A guide to buying an apartment without making a big mistake

Don’t repeat the mistakes of others when becoming a homeowner.

Buying an apartment or a house is a lifetime decision. Nobody wants it become a lifetime trap, so it’s important to get the decision right.

After seven years of Kyiv life, Oksana Levkova, 30, has finally decided to buy her own apartment. She got tired of renting and sharing her private space, so she started to look for ways to make what she calls one of the most important steps in life.

The first question to consider is where to buy, which depends largely on your budget.

According to realtors, the majority of real estate deals done on the secondary market are in the price range up to $100,000, which will get you a one- or two-bedroom apartment in the so-called “sleeping areas” of Kyiv, outside the city center.

Real estate consultancy and broker SV Development reported that, out of 707 deals on the secondary market made in Kyiv in August, 44 percent were one-bedroom apartments and 43 percent were two-bedroom apartments.

In terms of value, 66 percent cost less than $100,000. Only 199 apartments were bought on the primary market.

Currently, the lowest real estate can be purchased in Darnytsky district of Kyiv, starting at $1,356 per square meter, and the most expensive is Pechersk, from $2,836 per square meter, according to the SV Development report.

So far, Levkova has visited nearly 30 apartments that fit her basic requirements: one bedroom, not in the city center, with a nice view, close to a park or a forest and not a Khrushchovka (a low-cost apartment built in the 1960s under the rule of Soviet leaer Nikita Khrushchev).

“The choice is very limited, unfortunately,” Levkova said. Kyiv has long suffered from a limited supply and choice of apartments, which has forced prices up.

The next step is getting a bank loan. Levkova, a head of a non-governmental organization and a journalist, said she is confident of securing a mortgage. But not everyone is as lucky, after the crisis cut the number of banks willing to lend money and pushed interest rates higher.

According to SV Development experts, currently only 25 banks are ready to issue mortgages.

The requirements for borrowers have become much stricter: You need a high income and perfect credit history, you have to provide an initial payment of at least 50 percent of the apartment’s value, and the loan will be extended usually for 10 years, and in rare cases 15, at a rate of up to 30 percent annually.

Levkova said she managed to find three banks offering acceptable terms.

“The main driving force behind the boom in the real estate market was mortgages.

Before the crisis, nearly 70 percent of apartment purchases were completed using bank loans,” said Serhiy Kostetsky, an expert from SV Development.

“We expect the revival of the market by the middle of 2012, when mortgages are again available,” he added.

Levkova said she has taken her time to make choices and consulted with friends and professionals.

“I’ve made up my mind and started the market study half a year ago. I’ve talked to friends that have experience in buying flats, attended special courses and, of course, approached professional brokers,” said Levkova.

Nevertheless, even though Levkova says her knowledge of the market and procedures have significantly widened, she doesn’t feel confident enough to handle the deal herself. So Levkova decided to use services of experienced real estate brokers.

Despite some scandals, in which brokers have been accused of not taking responsibility for the apartments they are selling, Levkova said she wanted to tap their expertise and save time.

Apart from the challenge of finding the best apartment to buy, a customer may face many other legal challenges connected with the ownership of the purchase.

Maksym Kopeichykov, a partner from Illyashev and Partners, said that the signing of the final deal is the easiest part. The main work, he said, needs to be done before the decision.

“It is crucial to study the history of the property you buy: When was it privatized, how many times it has been re-sold, on what terms, whether it is pledged as collateral for a loan and whether current owners are eligible to sell it,” Kopeychikov said.

He added that all research should be done by a broker that finds an apartment for a client.

“When they sign a contract with a customer, most real estate brokers usually commit themselves only to finding an apartment and support while closing the deal, but do not guarantee the quality of the deal,” he added.

In addition to this, broker’s services are not regulated by Ukrainian legislation and hence they don’t carry legal responsibility for their actions, explained Kopeychikov. His advice is to get a lawyer to check the apartment’s history.

Kyiv Post staff writer Olga Gnativ can be reached at [email protected].