What are buyer’s agents and 5 reasons why you should have one?
If you’re looking to buy a property in Costa Rica you’ve probably already started to explore listing sites and if you’ve made it that far you’re probably confused. You may have stumbled across several of the same listings featured on different sites, at different prices, and listed by different agents. This is because it is common practice in Costa Rica to sign an open listing agreement. This means that the property can be featured by multiple offices and is not obligated to share any of the commission if another agent doesn't personally bring a buyer to the negotiating table. This, of course, is unfortunate news for a seller that has decided on an open contract. While it may seem to them that they are hiring more agents, they are essentially hiring none! Their property will be listed but there will be little incentive to share it with other offices or agents. Another agent could just come along and scoop it up to receive the full commission, regardless of the work they may have put into the listing. It is important to note that Costa Rica has no MLS (master listing service) so this can make it equally difficult to find a property, what looks like an MLS will be a private listing service and not routinely updated. This of course adds to the confusion.
So why is all of this important when talking about a buyer’s agent? A true buyer's agent is not working for the listing side at all. They don’t care if it’s an open listing. With an exclusive buyers agreement, a buyer’s agent is just as it sounds, an agent hired by the buyer. Therefore if you have a buyer’s agent they will work for you to find all available listings, present them to you and work for their half of the commission. You do not pay the buyer's agent unless you’ve hired them for extra scouting services or consulting services. Their commission will come from half of the listing agent’s commission which is typically between 5%-6% or even 10% for a commercial real estate/business. If you are searching for properties in Costa Rica yourself, you’ll likely end up working with the listing agent. Keep in mind, that the listing agent's job is to get the highest sale price for their client. If you are only working with a listing agent, you’ve not hired anyone to negotiate on your behalf. Most agents in Costa Rica are listing agents and will likely only show you properties in their portfolio or close network so make sure that you are with an agent who will not have a biased opinion and will go scouting for listings on your behalf.
So let’s go through, step-by-step, the responsibilities of a buyer’s agent and why you should have one.
1. A buyer’s agent will know exactly what their client is looking for:
Your buyer’s agent will have asked you a series of questions or they may even have given you a spreadsheet to fill in. This will inform them as to exactly what you are looking for. Additionally, it starts the working relationship and will give them notes to fall back on. As you begin to look at properties, your agent will develop an even clearer picture of what you are looking for. This means that you can save your time, money, and energy on properties that best suit your interests via this ongoing relationship.
2. A buyer’s agent will help buyers understand the market:
Your agent will be your insight into the market. This is particularly important in Costa Rica. Many international buyers will have only a tiny grasp of Costa Rican real estate investment knowledge, additionally may have a limited understanding of cities, provinces, and more importantly the ebb and flow of the high season and low season markets. Although you can buy a property in Costa Rica with only a lawyer, a lawyer is not going to know the market or be able to properly assess your purchase. A buyer’s agent is a valuable resource in this regard. If you are looking for a commercial property it will be equally important to find an agent who knows your specific commercial needs and how to break down a commercial investment. A group like Buy Hotels Costa Rica for example focuses solely on commercial interest and is not mixing its portfolios with residential properties.
3. A buyer’s agent, especially in Costa Rica, will find you the best property listings, set up tours, and compile information about those particular properties:
As mentioned above, the buyer’s agent in Costa Rica will dig through multiple networks to find you the right listings, they may even refer you to an agent in a specific area or niche. Remember they now work for you, you have acquired a teammate with an unbias trained eye. It is the buyer’s agent’s job to look for the properties that fit your desires and descriptions.
4. A buyer’s agent answers all questions or concerns:
With your own agent, you can direct your concerns to someone who has your best interests in mind. We routinely hold our client's hands through the purchasing process. We answer questions about the contract, help with inspection, get building or renovation quotes and go through each discovery while in the diligence process. We help to find the right legal team and even aid in setting up escrow if this service is needed.
5. A buyer’s agent will handle the transactions on behalf of the buyer including negotiations:
A buyer’s agent is going to write purchase agreements, and contracts and will be continually negotiating with the listing agent. Once the letter of intent has been made and an offer accepted, the property will go under contract. It is at this stage your team can inspect and start diligence. Your agent will be negotiating this transaction with each new addendum, change, or redefined offer. Their aim is to make the transaction as seamless as possible while protecting your investment.
Reviewing these 5 points is extremely helpful to fully understanding real estate negotiations in Costa Rica. It’s important to educate yourself as much as possible. If you’d like to know more about purchasing in Costa Rica read our blog 5 Common Mistakes When Purchasing in Costa Rica, or this one about Owning a Property Under Your Name or a Corporation.
Please do not hesitate to reach out should you desire an agent yourself. Joshua Wittman is a buyer’s agent, I focus on lifestyle needs and we are here to help.