Why things happen as they do…
Estate agency is a very ethical profession. As with all other businesses it always follows the money and thus is centred on the agent first; the paying client second; other people paying a share of their commission third; and the other party to the deal fourth. As the buyer does not pay the selling agent, rarely can the buyer be anything other than fourth in the deal. At the end of the day, each party has to look after themselves and that includes the buyer. By recognizing the influences on those advising them, buyers can prudently take care of their own interests.
The agent only gets paid if the deal does go through, therefore, it is in their interest to ensure that a deal is done, no matter the fairness of it, even to their major paying client. The convention on the Costa del Sol and in most of Spain is for the agent to be paid by the seller from the proceeds of the sale. Thus, the seller is the one who ‘calls the tune’. The agent’s fee, conventionally a percentage of the price, which may be modified to a "round" amount, is added to the price wanted by the seller. As negotiations proceed, agents are often prepared to reduce their fee amount to ensure that the deal goes through, normally alongside a reduction by the seller. The agent can be a friend to the buyer all the way through until the 59th minute of the 11th hour. Then the agent has to take instruction from the seller and do as the seller wants. If the seller wants to the agent to back off, the agent will have to do so and negotiate with the buyer to get them to raise their price or improve their terms.
So the buyer turns to the lawyer for support. If the lawyer has been contracted independently and has no connection with either the agent or the developer, this may well be available. However, the lawyers know that they have a living to make in the area and perhaps will have a history of transactions with the developer and agent in the past and hope to have more dealings with them in the future. The buyer is only a client for one transaction and whilst the lawyer will hope for future business from them and the buyer’s friends or relatives, that is not assured. In addition, whilst against the rules of the Colegio, some lawyers may pay agents and developers a share of their fee or some other benefit for introducing clients. Thus the lawyer may feel an obligation towards their long-term ‘partners’ in conflict with their professional duty to their buying clients. How they act in the end depends upon their professional conscience.
The Notary is the most independent of all. Their principal obligation is to ensure that the deal is recorded accurately and legally. They have no duty to comment on the commercial fairness of a transaction.
There may also be introducing commissions between the agent, lawyer, developer and the mortgage broker. Each party may depend upon the other for transactions and to have built up a professional relationship and friendship that they would not want to break for one client, except for good reason. Where a property requires some refurbishment, a building contractor may be recommended and again payment may be made to the party providing the introduction. There should be no damage to the buyer’s interest in these payments as long as the introducer puts forward these people conscientiously believing that they are the best available for the client.
The buyer can employ a ‘Search’ agent who they will pay a fee, which realistically must be approximate to the fee they would get from the seller. The agent can then negotiate 100% on behalf of the buyer including intimating to the seller that the price should be reduced, as they are not being paid a fee by the seller. However, unless an hourly rate is paid for work done no matter whether a deal goes through or not, the agent may eventually compromise in advice to ensure that there is a sale eventually.
In addition, few agents, whether acting on behalf of the seller or the buyer, are going to point out defects in the building that might jeopardise an otherwise straightforward deal. Again, a prudent buyer should have the property inspected and related to the legal and tax descriptions by a knowledgeable professional who is independent of the buying process.
So, the agent will always work to get the deal done. That is what his client, the seller, wants, as quickly as possible and at the best net price achievable. Similarly, the mortgage broker will only get his fee if the loan is taken out. The lawyer too will be aware that he may only get his full fee if the deal goes through. Conscientious professionals will advise the buyers as best they can, but at the end of the day the decision on whether to buy or not is the buyer’s alone.
by Campbell D Ferguson
F.R.I.C.S. Chartered Surveyor
Survey Spain www.surveyspain.com