“It’s a Jungle Here” – The Unregulated World of Buenos Aires

One thing that most foreigners don’t realize when they embark on their adventure of buying real estate in Buenos Aires is that for the most part there is absolutely no regulation in the real estate industry. If you walk around the streets of Buenos Aires, you will notice a real estate office on almost every other block. For every one real estate office you see, there are probably 25 independent realtors or companies that are operating as a “realtor agent”. There is no real experience needed to operate as a realtor.

I have purchased more residential real estate in Buenos Aires the past two decades than any single individual in the world. I have purchased from big realtors, small realtors, and independent realtors. You name it. I have seen it all. One thing that is easy to see is there is no real regulation like there is in the United States or other first world countries.

Even real estate companies that have been operating for decades will often times employ realtors that have no experience. I have traveled around the world and looked at real estate in dozens of countries. I have never quite seen anything that I see on a weekly basis in Buenos Aires. There are so many scams, cons and cheats here.

Because there is no real “comp” (comparables) system here in Buenos Aires, a realtor can tell you that a property is ‘fairly priced’ only to find out that the property you just purchased for a fair price is tens of thousands of dollars more than they just sold a property the day before in the same building.

Even locals that have lived here all their lives have been cheated by the local real estate companies. Most I talk to know absolutely nothing about the process. I’ve personally met several that ran into serious problems because the realtor had cheated them. In fact, something interesting is that I have been retained to purchase real estate as an investment for even locals that have lived here all their lives. The reason they tell me is because they understand how complex it is here and how they can be cheated.

Many people get excited about real estate here because it is relatively cheap compared to major metropolitan city capitals around the world. They don’t really know what a fair price to pay for a property is. They would pay anything the realtor tells them is a ‘fair price’. Fair price is a subjective term.

I recently was retained by a gentleman from the UK. He was going to purchase a property that he saw. He decided to retain my firm as a real estate consultant to help him through the process and act as an independent source of information because he did not like the fact that a realtor gets 4% from the buyer so they have no motivation to fight for a fair price. I went out and evaluated the property that he wanted to purchase. I knew that building well as I purchased an apartment in the same building on a higher floor with the exact same floor plan. In fact, I purchased it from the same realtor that was selling him the apartment. His own realtor told him that the ‘price was fair’.

I was very surprised that the realtor did not mention to him that I just purchased an apartment in the exact same building 2 weeks earlier for $200 per sq. meter cheaper. He would have paid u$s 25,000 more for an inferior apartment than the higher floor apartment with more natural sunlight in better condition. He was very angry at the realtor for not disclosing this fact. This is very common here. Realtors simply don’t act in YOUR best interests. They act in THEIR best interests. They have no real incentive to help you get a lower price when it means they will make less money.

We helped our client save u$s 25,000 on the property purchase price above when he was prepared to pay the so called realtor’s ‘fair price’. It’s easy to get cheated in a First World developed country. Here in Argentina it’s almost guaranteed that someone will be taking advantage of you.

Another example is I put an offer on a nice property in Recoleta. The apartment I deemed was overpriced at the time at the u$s 238,000 asking price. I was working with a realtor I have worked with on tens of millions of dollars of transactions that is competent. She agreed with my assessment that the apartment was fairly valued at closer to u$s 220,000. I buy many properties in the area so I know what property is selling for. The seller had his own realtor. I made an offer for u$s 220,000 which I deemed was fair. The seller’s realtor did not even want to take the offer saying it was “too low”. I told her to take it and just present it to the clients. I put down a u$s 5,000 reserva (down payment offer) to show I was serious. As a consultant I notice all the little details. I saw that they had a small baby and the wife was pregnant which usually means the sellers are motivated to quickly sell and move to a bigger house in the suburbs away from the city.

The realtor counter offered at $230,000 down from $238,000. Still far from my offer of u$s 220,000. I countered again at $225,000 which they refused yet again and asked for $228,000. I then walked away. I asked for my u$s 5,000 reserva (offer) back. The seller’s realtor was stalling not taking phone calls and very flustered. They did not want to return my $5,000 saying that they were ready to now accept at $220,000. They clearly turned down my offer at $220,000 and now they were trying to say they accepted. In fact, when we went to their office to see a copy of the acceptance, I noticed that the seller’s clients – the owners of the property- had accepted at $220,000 days before and the realtor was still trying to tell us they refused that offer. This is a clear example of the type of unethical behavior that exists here in Buenos Aires.

Any expert will tell you the best way to avoid problems is teaming up with a local partner or consultant that specializes in real estate transactions and is looking for YOUR best interests. That is what our firm provides.

Below is an article on the real estate industry in the UK which is one of the most developed countries in the world. If people are getting cheated in the UK, imagine what could happen in South America in one of the most corrupt countries in the world like Argentina. Being one of the largest purchasers of residential real estate in Buenos Aires, I can tell you these examples listed in the article below is nothing compared to what I have seen in the local market in Buenos Aires. Buyer beware!

The Secret Agent
By: Anna Adams

March 21, 2006

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/1/hi/magazine/4826444.stm

Lying to customers, faked signatures, false passports and dodgy deals with developers. An undercover investigation reveals the secret world of estate agents’ dirty tricks.

My boss congratulates me on getting an offer on a flat that has been overvalued by £60,000. The newly-wed young couple viewing the property are stretched to their financial limit. But my manager is happy.

He takes me aside and explains how to convince a surveyor that the flat in London’s fashionable Notting Hill is worth more than it is. He calls it “slightly simmering” – I call it cooking the books.

The scenario is not uncommon, in fact the manager himself boasts: “This kind of s*** happens all the time … that’s why we estate agents are here.”

That night I head to the weekly sales meeting at Sloane Square. It’s held at 7pm on a Friday night – when other people are relaxing in the pub.

Under-performers are heckled and those who have done the most deals are applauded and given champagne and £50. Young agents in Foxtons exchange high-fives as they swap tales of gazumping and over-valuing.

The ambitious young graduates in sharp suits are full of bravado as they discuss their equally sharp practices while their sales figures are projected onto a giant screen.

But I can’t stop thinking back to the hard-working young family who dream of getting on the property ladder and have wasted their money unnecessarily.

For BBC One’s Whistleblower programme, I spent eight months investigating the murky world of the estate agent.

This involved spending time in five very different agencies and within days, I got a shocking glimpse inside this largely unregulated industry.

During the investigation I saw the depths to which some agents will sink to get a deal – not only offering a house and a mortgage, but also a fake British passport.

Together with a BBC colleague, Emma Clarke, I spent three months in Foxtons. Londoners will know the brand by its ubiquitous fleet of branded Minis and the trendy high-street offices that look more like wine bars than estate agencies.

But behind the stylish facade it is easy to see why the company has made its owner Jon Hunt one of the wealthiest estate agents in Britain.

I’m told he encourages his agents to adopt the mantra: “Our clients expect us to go to war for them!” – so it’s hardly surprising the lengths his staff will go to keep the deals coming in.
According to the Sunday Times Rich List, Jon Hunt is worth £345m and also owns independent mortgage brokers Alexander Hall.

I soon discovered his mortgage brokers work closely with Foxtons’ agents. They openly discuss potential buyers’ budgets so they can squeeze as much money out of them as possible.
Some buyers have no idea that the Foxtons agents showing them around properties already know exactly what they can afford.

After an excruciatingly intense two-hour job interview and presentation with 20 other young hopefuls – I got the job.

I have a cover story but I’m still nervous when I’m quizzed for 20 minutes about my work history and squirm as I reel off what I think they want to hear.

I’m unaccustomed to a sales environment, but when I tell one of the directors that “failure is not an option”, he looks thrilled. Two days later I got the job.

I was posted to the Notting Hill branch, a former pasta restaurant where Jon Hunt started his Foxtons empire 24 years ago.

I was convinced my cover could be blown at any time as I worked round the corner from where I live. My friends didn’t know about my new day job, and I felt exposed as I zipped around my neighbourhood in my Foxtons Mini.

Working undercover is exhausting. I have to start at dawn, making sure my cameras are working and well-hidden. Estate agents are a well-turned-out bunch and it’s a struggle to make sure my two cameras are concealed.

Life as an estate agent is arduous. We work six days a week, 12 hours a day. We work together and socialise together, but we are also pitted against one another as we battle for deals. It’s a punishing regime and the pressure is palpable.

Some Foxtons agents earn a basic salary of £10,000 – nowhere near enough to live in this trendy hub of west London populated by City high-fliers and celebrities.

The company demand that you live close to your office and they tell you it should take no longer than 40 minutes to get to work. Clinching a deal is a necessity if you are to survive, and some agents will do whatever it takes.

In another Foxtons office, lettings staff jump up and down in delight after they successfully fake a signature on an absent landlord’s paperwork.

Faking documents is something of a habit in the St John’s Wood office, where Emma Clarke worked undercover in the lettings department.

I was shocked when she played me her secret footage which showed staff cutting, pasting and gluing signatures onto contracts. They call it “chop chop”.

Nothing prepared me for working at Foxtons. It’s not just a job – it’s a way of life. Rewards include booze-filled weekends away with management and a weekly breakfast club where you have the dubious pleasure of dining at 7.30am with your bosses.

The pressure is relentless and even on your one day off, your company mobile buzzes as head office texts you new property details.

Staff turnover is high and new recruits quickly burn out. The staff are young and keen and usually straight out of university – happy to get a job and drive a company car.

I spoke to a number of former employees who told me about the intense pressure and how it made agents behave. Only one former employee would help us with our investigation, and even he refused to waive his anonymity because he too feared reprisals.

When we revealed our findings to Jon Hunt, his lawyers threatened Emma and me with personal lawsuits and even hand-delivered letters to our homes. If they thought this would deter us from showing how his company works, they were wrong.

The undercover team also worked in a very different agency called Time2Move. The company’s three small offices are a far cry from the upmarket locations favoured by Jon Hunt. But some of the practices are not dissimilar.

The maverick owner of T2M, Bruce Burkitt, was fined last year by the Office of Fair Trading after he failed to disclose that a member of his family had purchased a property.

So I went to see if the agency had cleaned up its act. I got a job and within an hour of joining T2M, I was shown exactly how they sold their properties. It was simple. Once they value a property and get the owner to use their services, they then lie about offers they haven’t had.
Then after a while, when the owner is utterly desperate to sell, they make up false offers well below the original valuation so the owner reduces the price. The manager called it “price reduction hour” and “vendor care” – everyone else calls it lying.

There was no way I could join in with this “vendor care” and I wasn’t sure how long I would be able to maintain my cover. T2M were on high alert. Something had made the manager jumpy and when I questioned the need to lie, he got suspicious and asked what newspaper I worked for.
His paranoia led to him reading one of my text messages – this time I was sacked.

I then joined ranks with a property developer who taught me some other tricks of the trade. It wasn’t long before I found agents asking for cash backhanders in return for cheating owners out of tens of thousands of pounds.

He told me lots of agents would take a cash bung in return for getting properties at knock-down prices.

After just a few days trawling the high street agencies, we found one unscrupulous agent who asked for a £10,000 backhander to cheat a pensioner out of more than £50,000.

The manager of a Chard estate agency branch in Fulham, west London, showed us round a flat worth more than £190,000. Yet if our developer was happy to grease his palm to the tune of £10,000, he’d tell the owner to take the offer of £140,000.

Months later, we found an agent willing to go to even further. I was totally shocked when we were offered a fake identity in order to get a fraudulent mortgage.

We visited Primetime Mortgage and Property in north London and within minutes of our meeting we were offered a fake British passport, P60 forms and forged utility bills.

I still wasn’t convinced that he’d be able to come through with the passport. But after one more meeting and £550, we had a fake British passport in my name.

When we embarked upon the investigation, I would never have suspected that an estate agent would go to such lengths to make a sale.

There are more than 12,000 registered estate agencies in the UK, and not all of them are as murky as the ones I came across.
But during my eight-month investigation, I discovered a litany of dishonesty, deception, deceit and outright criminality.

The industry desperately needs better regulation and perhaps, like in the United States, estate agents should be required to have a qualification other than a sharp suit.

In response to the reports of the Whistleblower programme, Foxtons said: “Foxtons Limited and Alexander Hall Limited pride themselves on the professionalism and transparency of their respective businesses and has the utmost respect for the needs of its client and will always act in the client’s best interest.

“Foxtons has in place a rigorous training process, during which its employees are told repeatedly of their statutory and contractual duties, and the high standards expected of them.”
The programme also contacted Time2Move about their manager. He said: “I have no knowledge of your accusations and I have not acted inappropriately”. He also stated that T2M does not, and has never held a “price reduction hour”.

The Chard estate agency said: “We are shocked at these allegations and are grateful to the BBC for bringing them to our attention. On learning of them, we’ve taken immediate action to question the individual involved and then to suspend him. We are now conducting a full investigation of the circumstances.”

A spokesman for Primetime Mortgage and Property said that a member of staff had been suspended while the matter was being fully investigated, and that they were not aware of any illegal practices. He said the company prided itself on providing an efficient, honest and high standard of service to its clients.