Would you trust a taxi driver to sell you real estate?
Looking to buy your dream home in Costa Rica? Why not ask your taxi driver? After all, he has the same legal authority to bring buyers and sellers together as a career real estate agent — i.e., none — and he is entitled to the same fat commission. That’s because there is no mandatory real estate licensing in Costa Rica.
The Costa Rican Chamber of Real Estate Brokers (CCCBR) recently announced that real estate licensing might soon be mandatory in Costa Rica, as I recently wrote in the Tico Times. There have been both positive and negative comments on this article as well as in my private inbox, which is why I’d like to dive into this topic a bit more.
Right now, there are thousands of formal and informal real estate agents in Costa Rica. Taxi drivers, waitresses, housewives and lawyers charge commissions to bring a buyer and a seller together and do no more than that. They are not formally trained and there are no rules to abide by.
As long as buyers of property in Costa Rica are willing to hire a taxi driver as a real estate agent, they have no reason to complain afterwards. Finding a professional agent you can trust to walk you through the many hurdles of buying real estate may take a little effort, starting with an internet search, but it’s well worth it.
Licensing does not make honest agents
There will always be dishonest people in business and even with licensing you will find plenty who will walk the line or go over it. Mandatory licensing will regulate not only who is allowed to act as an intermediary in real estate purchases and sales, but will also oblige those who are licensed to follow the rules. Those who do not abide by those rules will eventually lose their license — IF the overseeing body, which should be the chamber of real estate agents to which that particular agent belongs, has a well-functioning ethics committee.
What does licensing offer for agents?
What good does it do to be licensed if non-licensed agents are also allowed to sell property? In my opinion, only education and a functioning multiple listing service (MLS) can make the difference. What does the licensing body have to offer to make it worthwhile for the agents to belong to that body? It should be a 2-way street. I turned in my CCCBR license 20 years ago because it charged me the monthly dues but never gave anything in return.
Greed has always been a factor in the real estate business, which is why it has been so difficult to organize and regulate the trade. Thousands of expats, many working illegally, have been involved in real estate transactions over the years, and many have long left the country with full pockets and never paid income tax.
Thousands of lawyers have taken advantage of unknowing real estate buyers who didn’t speak the language, finding ways to take ownership of their trust, demanding kickbacks from real estate agents and charging exorbitant fees for simple jobs.
Real estate licensing starts by educating the members of the chamber and offering worthwhile continuing education. So who is qualified to teach the necessary courses? There are quite a few real estate agents in Costa Rica who have sufficient experience in assisting buyers and sellers in successful real estate transactions. But are those agents willing to pass their knowledge on to the next generation? Real estate agents in Costa Rica have never been team players for the lack of an MLS.
Maybe the real estate chamber should bring teachers from the National Association of Realtors? There should be plenty of NAR members who are fluent in Spanish. Of course, they would have to be well versed in the idiosyncrasies of the real estate business in Costa Rica, where title companies do much of the work and a notary public does the closing.
If real estate licensing becomes mandatory, education should be No. 1 on the list.
Organized real estate
Organized real estate will structure all those issues that are necessary to turn this field into a real profession, favorable to both buyers and sellers of property in Costa Rica. We have an open listing market, except for a few pockets in some beach areas. In an open listing market, a seller needs to list the property with as many agents as possible to have any chance of selling.
Organized real estate will totally change that, and mandatory real estate licensing is necessary to line up all the important factors, make the members of the chamber responsible for their acts and follow the rules, and give them the necessary tools to provide professional services to all involved.
A real MLS
The real estate market doesn’t offer a functional MLS right now. With an MLS that actually works, buyers could go to the website of their choice, find everything available on the market and choose a knowledgeable buyer’s agent they feel comfortable with. And sellers wouldn’t have to call hundreds of agents to see if they are interested in listing their property.
In any MLS in the world, every member’s website holds a database of properties for sale and for rent, called an IDX. In Costa Rica, this would allow buyers to go on any member’s website and find everything available on the market.
The IDX gives sellers the opportunity to sign up with only one agent to promote their property through the MLS exclusively. That way, the buyer’s agent will automatically have to work with the listing agent and there won’t be any duplication of properties, different prices, wrong information or properties still listed that were sold years ago.
Comparative market analysis
Although the National Registry does not show the prices properties have sold for, the MLS could easily list the sales price (accessible to members only) and within a few years, the database would have comparable prices. This would allow any member agent to put together a comparative market analysis. This would help sellers price their property reasonably, and would give buyers a better idea what property in a neighborhood is worth. A taxi driver or lawyer would not have access, so this feature and many others would automatically eliminate non-licensed agents.
There are many other advantages to mandatory licensing, such as a complaint department where buyers and sellers can formally complain about a member of the real estate board. The tax department would be favored tremendously, as well as property buyers and sellers.
In my personal opinion, the CCCBR is making a mistake by working on a real estate licensing proposal on its own. I believe it should request the assistance of the other real estate chamber, the Costa Rica Global Association of Realtors (CRGAR), in preparing a proposal for the Legislative Assembly. Both real estate boards should work together to get education programs organized and lay the groundwork for a successful MLS before presenting a new real estate law, not after. Costa Rica needs a workable plan that is ready to roll out as soon as the law is approved.
Ivo Henfling founded the American-European Real Estate Group, the first functioning MLS in Costa Rica with affiliate agents from coast to coast, which has been in operation since 1999. Read his blog at https://www.american-european.net/Costa-Rica-Real-Estate-Blog or contact Ivo at (506) 2289-5125 / 8834-4515 or at firstname.lastname@example.org.
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