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Do high sales commissions drive bad behaviour?

13% sales commission: is it starting to get 'silly' again?

Lets be frank, selling a holiday or retirement property to a foreign buyer is often a long, expensive process with no guarantee of reward. But with reports that some developers are, once again, offering sales commissions of 13% on the Costa Blanca, Spain, is this driving some agents to seriously ‘cut corners’?

By ‘cutting corners’ we mean that some agents are either knowingly or naively promoting and selling new property that does not have licenses or bank guarantees. The agents in question are not AIPP members but new market entrants, enticed to our sector by large sales commissions but seemingly without doing much, if any work, to validate the product they are selling.

The issue is compounded by some lawyers – who should be protecting the buyer – acting in collusion with a developer and sales agent, ‘nodding-through’ sales particulars without flagging the true status of a new property.

So who will act as ‘whistleblower’? defined by Wikipedia as ‘a person who exposes any kind of information or activity that is deemed illegal, unethical, or not correct within an organization that is either private or public’. 

As AIPP operates a voluntary code of practice for professionals in the industry subscribing to it (currently over 370 companies in 31 countries), we can act only on information provided to us about AIPP members. If our members breach our code of conduct, then we will act.

Ignorance no defence before the law: what can / should agents do?

Agents promoting new property for sale – anywhere – should make proper checks on the property and, preferably, hire a good independent lawyer to review the property at least once every 6 months.

Whilst there are many items to be checked in the due diligence process the main ones (in Spain) are:

The Developer: track record, customer testimonials, financial standing and the provision of a Bank Guarantee that construction will be completed.

The land or property: Full legal documentation on clear title, planning permissions, and building licences that would provide the necessary security against any investment.

Marketing ‘claims‘: Independent corroborating evidence to substantiate the claims with underlying assumptions and/or examples.

The Financial transaction: That there is proper process, the funds are secured in an escrow account (with consumer-protecting terms and conditions) and if monies are deducted for, say, agent commission then this to be declared.

If you work in the international property trade and would like to share your views please email, in confidence, AIPP CEO Peter Robinson; peter@aipp.org.uk


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