Cultural Differences – Know Who is Across the Table

Reading that there are nearly two dozen German companies in the area (https://www.timesfreepress.com/news/business/aroundregion/story/2019/jul/29/german-connection-chattanooga/500019/) reminded me that there are cultural differences in the way people from different countries approach real estate. While we have a very strong system set up to support real estate ownership and transactions it’s not the same around the world and when engaging with other cultures it can be critical to understand the idiosyncrasies they have in order to be successful.

For instance the majority of Germans do not own their own homes. They are one of the largest leasing oriented countries with something like 80% or more not being owners. This will have obvious effects that we can see but also not so obvious ones like the limited number of potential buyers and a system that is not as efficient in transactions.

Another example are Middle Eastern countries. Their system of laws around real estate and their understanding of contracts is vastly different than ours. Where we have a simple underlying belief that if I sign a contract with you today we are in a ‘Contractual Relationship’ and we will follow its course to the end many Middle Eastern countries do not have the same adherence or even basic belief in such rigid structure. You can sign a contract today and find yourself tomorrow completely renegotiating it or worse find that there is a second contract they have entered into. They see nothing wrong with this and consider that if you wanted the property you would have bought it, without consideration for any due diligence. There is also a distinct bartering mentality which will drive you insane if you’re not prepared for it. Middle Eastern cultures will retrade and renegotiate endlessly – even at the closing table – in order to get even just one more dollar. This is not viewed as wrong or disrespectful but actually as good business. As fighting for every last possible bit of value. It’s just much more fluid than we’re used to.

On the opposite end of the spectrum would be Asian societies where structure and a rigid adherence to a way of doing business can seem almost stifling and if you don’t do your homework you can lose a deal before you even have it presented.

In short, as with all deals do your homework on who the other party is, their style and motivations. You don’t want to lose out on a deal because you decided not to join the Japanese for Sake and karaoke after a long day of negotiations. Sake and karaoke is not optional.