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1st July 2022
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Video killed the radio star

valuers CYPRUS and Greek banks have historically relied on asset lending, with real estate underpinning the majority of loans in both countries. Asset lending means that banks lend money primarily according to the value of the asset pledged as collateral, rather than taking into consideration the ability of the borrower to repay the loan.

This type of lending is characteristic of markets with immature banking systems (and of banking practices in Western Europe and the USA during the 80s) where companies are unable to access capital markets (there is no developed stock or bond market) and are forced to collateralize their assets in order to get working capital to finance their operations.

When the borrower is unable to repay their loan, the bank forecloses on the asset and sells it in order to recoup the amount owed. It is at that point in time when the valuer will enter the spotlight as the bank will compare what it thought it would get (the valuation) against what it will actually get from the sale.

A heads-up to valuers as to what to expect: picture yourselves on the morning after your wedding day – you are hangover, your hair stinks of smoke, your mother is wondering where you are, and the hotel is getting your bill ready. Yeap, that’s what it’s all about.

Valuers suffer from an inferiority complex – nobody really understands what they do, they don’t make ‘big bucks’ like Chartered Accountants (even though they call themselves Chartered Surveyors), and everyone is usually shouting at them to ‘produce’ the value that they want.

Valuers are accommodating people, so they have long hidden behind a 1977 UK court ruling (Singer & Friedlander Ltd V John D Wood & Co) that stated that “Valuation is an art and not a science. Pinpoint accuracy is not, therefore, to be expected” i.e. the value they come up with is a ‘rough estimate’ with a margin of error of 15% either way. Thus, utilizing their artistic license, valuers have been known to come up with almost every value known to man (or woman). Now they will need to prove that their valuations are worth the paper they are written on, as banks will soon start selling their collaterals.

Imagine that you are a bank which lent €80,000 against a property valued in 2008 for €100,000. Very prudent one would say, as you have allowed yourself a 20% margin if prices drop. At the time, the credit officer proactively pushed the valuer to see the property with a ‘silver lining’ (e.g. my client is very important to the bank, they are selling units like crazy, etc.) and they juggled with him for hours, threatening not to use his firm again, unless he agreed to be paid €80 for the valuation (this is a real fee by the way).

The valuer gave the credit offer the number they demanded and added some assumptions for good measure:

  1. He assumed that the property has a clean title deed,
  2. That the building is constructed legally, and
  3. That the rent the borrower told him he is earning from the tenant is correct.

Why these assumptions? Because the bank also told the valuer that they wanted the valuation within four working days and that they shouldn’t ask their client too many probing questions in order not to upset him.

The bank is now about to foreclose on the property – property prices are down 50%, but the bank is still OK because it has already taken provisions for this loss (shouldered by depositors, tax payers, and new shareholders). However, it turns out that the building has some illegalities and that the tenant has been paying half the rent recorded in the valuation. If the bank recovers €25,000 it should be ecstatic.

A new chapter in the relationship between banks and valuers is about to be written. Unfortunately for shareholders, neither side has an interest in actually setting the record straight.

Note: “Video Killed the Radio Star” was released in 1979 and made famous by the Buggles. The song’s theme was promotion of technology while worrying about its effects on media arts.

Pavlos Loizou MRICS VRS
Partner Greece & Cyprus
Resolute Asset Management



  1. @Richard, the problem is that nowadays banks operate under the perverse incentives created by the state(s). Essentially they are telling the banks “no matter what you do, we will bail you out”, especially if you are “too big to fail”, at the expense of the taxpayer of course.

    @Peter Howard, good luck to you fighting the criminal real estate agents cartel. It is indeed a very cosy arrangement they have.

  2. Editor – have you any evidence of which estate agents you can actually negotiate with, and if so, who are they.

    Peter – If you let me have your details I will contact you privately to take our discussion further.

    (Editor’s comment: Speak with the chap named in the article at Cyprus to host international real estate congress.

    He’s the former chairman of the FIABCI chamber in Cyprus – and was also the president of his Rotary club in the same year that I was the president of mine.

    Unfortunately he has the same name as the former Cyprus Interior Minister who was sentenced to 15 years in prison over ‘money laundering’ charges.)

  3. Costas Apacket

    I think that you will find that the problem is with Licensed Estate Agents who are always charging the 5% +VAT. I know that some other so called illegal agents charge differently.

    I can only speak for my business where we also charge a straight 5%, however if we have sole agency we charge 4% and if a property is valued at € 500,000 or more we charge 3%. Our adverting costs for a house over one million is higher than an apartment, but a commission of 3% for a high price property – is still ample reward for our services ! In cases where we have an offer for a property and we are asking a property seller to substantially reduce his price, to achieve a sale, we will also reduce our commission – a reduced commission is better than no sale.

    If I do not make progress here in Cyprus I may go to the EU but my legal costs and fines are already more than € 20,000 and not sure if I want to keep spending – so this cartel may continue !

  4. Peter,

    I would be happier to agree with what you state if there was a modicum of competition within the Cypriot property market that actually led to Estate Agents offering some variation in fees or at least offering the option of fixed fees for everyday property transactions, but it’s a solid 5% + VAT wherever you look.

    In my opinion this is market fixing and anti-competitive behaviour.

    I’m absolutely sure that if an Estate Agent in Cyprus offered commission fees of say 3% + VAT, and/or a fixed fee option, the volume of business that would be placed with them would increase commensurately, since this is how a ‘Free Market’ works isn’t it?

    However application of ‘Free Market Rules’ here is very often coupled with a brick through the window, or something more serious, which, I believe, is why many don’t take this route.

    It’s got to change.

    Are you planning to take your complaint to the EU if the boys at the SC use the usual a la carte ‘Justice System’ to protect the usual suspects?

    (Editor’s comment: You can negotiate estate agents fees.)

  5. I may regret this, but I am an ‘illegal’ estate agent, but will try and answer some questions.

    I have sold property here for more than 10 years, and to date no problems or complaints. You need a license to sell property here in Cyprus, but this is an illegal cartel. I was taken to court 2 years ago for being illegal, during proceedings it was shown that there are more than 200 licensed agents here in Cyprus – but at that time there were no English people granted a license. I claimed that under European Law I was qualified and free to operate here in Cyprus – apparently the court only recognized Cyprus Law, and I was found guilty. Like many English agents I had the option of paying considerable sums of money to a Cypriot and then operate under his license. I choose not to do this and am currently fighting my case in the Supreme Court. It is ridiculous to suggest that any English person selling property here is a crook, and that all Cypriots with a license are honest.

    Regarding commissions of 5%. I have sold real estate in both Spain and the USA and this is a standard rate. Rates are lower in the UK because the volume of business is much greater, and prices much higher – a successful UK agent will sell more properties in a month, than is sold in the whole of the Paphos area.

    Potential buyers over here can take up to 3 days viewing property and seeing different areas – and still not buy. Admittedly it is a nice commission when a sale is achieved, but you have to look at the wider picture. We spend a lot of money advertising 180 properties on the internet, operate two offices, have employees, and then maybe achieve 5 or 6 sales a month – this means that we are busy promoting 170 properties without reward. We also have to employ one person for after sales, as most buyers need help in settling into a property in a different country. These are all costs that have to be paid for out of income received. Mention has been made of Fitzgerald, who are very successful, but they do operate their own business model. Like many agents we do not ask for sole agency, and on higher priced properties we take a reduced commission.

    Pippa. I am sorry that you had a bad experience with agents, but you have to appreciate that because of forums like this, 85% of buyers will only look at properties with Title Deeds and many agents will only market property that have the Deeds – I believe that you are still waiting for yours – so an unfortunate situation, but hopefully rectified soon.

    (Editor’s comment: The European Commission took action against restrictions on estate agents’ activities in Cyprus in 2009 (Internal Market: Commission takes action against restrictions on estate agents’ activities in Cyprus.)

    But it terminated proceedings in 2011 (unjustified restrictions on estate agents’ activities in Cyprus removed) and in the notice said that “European Union estate agents can now choose to perform their activities in Cyprus and thus exercise their right to freedom of movement as guaranteed by the European Treaties.”

    Maybe it’s time someone else complained?)

  6. @Peter Davis –

    Yes I believe that Fitzgeralds are one of the few Estate Agents you could label as honest, however, they still charge an exorbitant 5% fee plus VAT to sell property and insist on a sole agency agreement.

    In the UK fees are typically 1% for a sole agency and up to 3.5% for multiple agencies.

    How can anyone justify a total bill of €21,000 to sell a €350,000 property?

    Just exactly what do they do to ‘earn’ this much money? Do they do more than a UK based Estate Agent?

    I very much doubt it.

    As I stated previously, it’s just the final insult to most people’s property nightmares here and a final opportunity to rip off people who have already been royally shafted throughout the Cypriot property owning process.

    ATM’s indeed!

    I ask yet again, does anyone know of a reputable Cypriot Estste agent whose fees are less than 5% plus VAT?

    If not then I believe that the property sales market in Cyprus is closed to effective competition which is illegal under EU free market rules.

    Prove me wrong, I challenge you!

  7. Three years ago, when we first decided to sell, we approached seven so called estate agents, to value and advertise the house, of those that bothered to either answer the phone or respond to e-mails none of them would come to see the house to value it as we live in the mountains as it was, to quote one so called agent “too far to travel”.

  8. @ Costa Apacket,

    There are honest Estate Agents out there. I sometimes do work for Fitzgerald, Paphos.

    The problem is to be an Estate Agent you need to be licensed. Why you need a license to run a shop I can’t understand? But this license ensures a ‘closed shop’. One of the original conditions was must be fluent in Greek. How many of us signed our contract in Greek? But the final examination for a license is still in Greek only.

    You need to remember that the Estate Agent only represents the seller. A servant can’t have two masters. So to balance the scales, the buyer has a highly qualified Cyprus lawyer looking after his interests.

    With a lawyer like that what could possibly go wrong?

  9. There have been no answers to my question posed yesterday ‘Has anyone actually found an fair and honest Estate Agent who charges a reasonable fee, or are they are rare as an honest and fair Lawyer in Cyprus?’

    Does this suggest that the Estate Agency profession in Cyprus is a ‘closed shop’ and is practising in an anti competitive marketplace, which presumably would breach EU competition laws?

  10. Valuers are just vultures grinding out some meat out of the bone (80€ paid for an dishonest certificate and 5 minutes of work, just says it all about the “valuer’s value”).

    The only real value of a good at a given date is the price for which it is sold at this given date.
    Which is to say, one has to take into consideration that real estate is a MARKET, and so, prone to inflation and deflation.

    Considering real estate, a good “rule of thumb” to appraise a good is the time span necessary to sell it.
    An average “fair” price should get the good to be sold in three months.
    More than that, it means the good is overvalued, less it means it’s underrated….

    Valuers appraisals should be made public before the sales, and recorded officially.
    This way one would get a “valuer’s efficiency ratio” given by a ratio “estimated value/actual sale price”.

  11. At great risk of sounding like a broken record – this is a western banking global problem.

    If you replace ‘property valuation’ for ‘investment rating’ and replace ‘Cyprus property fiasco’ for ‘Iceland economic fiasco’ – you get the picture?

    What irks me with bankers is one minute they take the most reckless risks (with either someone else’s money or with ‘faux’ money they’ve invented a la fractional reserve banking model) and then the next minute they want to exploit every regulatory procedure in the universe to get their investment back when everything derails.

    The nearest analogy I can offer here is like a bunch of teenagers who get roaring drunk and go on the rampage. Instead of being punished and made to clear up the damage – the police go to the off-licence and the drinks company and prosecute them for negligence and conspiring to cause criminal damage.

    Valuations are NOT the corner stone problem here. Reckless lending IS. When will everyone start addressing this giant elephant in the room instead of writing endless articles about side issues?

  12. Pippa, so very true but indicative of the amateurish modus operandi of the financial and property sector not to mention the legal services sector many of whom should be barred from practicing. Their past activities has led us to the mess we are now in and all we can do is try to justify why we were inept in the way we operated.

    The truth is we will do or say anything if there is a perceived profit at the end of it without any consideration of the consequences. So very sad and an abject refusal to grasp what could have been a goldmine of opportunity for the Country as a whole. We reap what we have sown and now bear the consequences.

    The biggest tragedy however is that we will not learn from the experience.

  13. Seems pretty accurate.

    The other area in Cyprus that needs urgent attention is the exorbitant fees charged by so called ‘Estate Agents’ who typically ask for 5% plus VAT to find a buyer.

    On a €350,000 sale this means that the agents will take a €17,500 fee + €3,500 in VAT leaving you down by a cool €21,000.

    It seems that the Cypriot property feeding frenzy (or rip off by any other name) continues right through to the end of your property nightmare.

    Has anyone actually found an fair and honest Estate Agent who charges a reasonable fee, or are they are rare as an honest and fair Lawyer in Cyprus?

    Rocking horse poo comes to mind.

  14. This is an exact scenario that has happened to my business partner in the UK. There is no way he can afford the repayments on the loans for properties he has purchased with the earnings he has from the company. It is all starting to go wrong for him now after losing 2 tenants.

    I would have described it as irresponsible borrowing by him and irresponsible lending by the bank. I have always wondered how the banks just accepted the spreadsheets and the valuations he put forward on his last trance of borrowing. Our company have consistently turned over 3.5 million per year for the last 4 years so we are a good customer. This article explains everything now. The words Asset Lending is something I had never heard of before now.

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