Friday, March 16, 2007

Caveat Emptor: Ethics, Integrity, and Real Estate Agents

Caveat Emptor

Ethics, Integrity, and Real Estate Agents

Buying in the Riviera Maya

by J.P. Money

From time to time, there are buyers out there that have bad experiences with buying property not just here in the Riviera Maya but in Mexico in general. Mostly, they state that they were misrepresented to and thus did NOT get what they expected or worse….got ripped off.

And no question about it, like in all industries, there are always a few bad apples who do bad things and tar the rest with that dirty feather. However, it’s not all true that everyone is a crook and criminal and to suggest so is simply unjust.

Admittedly, unlike the U.S. where the market is highly regulated, here in Mexico there is no regulation or government over site. This lack of regulation can invite unsavory characters into the industry with no way to stop them. Yes, there are laws for property and they are to be followed but there are just no regulations for this industry and that fact is just right there in front of all us. Thus, we have to deal with this directly and honestly if we are going to have investment success in one of the most beautiful parts not only in Mexico but in the world.

In the U.S., when a broker or agent commits a fraud, the consequences are extremely steep. For one, they lose their license to practice and thus their livelihood and worse face jail time or extremely steep civil fine. Furthermore, in a court of law, the court looks upon the licensed Broker and Agent as a “professional” and the buyer and/or seller as “non-professional” and always holds the Broker and Agent to a much higher standard of behavior. So that when in doubt, the Broker and Agent can expect to be dealt a harsh blow even for minor faux paux. This explains the plethora of disclosure agreements that are signed during the buying/selling process in the USA. This protects everyone involved and clearly outlines the expectations. So when a Broker and Agent breaks that vow of professional ethics and integrity, they are severely punished.

From a Broker and Agent standpoint, all this regulation is hard and taxing on their persons. The added responsibilities are difficult. But, on the other hand, buyers are more secure and what we see is a more organized market that moves at lighting speed and from a macro standpoint, is the envy of any fan of pure economics.

Here in Mexico, it’s left to Caveat Emptor (buyer beware).

We are in a market that has virtually no oversight and is injected with a dose of chaos married with distrust and skepticism. This author has argued for years that a more regulated market will increase the sales exponentially. Of course, there must be an advantage to the chaos otherwise regulation would have happened already…I just can’t fathom that advantage except for the fact that scammers prefer ignorance in the market place so they can pull off the grift.

In Mexico, there is NO official license for brokers or agents and no real consequences for bad behavior to protect the buyer. They are left to their own accord. And like men and women from all walks of life, differing ideas of values and ethics exist side by side sometimes causing confusion.

So what is the buyer to do?

Well, to me, it’s clear that one must understand that a broker and/or agent gets paid a commission to complete a deal and thus, that’s there ultimate goal.

Most feel that doing the right thing and giving the buyer and seller great service is the way to go…….they feel great after the sale and the buyer and seller go away happy. One can argue that this type of person is the very best citizen and is out to do good work.

Some feel that as long as they sale is completed and they got their commission, who cares! The agent has a commission and moves on and the buyer and sellers are left holding and unhappy bag of “I got screwed!”.

The latter is weakest type of so-called salesperson, if we can call them that……and frankly, I don’t think we can. It’s more appropriate to refer to this low life as a Confidence Man or better known as a “con-man”.

Just like a Sales Professional, they win the trust and confidence from the prospect…..and then they abuse it completely and without conscience as soon as they can get away with it. This is intentional and always was part of the plan. They faulty and cannot help themselves. It’s in the nature. These type of people are to be outed immediately and challenged. They are bad for everyone in the market. Some of them even wear suits, drive nice cars, and insist that you “trust them”…… be careful, not only in Real Estate here but everywhere on every continent. That’s just common cents!

But thankfully, most people just can’t go that far. A moral compass stops them from such behavior.

In fact, most choose to do good work and respect and honor the process. It’s an innate thing….that’s not to say that some good people don’t make mistakes. They do and it can sometimes look like a scammer but in reality it’s just a ignorant person not knowing what’s the right thing to do. I especially find this in younger folks…..they typically are trying their best but are unaware that sales in of itself is a profession and has that they can sell honestly with great pride and do good work, and yes, get a honest and significant commission for it. All they need is leadership and mentor to help them see the light and to run from that dark place where lying, cheating, stealing, and dishonor is just a path to genuine personal and yes, financial failure as not even a grift of money can save this person from losing it’s true value and thus will lose it anyway as they follow it’s path into the abyss of becoming a nowhere man or women!

So as a buyer, what do you do?

Common Cents! That’s What!

Well, for one, make sure you check out the brokers references and past clients. Be direct. If that broker or agent is offended, guess what? They are hiding something and that’s a red flag. More, learn everything you can about buying property in Mexico. Do NOT come to Mexico and buy like you are buying an impulsive piece of chocolate at the supermarket line. That’s a set up for failure in a big way. What is an Fideicomiso? An Escritura? What is a Notario? If you don’t know yet, find out first because it’s caveat emptor here in Mexico………..double check everything! Period! And if someone gets offended, they need to be offended!

Now, most of you will buy and have good experiences……we just want all of you to buy down here smartly and intelligently because when you buy here in the Riviera Maya and have success, everyone benefits…………well, except the scam artist! And who needs them anyways!


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Jonathan Olkoski said...

J.P. Money you hit the nail right on the head with this post. As a loan consultant for a direct lender for U.S. and Canadian citizens investing in Mexico. It absolutely amazes me how many people lose their common sense when they buy real estate in Mexico. Personally one of the biggest problems are the sellers that register a lower purchase price than the actually sale price. These people are sticking the buyers with future capital gains taxes they shouldn't be responsible for. Real Estate Agents shouldn't be forcing people to buy property through an LLC just so the actual seller doesn't have to pay the capital gains tax and once again sticking someone else having to pay extra taxes.

The availability for mortgages and the overall need for financing on these beautiful homes will help protect the buyers from these scams. When a buyer receives financing from a U.S based lender they will have their Fideicomiso, Escritura, Title Insurance, and the Notario will register the actual purchase price. This guarantees the buyer clear title to their new home and they will not be stuck with extra capital gains taxes when they decide to sell years down the road.

Please contact me I would like to discuss these issues with you more in-depth

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