This is a sad story which does not show me in a favorable manner, but which I feel could be of interest of forum members envisaging property investments in Colombia; more specifically a pitfall to be avoided when making a sale.
Some of you may know, we (My wife and I) wish to return to Europe and as part of this process we placed our casa on sale last month. Our residence in Medellin is much sought after and we quickly received considerable interest and two offers within the last 10 days:
One, an offer via a local authorized Real Estate agency (Agency commission 3% of sale price)
Second, a private offer (No commission) but with paperwork to our charge.
Guess which was our first choice (The offer prices were virtually identical)?
So we proceeded with private offer N° 2 and had a meeting yesterday at which we established all the details that would be required for the initial Promesa de Compraventa. So far, so good; no problems until the prospective buyers ask how we were going to remunerate “Joe & Maria” (Not their real names). We were taken aback; we knew “Joe”, but had never heard of “Maria”. The following is how they became involved.
The prospective buyers already knew the residencia because their niece (“Maria”) already lived there and they had enlisted her aid to find out if any casas were on sale. “Maria” (a lawyer) then spoke to “Joe”, a gardener employed by the residencia who knew everything that was worth knowing about the occupants and premises. “Joe” knew we had the casa on sale and informed us he had been contacted by someone who was interested in buying. We told “Joe”, ok, sounds interested, tell them to phone us and if the price fits AND they are serious, we can meet and discuss.
It all sounded ok to us as the deal would be private and free of Realty Agency commission and we would assign the paperwork to our local notary who knew us well and had realized many other transactions for us. We also knew “Joe” warranted some monetary compensation for redirecting a prospective buyer to us.
To our mind "Joe's" contribution was akin to a type of “tip” for introducing a buyer to a seller. We were thinking of about COP 5 million, but when we asked “Joe” how much he expected he said “it is up to you, whatever you think appropriate”. Sadly, we made the mistake of imagining no more specific commitment was required.
So here we are, up to date – last night, when “Maria” phoned us asking to see us. We asked “Maria”, “Who are you?” She informed us, I am your “Comisonista” and we need discuss how you will pay my remuneration for the sale I brought to you.
It now appears when “Maria” asked “Joe” if he knew of any casa up for sale they had made a deal between them to split whatever remuneration arose. From this, “Maria” had unilaterally designated herself as a “Comisionista” entitled to a fee for “finding us” a buyer for our property.
There followed a fairly heated discussion when we told “Maria”, nobody but us could nominate her to act as a Realty Agent on our behalf, an assertion she reluctantly accepted; but only to state her, and “Joe’s” entitlement to remuneration still held good, but based on Colombia norms.
Finally I have reached the point that I think should interest members contemplating buying property in Colombia:
“The Real Estate agency commission rate in Colombian cities is 3% of the sales price, but “INTRODUCTION” fees of this nature are commonly agreed at between 1.00%, to 1.50%. Thus in our case, “Maria “and “Joe” were expecting somewhere between 10 and 15 million pesos for introducing “Maria’s” uncle. Not a bad day’s work for “Joe” knowing” what properties were on sale.
In the light of this we have rejected Offer N° 2.
We acknowledge we allowed ourselves to falling prey to this pitfall because were not aware of this “norm” (Our first private deal). Our fault, but now you know about it if you did not already know.
Interested in your comments – Do you think a simple “introduction” of this kind warrants a fee at the rate of half the Real Estate agency commission? I think it is ridiculously high, but that is what it is in Colombia.
Some of you may know, we (My wife and I) wish to return to Europe and as part of this process we placed our casa on sale last month. Our residence in Medellin is much sought after and we quickly received considerable interest and two offers within the last 10 days:
One, an offer via a local authorized Real Estate agency (Agency commission 3% of sale price)
Second, a private offer (No commission) but with paperwork to our charge.
Guess which was our first choice (The offer prices were virtually identical)?
So we proceeded with private offer N° 2 and had a meeting yesterday at which we established all the details that would be required for the initial Promesa de Compraventa. So far, so good; no problems until the prospective buyers ask how we were going to remunerate “Joe & Maria” (Not their real names). We were taken aback; we knew “Joe”, but had never heard of “Maria”. The following is how they became involved.
The prospective buyers already knew the residencia because their niece (“Maria”) already lived there and they had enlisted her aid to find out if any casas were on sale. “Maria” (a lawyer) then spoke to “Joe”, a gardener employed by the residencia who knew everything that was worth knowing about the occupants and premises. “Joe” knew we had the casa on sale and informed us he had been contacted by someone who was interested in buying. We told “Joe”, ok, sounds interested, tell them to phone us and if the price fits AND they are serious, we can meet and discuss.
It all sounded ok to us as the deal would be private and free of Realty Agency commission and we would assign the paperwork to our local notary who knew us well and had realized many other transactions for us. We also knew “Joe” warranted some monetary compensation for redirecting a prospective buyer to us.
To our mind "Joe's" contribution was akin to a type of “tip” for introducing a buyer to a seller. We were thinking of about COP 5 million, but when we asked “Joe” how much he expected he said “it is up to you, whatever you think appropriate”. Sadly, we made the mistake of imagining no more specific commitment was required.
So here we are, up to date – last night, when “Maria” phoned us asking to see us. We asked “Maria”, “Who are you?” She informed us, I am your “Comisonista” and we need discuss how you will pay my remuneration for the sale I brought to you.
It now appears when “Maria” asked “Joe” if he knew of any casa up for sale they had made a deal between them to split whatever remuneration arose. From this, “Maria” had unilaterally designated herself as a “Comisionista” entitled to a fee for “finding us” a buyer for our property.
There followed a fairly heated discussion when we told “Maria”, nobody but us could nominate her to act as a Realty Agent on our behalf, an assertion she reluctantly accepted; but only to state her, and “Joe’s” entitlement to remuneration still held good, but based on Colombia norms.
Finally I have reached the point that I think should interest members contemplating buying property in Colombia:
“The Real Estate agency commission rate in Colombian cities is 3% of the sales price, but “INTRODUCTION” fees of this nature are commonly agreed at between 1.00%, to 1.50%. Thus in our case, “Maria “and “Joe” were expecting somewhere between 10 and 15 million pesos for introducing “Maria’s” uncle. Not a bad day’s work for “Joe” knowing” what properties were on sale.
In the light of this we have rejected Offer N° 2.
We acknowledge we allowed ourselves to falling prey to this pitfall because were not aware of this “norm” (Our first private deal). Our fault, but now you know about it if you did not already know.
Interested in your comments – Do you think a simple “introduction” of this kind warrants a fee at the rate of half the Real Estate agency commission? I think it is ridiculously high, but that is what it is in Colombia.
