Buying, Selling, and Profiting in the Russian Real Estate Market (3/4)
We had decided on a large 3-room apartment in the city center of Russia’s fourth largest city. We were excited because the location was excellent. We were a mere 5-minute tram ride from the city center and river beach. It was right in the middle of the action. We had raised the $70,000 needed to purchase the apartment from friends with varying interest rates, amounts, and terms. We were now ready to close.
About five days before closing we had safely wired our money into our Russian bank account. There were no questions from the bank in the U.S. or in Russia. I expected to get questioned at least by the Russians but it didn’t happen. I asked my realtor/attorney, Svyeta about the escrow and she informed me that there was no escrow. (I need to mention here that the Russian real estate market has evolved dramatically since the early 2000’s. I believe now there is an escrow process in many transactions and the fees paid to agents has increased to western standards).
Svyeta informed me that on the day of closing we will need to pull out all of the cash and go to the city title office for the signing of the documents. Now I was nervous. I didn't want to handle this quantity of cash. I remembered at that moment a few years before visiting with a friend of mine from Turkey in the Russian city of Irkutsk. Hanging on the wall in his dormitory was a suit. I thought it strange so I asked, “Hey, why is there a suit on the wall there?” My friends countenance became grim as he explained to me that one of his Turkish friends was shot and killed during a business transaction. The bad guys found out he was carrying $15,000 in cash in his briefcase and decided to intercept him and take the money. The suit on the wall was for the mans funeral. As that replayed in my mind, I felt some nausea come over me. I decided that was a memory I’d keep to myself and not tell Kristen until after the transaction was over. I asked Svyeta about security and she informed me that the sellers agent would be carrying a pistol, so I need not worry. “Shouldn’t you have a pistol too since you’re my agent?” Not necessary, Svyeta informed me. I decided to go with it reasoning that if I died, it would at least make a good story. But in reality, Svyeta knew what she was doing and it showed in her careful attention to details.
On the day of closing Kristen and I drove to the title office and met the seller, Svyeta, and the sellers agent. As expected, the sellers agent was packing heat. He had a gun tucked just under his belt. Sweet! I thought. This was my first real estate transaction ever so I began to wonder if it was this exciting back in the U.S. We signed the paperwork at the office which was very smooth and efficient. Years later after closing some deals in the U.S. I remembered thinking it was strange that I never saw or met the seller. In Russia, I was interacting and speaking with the seller directly. I had no idea this was not normal practice back home. Our Russian seller was a nice lady and seemed very calm about the whole transaction.
After signing the papers we sat in a car with the sellers relative at the wheel. He and the sellers agent sat in the vehicle with me. I thought that was odd so I asked if he could be dismissed since he had nothing to do with the transaction. I didn't know him and saw his dismissal as a risk minimizer. Nobody had any issue with that and we ended up driving to the bank with the sellers agents. It was then that the sellers agent informed me that his gun only had rubber bullets. He laughed. I didn’t.
At the bank I pulled out the $70,000 in cold hard cash. I put it in a plastic shopping bag and walked out of the bank and sat in the car. The next 20 minutes were going to be the most stressful part of this deal. In my mind I imagined cars following us on the way back to the title company. I imagined someone might block off the road and waylay us for the cash. My imagination and my nausea were at peak levels as we drove through the city. I decided not to look around. If something was going to happen, my only hope was that Sergey, the sellers agent could shoot those rubber bullets with pinpoint accuracy into the eyeballs of any perpetrators we might encounter. That could work I suppose. I sat and prayed.
We arrived, thankfully with no incident. I walked into the title company to sign a couple more documents with Kristen, all the while holding a plastic bag full of $70,000. It was the same kind of shopping bag that the Russians might carry bread, or groceries with, so I reasoned that most people, if not all wouldn’t think anything of it. However, I also noticed that inside the title office there were MANY people carrying similar bags. This was so dangerous, I thought. I need to close this deal and get outta here!
When we finished signing the final documents, we all shook hands and it appeared we were finished! After that we walked back out to the parking lot where I sat in the back of the sellers agents car with the seller. He told me that now was the time to give her the cash. So there I was, sitting in the back of a Russian Lada, right next to the seller. I handed her the bag full of $70,000, which she promptly began to count. This was going to take awhile. The sellers agent informed her that it was all there and so she stopped counting and smiled. She then exited the vehicle and walking off alone. Man, I thought, now her life is in danger. This is nuts! I sure hope someone is waiting for her to give her a ride.
That was the closing. After it was all done we met the sellers agent at the apartment and got the key. We were so excited. The apartment was ours. We were so elated. We had accomplished something that seemed almost impossible in the beginning. We purchased an apartment with cash, in Russia! So cool!
Owning in Russia was the right decision for us at the time. In the coming years we’d see the emergence of the mortgage market, high oil prices, and a limited supply of apartments in Russian metros. Furthermore, we had all the freedom we needed to do the work we came there to do. At the 3-year mark we sold it, capping off an incredible experience. But I’ll save that for the next and final installment.