The Dangers of the Trip Dip.
Make sure when you think you are buying something like this, you are not really getting…
Don’t be ripped off in an Ecuador real estate scam.
Recently I highlighted a ten year old article I had written about 38 beach acres for sale at $15,000. I must have worded this article badly (plus it’s easy to mistake 2001 for 2011) because many readers asked me if it was still available at that price, not realizing that this was the price ten years ago.
I replied to those who asked that “I regret that more readers had not read our messages ten and 15 years ago and bought real estate then”. Those who bought Ecuador real estate a decade ago have done really well. One can still find Ecuador real estate bargains but not as easily as a decade ago. One has to shop harder… negotiate more cleverly and be much more careful.
Our business has shifted from convincing readers to come to Ecuador to helping them avoid paying much more than they need to pay.
In the past decade many people have set up shop as brokers and or developers. There are no strict licensing laws so many of these can do just about anything they please.
One such scam is triple dipping.
Recently one of the Ecuador Ateam sent me this note.
Gary, Interestingly I met with a prominent Cuenca Ecuador attorney last week and he mentioned that a real estate broker recently came to him looking for referrals. He was uncharacteristically candid with the broker and said that the broker’s practice of collecting from both sides and inflating prices in order to get a larger commission prevented him from referring clients. To this the broker suggested having the spouse represent the seller and the broker the buyer. Clearly integrity is not high on this broker’s list of priorities.
Triple dipping is quite simple. The person offering the property for sale stands between the seller and the buyer. The broker increases the price the seller really wants (and keeps this difference) PLUS charges both the seller and buyer a commission.
Here is what another subscriber trying to buy Ecuador real estate shared.
I am a subscriber of your newsletter and have taken your multi currency course.
I believe you are an honorable man. I also believe that you have a genuine regard for the Ecuadorian people and without question you have been a major influence in getting people to go to Cotacachi and the surrounding area. All of these reasons compel me to write you with my concern about a real estate broker in Cotacachi.
The “trust me I am a fellow American” is with certainty giving this broker an opportunity to manipulate and take advantage of both Ecuadorians wanting to sell their property and starry eyed expatriates seeking paradise!!
This broker is a dishonest. We recently had the unfortunate experience of dealing with him.
The arrogance of the man has provided a complete papertrail via email of his dishonesty and disrespectful attitude but let me just give you a thumbnail sketch.
We saw a house and acreage, about a hectare (2.4 acres) of garden just inside the village limits. We returned to Canada and put in an offer that was counteroffered and then accepted by the Ecuadorian sellers.
A confirming email, that we have, states the terms 10% down remainder on closing, no reference to commission being paid.
Then things got interesting.
1. The first problem was we wanted our own lawyer (we have previously purchased land in Ecuador). The broker wanted to represent us. We insisted on our lawyer and he conceded.
2. The broker called and said “In Ecuador buyers pay 6% commission.” “No actually they don’t” said our lawyer. The broker conceded this on a subsequent phone call.
3. The broker emailed “we need 50% down because that’s how we do things in Ecuador” we responded that the accepted offer was only 10% down and that was not the rule in Ecuador. The broker conceded in a return email.
4: The broker emailed again “at the signing of the contract we would like another $6,000 (for closing costs that we have to pay about $1600.00) and so we get our commission up front because the Ecuadorians never want to pay at the end as they don’t understand the money we put into advertising and work we do”.
5. A request for lot size gave us a translation of a lot area of 382 thousand square meters (3.8 million square feet) with a distance on the north from another property of 39 meters ten inches. My name as purchaser was wrong. This was turning into a gong show.
My husband and I really wanted this property so I notified the broker I was coming to Ecuador. I also contacted an Ecuadorian friend in Cotacachi who went and spoke with the sellers and assured them of our interest.
My lawyer from Quito and I met in the village. Our first stop was at the sellers who confirmed that they were to pay commission, what the property size was and the agreement that they would receive 10% down and the remainder on the completion date. We then went to the broker who turned us over to the secretary. My lawyer then spent 3 hours in the office and the offices of the municipality getting the file in order. The seller was in attendance at the office and we left with the agreement that the papers would be signed at a notary office in Quito on the following Friday.
Three days later my lawyer got a very disrespectful email saying the deal was off UNLESS we paid the commission up front, 50% down instead of 10%, and $250.00 for preparation of documents.
Our lawyer promptly phoned the sellers, who was in tears. She said the broker had stormed into her house, demanded she sign another paper and told her to shut up and not to talk to us or our lawyer. She was also told that we had lots of money and could pay more because we had already come down twice.
Interestingly enough it was never mentioned that they were now demanding 50% down. Our lawyer told the sellers not to worry that we would come, sign things there and they were not to worry about repercussions in talking to us. However, they had already contacted their daughter in New York who was so alarmed she flew down to be with them.
The daughter certainly straightened out the commission issue and the papers were signed. It however, remains a very unfortunate and devastating experience for a wonderful, older couple that didn’t need this trauma along with giving up their home.
We really wonder who would have held the 50% down if we had been naive enough to pay it?
Would the broker have collected a commission from both buyers and sellers had we not understood the process?
We understand it is now this broker’s “policy” that no one is allowed their own lawyer, that you must sign a buy/sell exclusive agreement with this broker so that there are not these “complications” that come from troublesome clients, I would question the morality if not the legality of that particular “way we do things here in Ecuador”.
I would also respectfully request that you would use your considerable influence to remind those seeking paradise that just because the sign is in English it is not prudent to leave their brains at the door.
There were some insulting and imprudent comments made to our lawyer that she is following up on; in particular she is taking very seriously that the broker claims that he provides “legal representation” and can cause problems during deed transfers by using his “contacts”.
There you have it. You have to be careful in Ecuador not just of Ecuadorians, but of gringos who have arrived ahead of you. They’ll seem like such good friends… but beware. Their intentions may not be in your best interest.
This is why Merri and I recommend visit first… rent second and buy third after you have had time to make sure Ecuador is the place for you and get to know property values and the people…
In addition when you buy… ALWAYS APPOINT YOUR OWN INDEPENDENT ATTORNEY. I cannot express the importance of this action.
One benefit we have with over 22,000 subscribers and thousands of them in and out of Ecuador is a wide perspective of what’s going on. We learn quickly about unethical activities from notes such as those above.
We share with our Ecuador premium subscribers what we learn, plus have a list of attorneys across Ecuador who have served our subscrobers well. See how to subscribe to our Ecuador Living service here.