Commissions in Real Estate Sales in Central America

peterchristopher's picture

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."

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welcome to the forum

Hi Chale.  Welcome to the forum.  It's certainly a challenging task to work with Nicaraguan attorneys.  I remember one of the first Americans I met in Nicaragua was a 50-year-old retired man who had grown up in Nicaragua, then worked in the states for 25 years, retired, and had just moved back.  He pointed out to me two lots: he had paid for both of them, but the lawyer he had employed managed to get the title to one of the lots (the better one!) and the man I met, Nicaraguan and all, was trying to take the first lawyer to court with another lawyer.  Because of that, I literally employed three lawyers when I purchased the farm, all trying to check each other, plus two more to check the three, and between them all they managed to get most of it right.  They still did leave a loose end (that even I thought was an error at the last minute, but the three of them said unaninmously that I was in the wrong) - and I later had to get that loose end tied, boy did that take a lot of a** k***ing and payments to other lawyers and offices.

One of my friends in Nicaragua who is a big landowner got so fed up with lawyers that he went through the law program at the local college himself.

I'm sure many of us here would appreciate to hear specific stories involving real estate in Nicaragua if you ever feel inspired to type something up for us - whether you participated or just were an observer.

Commissions in Real Estate Sales in Central America

 From my experience living in Nicaragua, what I see is that many investors being represented by individuals/attorneys that as a local would never think of hiring to represent me in a real estate transaction.    It applies in Nicaragua, in the States or any where in the world  "Buyer Beware", due your own due diligence, look for reputable Real Estate Agencies and attorneys, get a quote for services to be rendered by the attorney and.understand how real estate commision work, who pay what and when.   Also, what I do is get a real estate appraisal of the property, I use Tecnitasa, a subsidiary of one of Spain largest real estate valuation company, this is an independent company  not associated with any of the local groups so am certain that the valuation price is near what the real prcie of the property should be.  The appraisal,  gives me a base price from where to negotiate with the seller.     My contact at Tecnitasa is Mr. Luis Saenz 278-1814/1815 and his e-mail : is   lsaenz@tecnitasa.com.ni  and their website http://www.tecnitasa.es/menu.html

Re: Commission

By definition, Adam Smith, author of The Wealth of Nations would say when two parties can agree upon a price, an honest deal has been made.  The 30% senario is an honest deal.  Now, the buyer was not an enlightened one and made himself a poor deal well above market price.  I empathize as I am a Latin American and Caribbean living consultant and I see how hard it is to get good answers and good information on where to go and what to do to find the information necessary to broker yourself a good deal.  That was the main facilitator for my creation of www.costaricarealestate411.com.  That will soon be followed by many others for several popular foreign investment destinations in the region including Nicaragua.  Feel free to reach out for I will need plenty of expert advise during the content creation!

Pura vida,

 

P.S.  If you think the seller is not being compensated when you buy real estate anywhere then...

no wifes involved; just don't use "buyer's agent" model

 Hi Cory,

In my own example of the large property I purchased in Nicaragua, I employed a local man.  My goal in sharing the above example is so that buyers understand that in Central America there is no such thing as a buyer's agent guarantee.  The rules are quite different.  Someone coming from the states has so much experience with a 4-10% comission model split between buyer's agent and seller's agent brokers, that it's natural to think something like that must exist here.  My point is to follow the very clear advice of my friend in Nicaragua: if someone tells you about land: assume they will get a commission from the seller, and be clear up front that you as a buyer will not pay any commission.  Attempting to pay a buyer's commission and thinking that this makes the intermediary represent you won't work.

In the example of Phil Hughes, I know that he employed a variety of "buyer's agents" for at least his two first property purchases, and he was not married to any of those agents.  I don't know about the third.

Peter

Wife?

Are you saying that the wife charged the husband a commission? Wouldn’t that be a wash?. I know that I have never paid a commission on the house and land I purchased but then again I have never asked someone to look for, negotiate for and pay for land in my name. If I did then I would expect to pay a commission.

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