To start, it’s important to establish that Ecuador is one of the countries where you will find a wide variety of people that will claim to “know of a property” or “represent a property” to sell you. The relationships these characters have with the property they are pushing for you to buy come in a wide variety of flavors.
Here are just some…
- The local:
There is the local guy, maybe who introduced himself to you on the taxi ride in or approached you at a restaurant and asked if you were looking for property. This could even be the proprietor of the hotel you are staying in. In any of these cases, you are essentially dealing with someone who isn’t actually working for you to find the best property or help complete your perfect dream in Ecuador. Instead, you are likely being directed to a property that many people might represent and the referral commission is what they are after. So, to be clear, your best interests and priorities are not being put first and foremost in this case and while often you might hear that “this is a local’s price”, the reality is, you were targeted as a mark and they are going to push for what they think they can get regardless of actual value. Even worse, in many of these cases, the arrangement that has been made is that the property has a set static price the owner will accept and anything the referring party can mark you up over that price, is theirs to keep as their “commission”. Essentially, the incentive here is to actually build as much on top of the “real price” of the property without it being more than you are willing to pay, of course at your expense. You’ll find often, in this case, if you say your budget is $100,000, the price of the property to you will miraculously be $95,000; just enough to make it affordable. Likely, the actual price of this property was much much lower. But hey, you are a gringo and you can afford it right?!
- The Expat Middleman:
True in more than just Ecuador and probably redundantly true all the way back as immigrants came into New York Harbor for a chance of adventure; the person that came off the boat before you might just suddenly be your best buddy to get you setup in town. You will find it’s the expat with no license that claims they are “a real estate agent” and has only been in-country for a year or so, is also the one who will boast to you that real estate licenses aren’t important in Ecuador. Of course, this person doesn’t have a license when they are saying so try to recognize the bias as much as possible. It isn’t hard to understand of course; when you combine a situation where licensing is required but barely enforced, with inexperienced expats arriving in a foreign place and without speaking the language, it naturally creates an opportunity for those expats that have already arrived to take advantage of them. They speak your language, they seem like they know the ropes and are willing to tell you about all of the “insider concepts”, so they must be looking out for you right? (sarcasm). More typically, you are dealing with a person who recognized that the next inexperienced expats coming off the plane were actually more likely to pay more when another expat was involved in the sale. A reality which has provided them with a new and pretty lucrative form of income that they hadn’t considered until they moved down. The danger here is that you aren’t dealing with a professional agent, a person who has intimate experience with real estate in the country, or even a person who speaks the language fluently and understands the culture necessarily. You are simply dealing with an opportunist and at your own expense and risk. This reality is most evident when issues arise with the purchase of the property (often after the sale is complete) and your new best friend/agent is nowhere to be seen and unable to assist you legally. In most cases, these are issues that should have been caught prior had you been working with a licensed professional.
- The licensed agent:
Contrary to what you might hear from many of the people who fall under item #2, the reality is Ecuador is not the “wild west” that they claim it to be. Ecuador actually does have formal licensing requirements written into law and has major association groups of realtors just like in the USA or Canada. The “licensed” professionals had to complete 6 months of education, pass and graduate in order to achieve their license and with that license, they carry a sense of liability under established ethical and legal guidelines. All of which is designed to protect YOU.
- The Lawyer:
Lawyers are recommended to be involved in essentially all real estate transactions. You real estate agent will likely work with one they trust. This is a reality Ecuadoreans themselves abide by quite heavily. The primary reason being that due to the complexity of some requirements in real estate transactions and the presence of risk depending on where and who you are purchasing from, lawyers can often help to further ensure you are protected in the event a problem escalates beyond the purchase. In many cases, lawyers themselves may refer you to a property. In these cases, the recommendation would still be to bring in a licensed professional on the real estate side. The reason being that while the lawyer can handle the sale, your interests, in this case, have not been established to be a priority and you should be represented by a party that has no potential conflict of interest with the seller. Specifically, you need a party that is there to make sure you get the best deal and vet the property.
Would you disregard a license any other time?
So, let’s just ask ourselves the simple question: Would you allow an unlicensed doctor to operate on you? An unlicensed dentist? Would you hire an unlicensed lawyer? Obviously no. So, why would it even be entertained as logical to work with an unlicensed professional in the case of spending your hard earned money or life’s savings?
A lawyer might cost $500 in Ecuador for their services and we absolutely expect them to be licensed. Why then when spending $150,000, $250,000 or potentially more, would we ever consider not requiring a license for our real estate professional?
But real estate agents can be bad right?
Yes, of course, the possibility exists that a licensed agent could be a bad agent. Of course, saying that doesn’t thereby make it not true for unlicensed agents or lawyers, or the local guy in the bar, or the expat who has befriended you and knows a great deal. In all of these cases, the possibility exists that you may come across a bad egg. However, doesn’t it seem less likely of coming across that bad egg in dealing with the group of people who spent their personal time to be educated in their trade, who spent thousands of their own money to invest in the knowledge of their market? Whereas, on the other hand, others with no professional licensing haven’t put the effort into gaining the formal knowledge, have no fiduciary responsibility to you whatsoever and you have essentially zero recourse against them in the event they mislead you or bring you into a deal that encounters problems.
Overall, placing your money and your future in the hands of professionals vs. opportunists will always make you more secure in your business dealings. Ecuador is no different and in fact, likely a place where it becomes more important to do so.
So, if you are looking for real estate in Ecuador or selling real estate in Ecuador, do the smart thing and keep yourself protected along the way. That formality may just be what separates you from the rest of the victims that thought they were being smart and “getting a deal”.
This article first appeared on http://www.realestatecuador.com and is protected by the website's copyright and trademark information.