Real estate offices: how do they work?

[steveinbsas]

Okay, please explain how it cost me to use an agent to help me find the apt. I am willing to learn.

Did your agent take a cut of the buyers and seller's commissions? If so, you paid, but you were also fortunate that the total commission you paid was still within the "normal" range of 3 to 4% and you were not charged an additional 2% by your agent.

The one buyer's agent I know of does "try" to get the buyer's commission (paid to the broker) lowered so his clients do not pay "extra" for his service, but I don't know how successful he is in doing so. The "negotiated price" might have included the necessary $ to satisfy the seller, the broker, and your agent. You may be oblivious to a "back room" deal that was struck in your absence.

As you indicated, the price you actually paid was still "high" by the meter. I seriously doubt the two brokers were willing to split your buyer's commission of 3.5%. Your agent might have been happy to get 1.75% but I don't think the seller's agent would settle for that low a figure.

If you are happy with the apartment it really shouldn't matter.

 

[perry]

I have news for you elhombres. The way things are done in Argentina is not always a good way even if there are historical reasons for why they exist. That you feel insulted or regard my observation as overbearing strikes me as odd. Did I make a personal attack on you or anyone (as Perry did to me)?
On an expat forum such as this I thought it was okay to criticize local economic policies including the absence of something as universally practiced as mortgage lending, especially since it was my impression this cite was designed for expats, not locals who might be more susceptible to emotional outbursts when confronted with immutable but unpleasant truths about their homeland.

To make value judgements on a country and its people with scant knowledge on the topic is the height of arrogance.

In regards to mortage lending and the like I personally do not agree in most cases as it creates speculation in prices and is open to abuse by realtors and bankers . Saying that I do agree that the Government should provide cheap housing for its citizens and offer low interest loans for qualified buyers . There is a lack of housing in Buenos Aires that seriously needs to be addressed by Christina Kirchner and Mauricio Macri.

In Australia the realtors there are notorious for lending to all and sundry in cohorts with corrupt banks . The property market there will collapse like a pack of cards soon as it completely fueled by a false economy of easy credit.

The property market in Buenos Aires is at high prices at the moment for the simple reason that the american dollar is no longer seen as a safe currency and Argentina being one of the worlds largest personal holder of dollars are using their fiat currencies to obtain property titles in desirable neighbourhoods. Many people do not understand also that there are a large pool of very wealthy Argentinians who seem to have gotten richer of late . With the price of commodities never ceasing to rise in price this trend will continue with more demand for property purchases.

Buenos Aires has in my opinion the most beautiful apartment buildings in the world and if you look at the golden age of Buenos Aires architecture from 1900 to 1940 the features of these buildings are unmatched anywhere else . To build these today would be impossible due to cost factors.

For this reason alone if you choose carefully a good apartment with a well run consorcio you will be able to protect your savings and have a unique place to live .

 

[starlucia]

to attach blame to those down at the real estate agent level is like saying the Sun revolves around the Earth.

Are you kidding? Agents AND appraisers played a big role in fueling the fire. Who do you think were helping to inflate prices and close deals at the local level, so that they could cash in on those hefty commissions? My brother, at the age of 19, was a real estate agent in Daytona Beach, FL during the boom years. Very smart kid who, unfortunately, had very few business ethics. Within a year, he had more money than most guys twice his age, thanks to the very "creative" loopholes he had found in order to close deals for risky borrowers. Straw buyers, equity skimming, falsifying documents, paying appraisers to inflate prices -- tactics that were being used by clever agents all over the U.S., who knew there was virtually no risk of being caught or penalized in any way. But then, what kind of behavior do you expect from an industry that dangles fast, 5-digit commissions in front of any loser that coughs up $129 for his 'state-approved license'?

 

[perry]

Are you kidding? Agents AND appraisers played a big role in fueling the fire. Who do you think were helping to inflate prices and close deals at the local level, so that they could cash in on those hefty commissions? My brother, at the age of 19, was a real estate agent in Daytona Beach, FL during the boom years. Very smart kid who, unfortunately, had very few business ethics. Within a year, he had more money than most guys twice his age, thanks to the very "creative" loopholes he had found in order to close deals for risky borrowers. Straw buyers, equity skimming, falsifying documents, paying appraisers to inflate prices -- tactics that were being used by clever agents all over the U.S. But then, what kind of behavior do you expect from an industry that dangles fast, 5-digit commissions in front of any loser that coughs up $129 for his 'state-approved license'?

Great post Starlucia . Bernandino believes that the USA is the model of respectability and legalities when all evidence completely shows that realtors and the industry that supports them were the primary reasons that the housing crisis started in the USA and is still continuing today.

 

[bernardinho1961]

Did your agent take a cut of the buyers and seller's commissions? If so, you paid, but you were also fortunate that the total commission you paid was still within the "normal" range of 3 to 4% and you were not charged an additional 2% by your agent.

Thanks for offering to shed light. You seem to distinguish between my broker and my agent. Heretofore, I have not. Is there a need to?
I paid the "normal" buyer's commission (3.5%) presumably to the broker of the seller. Whether the seller's broker shared that commission with my broker (or my agent) is unknown to me. It matters not to me although the failure to disclose shared commissions is just one more big difference between local broker ethics and US broker ethics (where it is obligatory to disclose commission sharing).
As I indicated in a previous post, there might be an indirect cost to introducing a second (buyer's) broker into the transaction as that will reduce the seller broker's total commission. Having to share their commission to effect a sale might discourage some seller brokers from encouraging their client to accept an offer below the listed price, in the hopes a nonrepresented buyer will later show up. That is a real consideration, but no one even suggested to me that I might need to pay a supplemental fee to do the deal.

The one buyer's agent I know of does "try" to get the buyer's commission (paid to the broker) lowered so his clients do not pay "extra" for his service, but I don't know how successful he is in doing so. The "negotiated price" might have included the necessary $ to satisfy the seller, the broker, and your agent. You may be oblivious to a "back room" deal that was struck in your absence.

I have no idea whether such a back room arrangement was made by the 2 brokers, nor do I care as it did not affect my bottom line. Without wanting to annoy you by pointing our differences between local and US ethics, such back room deals are a violation of the US broker's fiduciary duty. It is okay to share commissions and it is done all the time because most buyers use their own broker, but a US broker could lose his license for doing it and failing to disclose it.

As you indicated, the price you actually paid was still "high" by the meter. I seriously doubt the two brokers were willing to split your buyer's commission of 3.5%. Your agent might have been happy to get 1.75% but I don't think the seller's agent would settle for that low a figure.
If you are happy with the apartment it really doesn't matter. Even if you paid a high price at the time (3 years ago), the apartment is probably worth significantly more than that today.

The seller's broker reduced its fee in conjunction with its request not to skip doing a boleta. The secretary "seller" told me as much. I have no idea how the 3.5% I paid was divided between the brokers. Though I did not spend a lot of time selecting the apt I do not begrudge the brokers the right to earn their fees. The easy client I was compensates for the tough ones that occupy a lot of broker time and resources.
Not that it much matters, but the price I paid ($2100/sq m) was not very high given the details built into the prime located Recoleta apt, e.g. marble bathroom and kitchen counters, fancy fixtures, high tech metal doors, double pane french door windows that open from top and from the side, solid wood floors, separate air-conditioning and heating controls/splits in each room, a wind sensitive awning that closes with the push of a button or when the wind is strong, etc. As I said above I love the pad. I have no intention of ever selling it and I am not overly concerned in its increase in value - though I know things change.

 

[bernardinho1961]

Are you kidding? Agents AND appraisers played a big role in fueling the fire. Who do you think were helping to inflate prices and close deals at the local level, so that they could cash in on those hefty commissions? My brother, at the age of 19, was a real estate agent in Daytona Beach, FL during the boom years. Very smart kid who, unfortunately, had very few business ethics. Within a year, he had more money than most guys twice his age, thanks to the very "creative" loopholes he had found in order to close deals for risky borrowers. Straw buyers, equity skimming, falsifying documents, paying appraisers to inflate prices -- tactics that were being used by clever agents all over the U.S., who knew there was virtually no risk of being caught or penalized in any way. But then, what kind of behavior do you expect from an industry that dangles fast, 5-digit commissions in front of any loser that coughs up $129 for his 'state-approved license'?

You admit your brother was a crook. The overwhelming majority of real estate agents were not. While you might find some solace in minimizing the gravity of the criminality practiced by your brother, it just is not true that many RE pros engaged in such criminality. It wasn't necessary. Money was easy to make for honest brokers because the bank loan officers and/or mortgage brokers (to be distinguished from RE brokers) were themselves eager to do the dirty work in order to earn big, easy commissions. All the brokers had to do was produce a signed sales contract contingent upon the availability of a loan and then wait for the loan to close. It was the structure of the system that was rotten, not the individual actors who, with few crooked exceptions, just followed the rules in place. The sources of that rotten structure were the greedy commercial banks who could off the bad paper to investment banks who could off the paper, now insured, to investors. The culpability of the RE brokers was minimal in comparison to the banks, wall street and the bought off Congressmen who overturned laws prohibiting such conduct.

 

[bernardinho1961]

Great post Starlucia . Bernandino believes that the USA is the model of respectability and legalities when all evidence completely shows that realtors and the industry that supports them were the primary reasons that the housing crisis started in the USA and is still continuing today.

Ignorance is bliss. Ok, you win. Compared to their US counterparts Argentine real estate brokers are the absolute epitomy of honesty, virtue, and the Argentine way of life.

 

[TomAtAlki]

a couple of things. First, RE Brokers (at least in Washington state) are not allowed to take kick backs from anyone and that includes bankers. Most Broker's, including me, work with several lenders and try to match up buyers with the correct lenders. I think Bernardinho1961 did an excellent job of summing up how the banksters created the bubble and the crash. It is too bad they have not suffered and have profited from their misdeeds. I believe the RE industry was innocent and used by the banksters. Second, mortgages on homes was one of the main factors in the growth and riches of the USA by.

Today mortgages are what they once were. If a person has income, savings and good credit they can buy a home with as little as 3.5% down and that is a good thing. Unfortunately, before the crash those 3 things (income, savings and good credit) weren't enforced which got the borrowers in trouble. By the way, the homebuyer (the borrower) was not totally innocent in this.

 

[TomAtAlki]

When I came to BA to buy an apartment I brought some conditions with me from the US that I thought made sense anywhere a person buys real estate. They include making sure you specify in writing that everything you want to stay with the place stays with the place. Otherwise you may find that lights, cover plates, toilet seats, heaters and AC units may disappear at closing. Specify in writing where the closing will take place. Otherwise you may be carrying hundreds of thousands of U$20 bills across town to an unprotected RE office. Specify in writing any inspections you want to take place as a condition of an accepted offer and as a condition of closing. Even though these conditions were not usual to transactions in Argentina, my seller had no problem with any of these conditions because they made sense.

 

[gouchobob]

Slightly off subject but affordability of real estate in B.A. is quite low. Who is buying, I know somebody is going to write back and say there is plenty of money and this is the only place to invest, that real estate is cheap compared to..., etc. etc. But really shouldn't this be a warning sign that the market is perhaps overvalued based on local incomes. At what point does the pool of potential of local buyers dry-up? Aren't local real estate markets supported by local incomes? If people can't afford real estate at current prices won't prices tend to fall over time to a level they can? Seems only common sense to me that affordability is key to a healthy market over time. Even if you believe there are a lot more people with money than I think there are in Argentina and that these are the ones supporting the market what are they doing with all these properties as few locals can even afford to rent them? I know with the high inflation a lot of people have invested in real estate but you suspect that returns must be getting awfully low or apartments are sitting empty. If the economy tanks isn't all buying frenzy going to tank as well, if sales fall don't prices as well. Any thoughts.

http://investba.com/2011/03/average-buenos-aires-salary-would-buy-10-square-foot-apartment/