Hogan, the executive director of luxury estates at Compass Florida. At one point, while her family prepared to take the boat out on Lake Jackson, a local told Ms. Hogan he’d sold a property similar to ones she’d toured for many figures less than she expected.
“The lack of data actually kept me from buying property because I didn’t want to get caught with something that I don’t want in five years and find out that I paid way more than it’s worth,” she said.
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A prudent house hunter, whether buying a vacation home or a homebase where location’s flexible, should steer toward transparent markets with ample public data and disclosure rules whenever possible. Historical sales prices and multiple listing services enable buyers and sellers to get a fair deal, while public ownership records safeguard people’s property and discourage bad actors from entering the market.
It might come off as conservative advice at a time when nascent luxury markets in places like Vietnam or the Philippines could offer tremendous upside despite being highly opaque. Even Ms. Hogan conceded Wyoming ski towns, like Jackson Hole, have boomed regardless of the state’s murky price data. (Kanye West bought two ranches in the Cowboy State last fall.)
But ample market transparency is the first line of defense against risk.
Why Public Data is Essential
At the most basic level, sales data sets realistic expectations, as both buyers and sellers can see how much comparable homes have sold for, how long they took to find a buyer and gauge the competition.
“It’s similar to a report on a stock: You do your research,” said Scott Durkin, president and chief operating officer at agency Douglas Elliman, a trailblazer in disseminating New York City price data. Today, the company employs home appraiser Miller Samuel to compile dozens of highly detailed market reports every quarter spanning Los Angeles, Boston, South Florida and soon, Houston, Texas, among others.
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“You can never have too much data, the more you have, the more educated you are,” Mr. Durkin said. He added that regular, reliable information offers a sense of stability, especially in downturns when the numbers show home values really only fluctuate by a few percentage points. Without it, people could feel like “the sky is falling,” Mr. Durkin said.
Robust public information can also help buyers cut through the marketing spin some sellers, particularly condo developers, might use to puff up a project, said Rachel Ostow Lustbader, a real estate broker with Warburg Realty in New York City.
“Sometimes if you go online, you can see a development’s website says it’s 25% sold. That’s misleading because what they do deliberately is only release a select set of units at a time,” Ms. Lustbader said. “They’re actually saying, we’ve sold 25% of maybe the 10 apartments we released.”
Instead, updates to the offering plan—in New York, a public document developers file with the state Office of the Attorney General and which is available online through the Real Estate Finance Board—will offer a more reliable measure of activity in a new development. The fine print of an offering plan can also tell a potential buyer if the dreamy square footage the seller’s marketing happens to include the common spaces like elevator shafts and stairways.
Chicago-based real estate services firm Jones Lang LaSalle, commonly known as JLL, has for 10 years put out an annual global real estate transparency index. The U.K., Australia and U.S. consistently top the list, followed unsurprisingly by other advanced economies like France and Canada.
Financial centers such as Singapore, Hong Kong and Japan lead Asia with strong regulation and market data and various performance measures, according to JLL’s latest index, released in mid-2019.
“Market transparency is the foundation which allows investors and corporate occupiers to operate and make decisions with confidence,” said Christian Ulbrich, CEO of JLL, in the report. “Without high levels of transparency, real estate markets cannot work efficiently.”
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Avoid Mysterious Markets
On JLL’s list, the most opaque property markets with large luxury components include the Bahamas and the Cayman Islands, while Venezuela came in last of the 100 countries ranked. On a city level, some of the least transparent locales were in Southeast Asia, including Ho Chi Minh City, Manila and Jakarta; and Latin American destinations including Buenos Aires and Mexico City.
In the niche market of private island sales, buyers sometimes find the search brings them across jurisdictions with wide-ranging degrees of market transparency and regulation. Farhad Vladi, founder and president of Vladi Private Islands, said one of his first concerns when advising clients is whether the local government allows straightforward freehold ownership of the island.
For that reason, Mr. Vladi won’t deal in Thailand or the Philippines, for example, where foreigners are not allowed to own land. Instead, such island buyers would have to fashion a complicated web of third-party entities to circumvent property laws.
“It’s very difficult and very dangerous, and when you want to sell, how can you find a buyer?” Mr. Vladi said. “Ownership means that you are in control of what you see. If you leasehold, you always have the landlord and the sovereign country above you.”
For that reason some of the most popular private-island markets are, unsurprisingly, in Western Europe, the U.S. and Canada. Freehold ownership in French Polynesia and the Seychelles also make those smaller markets highly popular among island buyers, Mr. Vladi added.
It’s a similar case for house hunters in the Caribbean, where transparency can run the gamut from the Turks and Caicos Islands, which have a land registry and legal system based on British common law, to more opaque systems in, say, Antigua.
Turks and Caicos also benefits from a sophisticated multiple listing service, said Sean O’Neill, managing director of Caribbean development and operations for The Agency. Detailed island sales data help him set expectations with new clients who come from U.S. or Canada, where a normal home sale will move maybe three times as fast as in Turks and Caicos.
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“A central MLS is really the backbone of the market,” Mr. O’Neill said. “It gives you ready access to where the direction of the market is, and vital statistics when you’re making an offer.”
He said he would love to see centralized multiple listing services in other parts of the Caribbean, such as in Antigua and Anguilla.
Of course, buying residential property can be a highly emotional purchase, said Stephanie Anton, president of Luxury Portfolio International. Totally opaque market metrics may not dissuade someone who dreams of buying property in their ancestral homeland, for example.
“If you’re buying a second home because you want a return on investment, then the data is incredibly important,” Ms. Anton said. “But if you’re looking for something that’s maybe going to stay in the family for generations, that’s more of an emotional purchase and the data is not critical.”