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In Costa Rica Real Estate Is being a dual agent a conflict of interest?

You probably already know that we do not have a regular MLS in Costa Rica, where you can just pick the real estate agent who suits you best to represent you as a buyer and that agent will connect with the listing agent through the MLS to show their property listings together. For that reason, it is quite normal you will have one agent representing the seller as well as the buyer, which is what we call a dual agent.

Quite often, I receive emails from expats who believe that a real estate agent who is the buyer’s agent as well as a listing agent is a conflict of interest. Costa Rican real estate agents’ commission is always paid by the seller.

Costa Rican real estate functions generally very differently than other real estate markets in the world. The lack of an MLS is one of those issues that some buyers see as a serious obstacle. Many buyers think they have to hire one agent who will work with both sides of the transaction and that this is a conflict of interest.

I respect that opinion, but I do not share it. I hope to show you that this is not entirely true and that this opinion is merely due to a lack of knowledge about the Costa Rican real estate market as well as about the market they originally come from.

Realtors in Florida, New York, and some other states can be a Transactional (or Dual) Agent, meaning they are legally allowed to represent both sides, which is a very common practice there. Dual agency imposes some restrictions on a real estate agent and the agent is required to treat both buyer and seller with fairness and honesty.

A Dual Agent can be a disadvantage to a buyer as stated in a New York Department of State memo; consumers are advised to be wary of dual agency relationships. I am telling you about this to show you that a dual agent is pretty common in the United States, too. Costa Rica and the U.S. are not as different as some people think in this regard.

I have heard, as a response to this fact, that agents in the U.S. are licensed and agents in Costa Rica are not necessarily licensed. In my opinion, a real estate license doesn’t make an agent honest. A piece of paper does not make one immediately ethical and the lack of one also doesn’t imply a lack of ethics.

In our agency, we have a buyer’s agent who doesn’t take any listings on purpose. He is exclusively a buyer’s agent and will work with any listing agent in the Central Valley. This agent will get paid by receiving half the commission the seller’s agent will get paid by the seller. That means that both agents are paid by the seller.

So what creates the conflict of interest? Is that the fact that the sellers pay the real estate agent’s commission? If, in your opinion, it is a conflict of interest that the agents get paid by the seller, you could hire your own buyer’s agent and pay your agent 2.5% on the sales price at closing. Will that make any difference? I honestly doubt it.

That will mean that the seller’s agent will take the full 5% real estate commission and you will be paying another 2.5% on top of that. Meanwhile, your agent will probably do everything he/she can to look out for your interest, you will be paying more than necessary for the property of your dreams.

You have two solutions to the dual agent issue:

  • Purchase through FSBO – For Sale By Owner. In case you do not think you will need the professional advice of a real estate agent, one who will walk you through all the different phases of the real estate purchase process, and way past closing in a country with different customs and a different language.
  • Hire your own buyer’s agent who can bring experience, a knowledge of the market, an introduction to a home inspector, a closing attorney, as well as all those people who you will need after closing like a doctor, dentist, plumber and bug exterminator. If you do this, you can have your agent share the commission paid by the seller.

When looking for a buyer’s agent, you should find one who works well with agents from other agencies, so you won’t lose out on any good deals that are available on the market. This buyer’s agent should not only have great negotiation skills, but also have a good knowledge of the local market, the legal aspects of buying and selling property in Costa Rica, and have great connections with the local community.

Ivo Henfling, a Dutch expat who has lived in Costa Rica since 1980, founded the American-European Real Estate Group back in 1999 which was the first functioning MLS with affiliate agents from coast to coast. 

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