Guys In The Zone: Costa Rica Real Estate

“Innovation distinguishes between a leader and a follower.”  – Steve Jobs

I bet your wondering how that idea relates to real estate in Costa Rica?  Well, simply put… if there was ever a time for property owners and real estate agents in this marketplace to be “innovative,” it’s now.

We all need to think outside the box...

LISTING IS ONLY THE FIRST STEP

Here’s how listing a property usually unfolds in The Zone—

• Step One: Call up The Guys and set up an appointment to preview the property.
• Step Two: Determine if an Open Listing or a Modified Exclusive Listing is appropriate for you.
• Step Three: Wait for The Guys to bring you a buyer.

The problem is that Step Three is taking much longer than most Sellers anticipated.

LOOKING BEYOND PRICE

We all know reducing the list price is the easiest way to increase property showings, offers, and sales.  However, if your property is in the ballpark of current market value and it is being shown but not selling, there could be other reasons limiting the sale.

Here at the Guys office, we continue to ask ourselves what can we do to speed up the sales process?  At the risk of sounding trite, one answer is: “think outside the box.”  Here’s an example of how The Guys have applied this idea.

Ben started his Costa Rica blog in 2003 (before many of us knew what a blog was) Read the full story

This series of articles is all about selling a property in Costa Rica.

Decide what the marketing fee will be.

• Part 1 dealt with the most common type of listing that sellers use in Costa Rica: the Open Listing.
• Part 2 discussed how agencies here in The Zone imitate the MLS (Multiple Listing Service) of the U. S. and other countries by offering Exclusive listings.

Now here, in Part 3, we are going to discuss an un-orthodox approach to selling a property in Costa Rica’s non-MLS marketplace. The incentive for doing this is the weaknesses, or flaws that were reviewed in Part 2 of our attempts to imitate the MLS of other countries.
I have been working in real estate here in Costa Rica’s southern pacific zone for years, and have always felt that the exclusive listing was a nearly sacred thing. It puts a tremendous responsibility on the agency that has the exclusive, but is also demanding on all of the agencies in that they must ignore the fact that the commission on this property is shared, when the majority of properties in their inventory are not.

I have been scratching and thinking about this topic and here is what I’ve come up with.

The Real Estate Agency’s Objective:
What we want to do is offer to sellers a better service, and in the process improve the professionalism of our industry. This is particularly appropriate when Read the full story

If you haven’t read Part 1 of this topic yet, you might want to. You can do so by clicking here.  You don’t have to if you don’t want to.  This article stands up fine all by itself.  However, to get a good understanding of the open listing, which is the most common type of listing here in Costa Rica, you’ll probably want to.  All right?

The quandary of how to best sell a property in Costa Rica

When we last visited, we were left with the cliff hanger – “what is a seller to do if they don’t live in Costa Rica?”  The absentee owners don’t have time to go to each real estate agency and distribute photos, write-up, survey and contract with every real estate agency.  This could really mess up a family vacation.  Not to mention the follow-up-regular-visits to see how it’s going with showings of the listing.

Before going into that and satisfying the “edge of your seat” drama that I have created here with this compelling topic, I’d like to give you a glimpse inside the mind of this Costa Rica real estate agent and share with you an alternate option to what has been the standard practice in Costa Rica for the exclusive listing of a property.

We have always known that the MLS (Multiple Listing Service) market place of the US is superior to the Costa Rica open listing model.  In our (Zone real estate agencies) efforts to improve our market, and to offer a better service to both buyer and seller, we have defaulted to imitating the MLS market place, without having an actual MLS.  The reasoning is simple: the MLS is a superior model that has evolved over time in response to gazillions of problems and concerns and has resulted in what we see there now: a mature business model that offers representation to both buyer and seller of a given piece of property.  So, we try and come as close to working like and MLS without having the actual infrastructure of an MLS.

For various reasons, I’m starting to think that this premise might be flawed.  AND it may be that, if we think outside of this box we’re in here, we might even come up with a solution that rivals, or perhaps (could it be?!?) even exceeds the MLS model of other countries.  Bear with me here.

How Costa Rica imitates the MLS model… Read the full story

This is the first of a 3 part series on how to sell a property in Costa Rica.

1. Part 1 is this one and it deals with the most common type of listing that sellers use in Costa Rica: The Open Listing.
2. Part 2 discusses how agencies here in The Zone imitate the MLS (Multiple Listing Service) of the U. S. and other countries by offering Exclusive listings.
3. Part 3 – A new thought on how to get representation and motivating all real estate agencies to promote the sale of your property.

This question just in:

To give an exclusive listing, or an open listing? That is the question. In Costa Rica's non-MLS marketplace, the rules are all different.

What is your advice regarding putting it out there with everybody vs. exclusive.  Several people know it’s for sale, including Guy X, Guy Y and Gal Z who do sell properties ‘on the side” Is there no exclusive at all down there?

Before going into these questions, I’d like to mention that these questions are common.  It is difficult to understand how Costa Rica real estate works when all one has ever known is the ubiquitous Multiple Listing Service (MLS) model of the US and other developed nations (with the exception of UK and the state of Mississippi).

Open Listings:

To understand exclusive listings, we need to understand open listings first. Open listings are the norm, if there is any such thing in Costa Rica real estate.  When you list a property with an agency in Costa Rica, that is as far as it goes. That office has your listing, and that is it.  If you want another agency to have the listing, you dear seller, have to visit the next agency and do your presentation all over again. Repeat these steps until all of the agencies that you want to list your property have your property.

Bear with me here now.  I’ve been down this road before. You think you’ve got it, right?  Well, oddly enough, it is very likely that you don’t.

In your country, it is most likely the case that you list your property with one agency and they are then entrusted with the task of announcing the listing to all the other agencies.  You get representation in the deal and all of the agencies that subscribe to your MLS now have your listing and they can bring the buyer to your property.  They are represented by whoever the agent is that shows them the property. You, the seller, are represented by the agency that you listed your property with.  The commission is split 50/50 between the listing and selling agencies.

In Costa Rica, when you list with an agency, you are simply enhancing the inventory of that one agency.  AND, you are not getting any sort of representation in the deal.  The agency will likely put you on their website, and they may even print out a flier for the wall or marquis outside of their office. If they sell it, they will get the full commission.

You go out and give your listing to as many agencies as you can and each one of them hopes that they are the one to sell your property and get the whole commission.

Later on, if you want to know what the reaction is to your listing among the prospective buyers who have viewed it, you will need to call or e-mail each of the agencies and ask how it is going.  This is recommended anyway since regular communication helps the agencies to keep your listing in mind.

It should be mentioned at this point that here in Costa Rica, most of our sellers don’t live in the country.  They live somewhere else.

Which segways us nicely into the…

Stay tuned to the next installment of the topic “Exclusive Listings Revisited”, where we will consider the pros and cons, and consider best practices of doing an exclusive listing.

Click here to be notified via e-mail when new articles are posted.

Click here for Part 2 of How To Sell a Property in Costa Rica.

In Northern California’s Bay Area, million dollar homes are very common.  They typically combine elements like— a desirable location, a large floorplan, upscale finishes, and/or estate-sized acreage.  My first position in real estate was in a beach area near Santa Cruz, and the power agent I worked for had no less than five million dollar listings when I joined her.  I just checked that broker’s website, and they currently have 307 houses listed between $1 million to $10 million.  Conversely, the Southern Pacific Zone of Costa Rica has a young real estate market and million dollar houses are less common.

Luxury Estate in Escaleras, Costa Rica.

As recent as 2006, this area was considered the new frontier in Costa Rica.  Access was difficult and more exhaustive than it is now.  Developments were few and far between.  Then, the real estate boom hit.  This boom affected all aspects of real estate—raw land, developing, construction, rentals and associated services.  All of the key elements for million dollar homes—desirable location, sweeping ocean views, large building sites, and affordable construction—were easily realized for a relatively affordable price.

Let’s start with the land… Read the full story

In my previous article I considered the workings of the standard Costa Rica real estate model – the Open Listing.. If you haven’t read it (and would like to) you can by clicking here.

I have been a bit negative about exclusive listings in the past. My attitude towards these is now changing and, if anything, I’d say I’m a bit positive towards them now – with caveats.

The Exclusive Listing is a hybrid business model between the existing Costa Rica non-MLS model, and the Multiple Listing Service model that so many are accustomed to in the U.S., Canada, and elsewhere. I have recently learned that England does not have an MLS and, get this, that Mississippi doesn’t have an MLS. The point about England came from a reliable source. The one about Mississippi was chit-chat. I did a cursory study of the Mississippi matter on the internet and found a little bit of information but it’s still unconfirmed.

The exclusive listing attempts to provide buyer/seller representation in the Costa Rica market place.

The Way it Works
You approach your favorite real estate agent. You give that agent the listing for your property. That agent then takes the full responsibility of marketing your property so that it receives the broadest possible exposure. Sounds good right? Well, it is, but…
Read the full story

I have written about the nature of our marketplace and the listing options open to sellers. Its not a pretty site in this non-MLS (Multiple Listing Service) marketplace. The seller is confronted by the decision to personally market the property to each of the real estate agencies in the area (Open Listing), entrust one agency to the task (Exclusive Listing), or go it alone with a For Sale By Owner. Here are the pro’s and cons of the options.

Open Listing: this is the type of listing that is considered the norm here in the non MLS model. The seller walks into my office with a packet of information on their property. I ask a number of clarifying questions: access, water, electric, phone, Internet, view, privacy and of course, price. Provided the answers to these questions indicates that the property is sellable for what the seller has in mind price wise, we set up a time to go and view the property. We visit the property, take photos/videos and then the listing goes onto my website.

This generally pays 8% commission to my agency.

The seller then goes down the road to the next agency and does it again.

Pros of the Open Listing: The agencies are motivated by the full commission. Right now the inventories of the various agencies are ripe with great listings. When a prospective buyer comes into the office, or starts up a dialogue via e-mail about their search for property, the well-intentioned, but commission motivated agent is going to gravitate towards the full commission listings first. This is a weighty point that will not be fully dealt with until we have a fully functioning Multiple Listing Service here in Costa Rica.

If you think it through, the seller has no actual representation in the marketplace. For that matter, neither do the buyers. You’ve got seller, buyer, and a commissioned sales person in the middle trying to make a deal happen so that he/she gets paid. Not the best of business models, but it’s ours and somehow it works.

Cons of the Open Listing: Read the full story

This is the continuation of an earlier article on How To Sell A Property In Costa Rica.  That article left off with the statement: “listing your property with an agency doesn’t guarantee that other agencies will know about the listing. There is a gap that the listing agency should try and fill with extraordinary marketing services.”

Here are some possible services that can be offered to fill that gap.
1) Market the property to other agencies, allowing them to list the property as well. They will obviously get a share of the commission if they sell it. (I’ll deal with the possibilities presented by this option below).
2) Prominent Internet exposure. The agency can put the listing on their web site and feature it so that it gets better exposure than their non-exclusive listings.
3) Real World Advertising. Depending on the property, and the agency’s normal advertising program, an exclusive lister can request that their property be mentioned on any magazine, newspaper, or other type of non-electronic advertising.
4) Pay-per-click Internet advertising. This again depends on the value of the listing. Normally this type of extraordinary marketing would be for a luxury property to justify the expense to the listing agency. This is highly effective.
5) Signage on and off the property. Directional signs leading from the main road to the property as effective as sales tool as well, but can be limited by permissions in placing the signs.

More about #1:
The listing agency should promote the property to other agencies, doing that grunt part of the listing work that would normally be done by the seller themselves. In order to appeal more to the other agencies, a creative commission structure can help to stimulate things.

For instance: The listing agency could offer to pay a 6% commission to the selling agency, and keep 2% for the listing agency. Sellers should keep in mind though that doing an exclusive listing correctly is time and labor intensive on the part of the agency. Reducing the listing agent’s share may not be the best way to go about this. The seller wants the listing agency to be motivated to share the listing.

The lack of the MLS results in the real estate agents being accustomed to the full 8% flowing into their agency. So any deviation from this can have a negative effect. The ultimate marketing formula is for all agencies to receive the full 8% while still making it worth the listing agency’s while.

Obviously the seller can simply be willing to pay a 12% commission in the case of another office selling the property. Some might feel this to be a bit steep in the commission department though.

So what can a lister do that wants to have the benefit of the exclusive listing?

The listing agency should have in mind the standard and try to reach it’s level of efficacy in getting the property marketed and sold.

I suspect that some day we will have an MLS here in Costa Rica, but until then we will see a diverse mix of policies that vary from office to office of how best to serve the people and still have good business take place.

The absence of an MLS or Multiple Listing Service causes an interesting challenge for those that would like to sell a property in Costa Rica (I wonder how many articles I have started with those words). In the U.S. you simply list your property with your favorite real estate agency and voila! Your property is listed in a huge database of properties for your area that all of the real estate agencies have access to, and your property gets represented in the fullest way possible. You’ve got your listing agent that represents you, the buyer has his/her representation from their agent, and everybody’s happy. Not so in Costa Rica.

In Costa Rica when you tell your real estate agent about your listing, that is usually where it stays, within that agency. I have seen cases where agents don’t tell others in that very same agency about a hot listing. The reason for this is simple; they want the sale, and consequently, the whole commission. In Costa Rica real estate there is no “listing agent” and no “selling agent”. This difference seems to be really difficult for our North American clients and sellers to understand. Understanding the difference though, can make all the difference in successfully selling your property.

Setting the Standard
The standard for selling a property in Costa Rica is to get all of the real estate agencies to list and show your property. There are a number of ways to go about this. Perhaps the most common method is this: the property owner makes up a flyer that features a photo or photos of the property, along with the details of the property ie. size, distance from the main road, electrical service, water, any distinguishing features about the property such as creeks and waterfalls. The prevalence of wildlife is helpful as well. Describe the view and if its quiet or not. Is there financing? Is there a Home Owners Association (HOA)? Are there Covenants, Codes, & Restrictions (CC & Rs)? Oh, and the price as well.

Its not a bad idea to make a number of copies of this flyer and emplasticate them. It might be good to have 2 versions, one that has the seller’s contact information on it and one that doesn’t. The one that doesn’t will be more likely used in the office to present to property to prospective buyers.

The seller then visits all of the real estate offices, or the ones of their choice, and distributes these flyers. Then a regular visit, say on a monthly basis, is a good idea. This keeps the agents mindful of your property, and insures that all agents within the agency know about your property.

Most of the agencies will ask that you fill out a “Non-Exclusive Listing Agreement”. This document will give all the details of the listing, and will also state clearly the commission percentage so that there is no confusion at closing. 8% is the norm in Costa Rica’s southern zone for single family lots and houses. This can vary for farms and luxury properties.

Options You can give an exclusive listing to your brokerage. This sets things up as though there were an MLS in Costa Rica. What this means is that they become the listing broker, and that if the sale takes place during the term of the exclusive contract, the brokerage will receive a percentage of the sale, or all of it if they sell it in-house. The concern with this is that the exposure that your property gets on the market might be limited since your agency might decide to not tell the other real estate agencies about it.

I like to mention the standard so that we can use it as a – well, as a standard by which we measure the effectiveness of the other options. The Standard option above sets the bar and really represents the level of market exposure that can be achieved by an enterprising land seller in Costa Rica. It is against this standard that we need to compare all other marketing of a given piece of property.

Why would a seller want to do an exclusive?
The benefits are that, since we don’t have a multiple listing service here in Costa Rica, it takes a lot of feet-on-the-ground effort to keep the agencies mindful of the listing. To do the printouts, the initial visit to the agencies, subsequent visits, perhaps on a monthly basis, requires more than many land owners have to offer. Having a single point of contact here that does all of this for you is attractive to some sellers. Also, it may be that the seller has built up a trusting relationship with an agency and so would like to deal exclusively with them, effectively insulating the seller from the other agencies.

Why would an agency want an exclusive listing?
One might wonder at this question, thinking that the answer is obvious, but really its not so. As a real estate agent here for a number of years I can honestly say that I’m not real quick to offer to represent a property on an exclusive basis. It’s a lot of work. If I get the listing in a non-exclusive, general market sort of way, and I think that the property is a good one, I can probably sell it quickly to a client in my database, and get the whole commission without having to do any of that extra work. So, to answer the question: “because it might make good business sense”.

I might be in that “trusted” position with a client, in which case there is a certain sense of responsibility to continue to represent my client. If their desire is for me to market their property on an exclusive basis, I’m on it.
It also might make good financial sense to do the exclusive. With the exclusive listing, the listing agency is guaranteed a percentage of the sale, no matter who makes the sale.

The Objective
The objective then of the listing agent will be to make up the difference between the standard, and just having the listing in one house. To repeat: listing your property with an agency doesn’t guarantee that other agencies will know about the listing. There is a gap that the listing agency should try and fill with extraordinary marketing services.

My next article will deal with the mechanics of how to do a successful exclusive listing.