Paying Too Much For Costa Rica Real Estate. Is your Realtor to blame?

I regularly get emails that say something like: “Si usted esta interesado podrá comerciarlas de acuerdo a los medios electrónicos o escritos que crea pertinentes con el fin de que el cliente contacte con usted y nosotros respetaremos una comisión de 5% de las tarifas base y un 50% sobre cualquier superávit del precio original.”

What he’s proposing is that if one of our Recommended Realtors help sell his land, he will pay the usual 5% commission plus 50% of whatever the excess difference is between the price the buyer is asking and the dollar amount the buyer finally pays. In my mind, this is unethical and absolutely not something that our Recommended Realtors will do…

Overpricing does happen though and here’s a detailed example of how:

If a seller has a $300,000 piece of land for sale, the real estate salesperson with the buyer can earn the usual 5% in sales commission which is US$15,000 – not too shabby in a country where the average worker earns less than $6,000 per year however …

If the real estate salesperson fails to mention to the buyer that the owner is only asking $300,000 for it (or in reality $285,000 after commissions) and persuades the buyer (which might be you) to pay $400,000 then the unscrupulous scumbag salesman earns the 5% commission plus half of the $100,000 difference for a total of US$65,000 which is a serious payday!

Let’s not forget that no matter what language they speak, real estate salespeople are in business to sell you property that legally belongs to someone else – their client, and they are being paid to sell you by their client – the seller and not the buyer.

Some people might say that this is ‘capitalism’ and in a free market this kind of ‘trading’ should be allowed, however this is considered highly unethical by most professional Realtor type organizations including the somewhat toothless Costa Rica Board of Real Estate Brokers which prohibits – but can’t enforce – the practice of ‘sobre precio‘ or ‘over pricing.’

However, it may be important to note that although overpricing is widely considered to be unethical, according to Costa Rica real estate legal experts, overpricing is not actually against the law in Costa Rica.

This is why – unless you actually want to lose your camisa (shirt) – you need to educate yourself in the Costa Rica real estate market. Remember that this is a market which has no real MLS system that could give you a clear indication of comparable sales, where accidental ‘mispricing’ and deliberate ‘overpricing’ are common, where real estate salespeople require no qualifications and are not compulsorily regulated.

The way that some real estate brokers get around any ethical obligations they may have is by taking off their Realtor hat and putting on their real estate investor hat and buying what they believe to be an under-priced property for themselves, which they then resell it for a substantial profit. We know people that have done this and doubled their money in a matter of weeks.

Asking if this is ethical for a Realtor is a far more complicated question but in doing this, clearly the Realtor is looking out for himself first and not doing his real estate investor clients any favors.

That’s the bad news, the good news is that this means the market in many areas of Costa Rica is still ’emerging’ and full of opportunities because as the real estate market becomes more developed, we will naturally see fewer and fewer opportunities.

While we’re here please allow me to stress that to the best of my knowledge none of the Costa Rica Realtors recommended on this website will participate in overpricing, and in the extremely unlikely event that they are discovered doing this, you can help me write a new article written about them on this site and it will not be a flattering one.

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Written by Scott Oliver, author of 1: How To Buy Costa Rica Real Estate Without Losing Your Camisa, 2: Costa Rica’s Guide To Making Money Offshore and 3. ¿Cómo Comprar Bienes Raíces en Costa Rica, Sin Perder Su Camisa?

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.