With the theme from Dragnet resonating in the background - the names have been changed to protect the "guilty". No...seriously...from time to time I want to use real world stories. To protect the parties, exercise discretion and protect anonymity...I will use just the name "Doe". As in Jane or John, but I don't even want to address gender.
I have always found it modestly "amusing" how folks love to write only about their successes. At times I wonder what the real value of such stories, besides self-promotion, might be to a reader. Don't get me wrong, no one enjoys an incident of failure, but let's be honest, some of the greatest lessons learned come from failures and overcoming them. So...with that, I will tell a tale of what I consider the only failure we have encountered in Ecuador thus far, from a business perspective.
A person named Doe approached us. They had been working with a real estate agent, had some reservations and wondered if we'd work with them instead. After a lengthy process, because we are very sensitive to "poaching" someone else's clients, or even the perception thereof, Doe ended up working with us. We started with the usual basics. Depending on the area in Ecuador selected, we always do a 2-day prep tour (free of charge) with the client. No, not to sell them real estate, but to familiarize them with an area, give them market perspective and set up realistic expectations. We do this with all our clients and Doe was no exception. However, in Doe's case, they were leaving Ecuador promptly and we had to combine this "tour" with some real estate showings, at Doe's request. That's not the norm as to how we operate. Doe was excited. Spoke about our professionalism and their interest in various things we showed them. They had to go back to the USA, but wanted to progress with a dialog and hire us to represent them in Ecuador.
Upon Doe's return,we began the client intake process, which normally gets started much earlier (remember, we inherited Doe). The very first thing we do is provide written disclosures for joint signature. One such disclosure is our Buyers Consultant Agreement. Now, you must understand the context, both as a partial defense for Doe, but also as a caveat to purchasing Ecuadorian real estate - most real estate "agents" in Ecuador can't spell "Disclosure" let alone practice it fully. Sorry, colleagues, but its true. When Doe reviewed our full disclosure agreement, they were shocked...nay flabbergasted...nay again, astounded that it included a compensation clause. Our compensation to be clear. Doe had been clear. He wanted us to knock down the price of any property they bought by at least 30%. For this hard work and diligence, Doe expected us to then return to the party that we had just drilled for a 30%+ discount and then ask *them* for compensation. And...why? Because Doe operates on the misguided belief, perpetuated by my industry colleagues in the USA, that this is the way things work at home.
Allow me to explain, but first allow me to note what truly surprised me, because this wasn't it. I simply acknowledged Doe's concerns and then asked them to instead sign a separate disclosure. The latter disclosure was an acknowledgment that thy had been offered Buyer representation, had rejected it and were instead prepared to move forward with us offering merely Fiduciary Representation, with our primary Fiduciary responsibility now residing with the Seller (the party who would then pay us). Doe was not happy. They decided, at that time, not to work with us. They couldn't comprehend why we wouldn't work in their best interest and against the Seller's best interest, but still seek compensation from the Seller.
Here is what every Expat should understand when considering Buyer Representation in Ecuador (or elsewhere):
1) If you find a real estate "agent", willing to do what Doe asked of us...run... don't walk away. What kind of integrity would we exhibit, or lack thereof, if we were willing to work against the best interests of the party paying us?
2) Don't buy into the "That's how it is done in the USA" spiel. Buyers may feel like they don't pay in the USA, but you do. Just that my industry isn't honest about it. Every time an agent sits with a Seller, they factor into the listing price the cost of commission and pass that cost along to the Buyer. It's a little secret we don't share. So, when you walk into that real estate office in the USA and that smiling agent says, "Welcome...don't worry, I will represent you for free"...not happening. Not in the real world. And if it doesn't happen in the USA, don't bet on it happening in Ecuador.
3) If you want to feel good, rather than invest wisely in a full disclosure environment, feel free to partake of the many "agents" (not us) who will promise to work with you for free. However, let me tell you what that truly means in Ecuador. In Ecuador, there is no MLS. No way to readily verify pricing or comparable sales, especially for a layman. So the common practice of many "agents" is to determine the actual sales price desired by the Seller, then mark that price up, currently on average, between $10,000-$20,000...in order to find the unsuspecting Expat to sell it to at the marked up price. So, that smiling Ecuadorian "agent" who says, "No I don't charge a fee"...well, they don't. They just mark up your costs. In fact, when Doe came to us, it was exactly because they had discovered, quite by accident, that the Agent they were working with had marked up a property by $15,000. Our fee, for driving the price down (not up) would have been about $3,900. But at least one can "feel good" that they didn't pay a fee.
Folks, if things seem too good to be true, they usually are. True real estate professionals work very hard and long hours. Like any professional, an attorney, an accountant, an advertising exec, they need to charge fees to earn a living. Ecuador has no implied fiduciary responsibilities that are actively enforced by law. They have no mandated disclosure laws. Real Estate folks don't want you to know that. Even in the USA, where such laws exist (most states), I would argue that their practical enforcement is almost impossible. So, unless you ask, or are offered full-disclosure, you will never know. As one agent - an Ecuadorian, not an Expat - proudly proclaimed at a recent meeting, "My clients don't even ask what I will get from a deal. They just ask how much and sign where I tell them." Wow! Folks...justice may be blind, but the real estate buying process shouldn't be. When in Ecuador...Caveat Emptor.
ps. Doe has, quite sadly, had to deal with a personal illness. Doe's Ecuador plans are now on hold. We are still in contact and we earnestly believe we will regain them as a client, full disclosure intact.
HGQ
"As scarce as truth is, the supply has always been in excess of the demand." ---Josh Billings
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