In many countries there exists some sort of legal regulation or association of real estate agents. At the very least there are consumer laws that protect both buyer and sellers from unethical or illegal practices of real estate agents. Many of those laws are born out of a history of shady real estate deals, poor customer service, and conflicts of interest among property agents who misrepresent the properties they are selling. Unfortunately, in Chile there has been little push for regulation in this respect. This is surprising with a growing industry that has a long standing reputation for shady practices.
There are many spooky stories around. In our own dealing with real estate agents, we have found the basics of business, let alone real estate specific issues, to be in short supply. We believe many such practices are caused by real estate agents viewing clients as one time, never to be seen again, clients. Thus, they approach sales with the intent of getting as much money as possible, and pass over the opportunity to build a long-term client base. This may very well be a good approach for them, given the historical and cultural context of the real estate industry in Chile. Purchasing a second home or recreation property is only recently becoming common in Chile's middle class. Nevertheless, the basics of professional conduct in business would seem to be a benefit to real estate agents.
What are you selling?We visited in person, and contacted by email and phone, more than a dozen real estate agents in southern Chile over several months. The first problem we encountered was the unwillingness to tell us what properties they had for sale or rent. Frequently, only after we located the properties ourself, and contacted the real estate agents listed on signs did we receive any information from the agents. This was particularly surprising when we came to find out that these were the same real estate agents we had already spoken to, and they had never mentioned the property.
How much does it cost?
There are one of two problems we encounter after we do receive information on property, either there is no price or the price is so completely unrealistic as to be considered a serious offer. There is a tendency, once one property in the area has been sold for a high price, for everyone to consider his property of equal value. We often receive initial prices from agents on properties in Southern Chile, that are better fitting property in California. There is a general failure to assess the real value of the property.
Our general rule of thumb is consider what would it cost to rebuild the structure if it burned to the ground. That is, what is the value of the underlying land, not so much the structure. Considering the cost of labor, building materials, and the general poor quality of existing structures in Southern Chile, the prices rarely justify the price being given. We quickly ask them to give us a serious price, before even bothering to look at the property. If they do not give us a price, we treat it the same as not giving us an unrealistic asking price. They are ofteh fishing around to find out if you have any idea what the property is really worth. Which should be taken as a sign of someone looking to take advantage of you.
Another issue, to foreigners, that is very confusing is the use of the UF to price property sales. This is an inflation-indexed price, to protect banks and lenders from large moves in the exchange and inflation rates when dealing with long-term loans and interest. For many foreigners looking to buy property in Chile this is confusing and not particularly helpful if you expect to pay cash or have financing outside of Chile. This is easily solved by asking for the price in pesos. Do the math yourself, and pick the one you like more. The UF is very standard, and nothing to be concerned about.
Where is it located?
Believe it or not, we often have to nag for this information. This is often not made clear, or is vague at best in the initial information we receive on properties. Be sure to check the specific location. There may be a world of difference between the value of property in downtown Pucon, and one that is even just a few kilometers from town. However, the price the agents ask for may not reflect that difference.
Stay objective about what you are looking at. Remember, just because a property area is a hot market in Chile does not mean it is valuable property. Downtown Pucon again would be a case in point, it happens to be a Volcanic Red Zone on the government survey maps and has been destroyed before; yet, it is one of the hottest real estate markets in Chile. Chileans will often have a very different set of reasons for valuing a property.
What does it look like?It is very common in other countries to enter the office of a real estate agent and find photos on the wall of the properties being sold or that they have sold in the past. At the very least you can have access to photos of the properties. Of all the real estate agent's offices that we have visited, we have never been offered a single photo of a property or seen any on a wall in their office. Even when asking for photos, we are rarely supplied photos. On the Internet, we have found very few with the technical knowhow to take digital photos or make scans. There are even fewer that are able to respond to emails. Very few, even when asked, actually have photos of their properties.
Can you show us the property?We have also never been asked by a real estate agent if we would like to see a property, even when ready to buy. We have always had to ask to see the property, if we had not already located it beforehand on our own.
Whom do you work?
Conflicts of interest are rampant in Chile. Talking to an agent, you might be given the sense that they are working for you, but in general they work for the seller; even though both buyer and seller share the cost of commission. Unless you specifically hire an agent to locate you a property, the agents work for the other guy. In all cases, good legal representation is a must. Most Chileans typically hire their own attorney to help locate and negotiate properties.
Another aspect that may not be fully disclosed or ever made clear to the buyer is who really is the real estate agent representing the property owner. Real estate agents often work together and share the commission, showing and selling other agents' properties.
Another thing to watch out for is agents who poach real estate and are not acutely the representative for the property. They are agents who find a buyer, through running advertising or other means, then contact the owner once they have an interested buyer. They may even go so far as to post a sign on the property.
So, how do you buy properties in Southern Chile?
Our best advice is to seek help. One of the better methods is to start with the area in which you would like to live or buy first. Second, ask the locals in the area and search for the "for sale" signs. Many of the less commercial signs means they are for sale by the owner directly. Often, just because a property does not have a "for sale" sign on it, does not mean the local farmer or resident will not make you a deal. If a particular piece of property you want is not for sale, often they can direct you to others in the area who will sell.
Local residents can also be an important source of information about real estate in general in the area. The best sources are the people who have really lived there, often for generations, about what problems their might be. For example, does the land flood during certain parts of the year or can you get the land during the rainy season? Real estate agents will often not know or not disclose such information, either because they do not live in the area or wish to close the deal. Make sure to have an attorney check all government documents, restrictions on the property, and the tax situation before even entering into any sort of purchase agreement.
We do not want to leave you with the impression that all real estate agents in Southern Chile are bad. There are many good agents out there. Typically the basic signs of professionalism, the same signs as you would find in any industry, will be their best guide to sorting them out. We simply want you to be aware that finding good real estate agents can be more difficult than finding properties for sale. When you do find one, building a long-term relationship with him is worth the effort.
In an ironic footnote, while preparing this story, we recently asked a real estate agent we do trust if he could recommend another agent we might talk to that covered an area outside his territory. The real estate agent was very hesitant to recommend any other agents, even though he knew many. When pressed for the reason, he frankly told us because he thought none of them could be trusted.
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