Commissions in Real Estate Sales in Central America
In May of 2006 I wrote the following description of how real estate commissions often work in Nicaragua. Certainly the same applies as well in the rest of Central America.
A year and a half ago, I had recently bought a property in Nicaragua following a model adapted from the one that Phil had told me about. I had employed a Nicaraguan to work as my agent, paying him one per cent with the agreement that he would not be able to get a commission from the seller. The more extended story of this is in an old blog I posted, “Concrete Examples of Dishonest Business Practices.”
After that sale, I was talking with a Nicaraguan friend, and he said, “I never pay a commission as a buyer. Maybe somebody can get a commission out of a seller, but I will never pay them. They will always try to get a commission from the seller anyway, no matter what they tell you.” I investigated the agent I had employed, and found out he had earned a commission.
Now, when I hear about gringoes buying property here, they sound rather naïve, especially when they say that because they were helped by a family member or friend, there was no commission. I don’t believe it. I think these folks will always try and get a commission, no matter if it is your wife of 25 years. The same may happen with certain apparently benign users of this website. They may try to earn a large commission without your knowledge and take advantage of your naivete about how cheap the property actually is here.
This weekend Phil and I were debating about this question. He says he doesn’t mind whether there is a commission and doesn’t care what percentage it might be. I think that is a poor way to conduct a charity, and an even worse way to employ one’s own assets. I am fine arranging a small commission between the buyer and seller for a variety of people involved in a property sale, but I don’t want to put a bag over my head and hand over my wallet.
If someone tells you because they are your friend, they’ll waive the 5% commission, just remember, it might be a lie and they might be arranging a 30% commission. And why would a seller allow that? Because you might be paying double the market price, thus giving them 40% more than they could get without a "commisionista de gringo."