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December 27, 2007
Disclosure Offers Hope for a Healthier Market
Moving beyond the status quo of silence
Observers are understandably surprised at the recent drama over the topic of real estate disclosure discussed in last month’s Gringo Gazette. "How could there possibly be opposition to real estate disclosure!?" they ask incredulously. Unfortunately, there is a wide gap between buyers’ expectations, and the level of disclosure that the real estate establishment is currently providing. Real estate disclosure in Baja is here to stay, and everyone will have to embrace it sooner or later. The buyers that come here from North of the border want it now.
Disclosure and openness is not a significant burden to an individual agent who is free to select which properties to offer to a client, and which properties to avoid. If the agent offers solid properties, disclosure is a simple act of filling out a short form and getting all parties to sign it. It is also no big deal for an individual home seller in one of the existing coastal communities.
Disclosure becomes a problem, though, for local real estate franchises. These companies often sell newer and pre-construction developments, and they compete among themselves to represent the new developments. Many of the new developments are plagued by problems such as conflicts, lawsuits, property invasions, Federal Zone violations, water shortages, lack of utilities, financing problems, liens, erosion, and sewage issues. Selling these projects to Americans means that these problems get covered up. The local real estate franchises need to redefine how they do business, because transparency will inevitably affect the desirability of the projects that they want to promote to foreign buyers.
Regrettably, the real estate culture cultivated by some prominent local leaders has been that problems must be silenced and hidden, instead of addressed. I personally observed this often as an insider working for the real estate establishment. The first time that I observed a cover-up occur was within one hour of starting my new job as a real estate agent at a well known local franchise. I realized that the franchise that I had just joined was selling "lots" in the Federal Zone. The problem is that such sales were illegal because the Federal Zone is national property and cannot be sold. I immediately warned my broker of the problem in writing, escorted a colleague to a Federal office, and showed my broker certified documents proving that the lots in question were the Federal Zone. I was then stunned when my broker, sales manager, and office colleagues pressed ahead to collect client deposits and their own commissions anyway. Hundreds of thousands of dollars were ultimately "lost", and the ethics of the issue has still not been raised within the general body of the real estate association after nearly two years.
Recently, the Baja Fair Trade proposal for mandatory disclosure that was open to all agents was summarily condemned by the same group within hours of being proposed. The marked contrast between actions that go against the public interest and real estate ethics is simply irreconcilable.
The Baja real estate clubs attempt to pretend that their practices conform to an American concept of standards by arguing that Baja real estate agents possess local licenses. Really, what is "real estate licensing"? It is about what an agent knows and what that agent discloses in order to protect the public interest, not the agent’s financial interest. It has nothing to do with franchise names, association logos, special sales techniques, or popularity contests. Licensing is 100% about knowledge and mandatory disclosure, which is the true core of the real estate professional. A license that does not represent these concepts means nothing.
Since the Baja real estate establishment openly opposes disclosure, it is now the responsibility of the public, individual agents, and independent minded agencies to help advance the cause. Ethically minded individuals should not allow pressure from the real estate establishment to compromise their ethics. One tool to help the market communicate is the Baja Fair Trade Disclosure Team on Google Groups. Participation is open to both real estate professionals and the general public alike with a free registration. Credible disclosure items will be added to the growing Baja Fair Trade disclosure database on Google Earth and utilized by Baja Fair Trade agents as part of their mandatory disclosures to new buyers. Informed buyers make betters decisions and will experience fewer surprises. The end result will be a healthier Baja real estate market.
In the absence of a culture of disclosure in the Baja real estate market, seek out a highly knowledgeable and transparent representative when you buy. The rest is simply style over substance.
December 27, 2007
MEXIDATA . INFO
Raising the Bar for Mexican Real Estate Representation
When purchasing real estate in any part of Mexico, it is important for buyers to know their “Bill of Rights.” Most gringos venture into the country in search of a little piece of paradise without fully understanding the rights that they have as foreigners. They hope for processes that will give them real estate protections that they are used to at home, but they often find something quite different.
In an effort to standardize buyer representation and disclosure by real estate agents, a new registry of real estate agents has been created in Baja California, Mexico, called Baja Fair Trade (www.bajafairtrade.com). The purpose of the registry is to better serve buyers and to promote real property rights by increasing transparency through a standardized disclosure database.
Baja Fair Trade agents recognize the special concerns that buyers have once they visit Baja California, with its unique processes, laws, and culture. The Registry’s focus is to help them obtain the real property rights that the buyers came to buy in the first place. The agents commit to promote properties that allow complete funds escrow and that are contractually contingent upon a clean title. They also disclose significant, known issues that may affect property values using the first such database in Baja California. Registry participants may be members of any association and must make specific disclosures to their clients in the current absence of objective federal, state, local, or association disclosure requirements.
Notably, Baja Fair Trade is the only registry of real estate agents that opens itself to public and media scrutiny. As well, buyers who feel that one of the agents on the Registry has not met the standards of the program can notify the committee via the Praise and Complaints tab on the home page.
Registry participation is open to brokers and all of the agents underneath them, or to individual agents who do not have a broker sponsor. The Registry is independent of real estate agency or association and promotes escrow, title insurance, debts that are managed as mortgages, property inspections, and professional closing services.
Any real property shown by a Baja Fair Trade agent should meet certain standards. The Baja Fair Trade agent discloses factors that may affect a buyer’s purchase decision, such as the risks associated with skipping steps, environmental hazards, property invasions, lawsuits and disputes, and other known factors that may impact property values to the buyer.
Baja Fair Trade standards prohibit certain referrals for compensation. An agent may not receive compensation for referring customers to an escrow agent, structural pest control firm, home protection company, title insurer, escrow company, or title company. The relationship of the buyer’s agent to the seller (if any) must be disclosed along with the method and amounts of the agent’s commissions.
Several tools have been established that will allow Baja Fair Trade agents to share and exchange information. Using Google Earth and Google Groups, a downloadable disclosure form will be made available to participating agents regardless of their other affiliations and will serve as a central database. The access to this information is an invaluable tool to the performance of proper disclosures to buyers.
Working with a Baja Fair Trade agent will help protect buyers and open doors to critical information once held in private.
November 29, 2007
EDITORIAL
"Expelling the Baja Fair Trade group ... was a spectacular mistake, and it will be difficult to regain public credibility after this debacle. Buyers will be shocked when they hear that a group of honest people who proposed reasonable reforms were summarily expelled from the local real estate organization. The ... Old Guard leadership has hurt the reputations of respectable agents and developers in Baja, hurt the reputations of its own members, and made fools out of themselves."
"Make no mistake about it, Baja Fair Trade was expelled because they promoted reform, and the AMPI Old Guard will not tolerate that."
"The principles that Baja Fair Trade promoted are totally reasonable and long overdue. Full Disclosure, Title Insurance and Escrow are no-brainers, and a real estate environment that treats these ideas as heresy is in serious trouble."
Baja Fair Trade Group Expulsion
"The members of the Baja Fair Trade real estate group have been expelled from the local real estate organization in Rosarito (AMPI) for advocating Baja real estate reform. The group recently announced that they would promote the concepts of Full Disclosure, Escrow, and Title Insurance in order to protect buyers in the Baja marketplace. The announcement was severely criticized by a local group of real estate agents."
"Baja Fair Trade had presented a proposal to improve consumer protection in the Baja real estate market. Their proposal included a disclosure form that would require all members to disclose known defects in a property to potential buyers. For example, Baja Fair Trade would require members to disclose sewage issues or title litigation. Additionally, Baja Fair Trade argued that agents should advise clients to use Escrow, obtain Title Insurance, legal guidance, a home inspection, and use a professional closing method. Although these measures reflect the ordinary expectations of any buyer, the proposals were treated as heretical by some members of the Rosarito real estate groups."
"This incident is expected to seriously hurt the reputations of [the local real estate associations]."
November 1, 2007
New Real Estate Organization Raises Standards
Hope for Baja real estate reform
"Now, a new real estate group called Baja Fair Trade hopes to provide the type of leadership needed to enact reform in the local market. The group will advocate US style standards regarding disclosure, title insurance, and escrow/ funds management, issues of enormous importance in Baja. Additionally, the group hopes to inspire and encourage other like-minded local agents who in the past may have been fearful of speaking out."
"Baja Fair Trade has proposed a complete disclosure packet designed for the Baja market. The disclosure includes a registry of known problems with various properties, including title issues, litigation, sewage or environmental issues, and federal zone problems. This disclosure registry will be an important guidance tool for buyers and may even influence the marketplace."
"Baja Fair Trade argues that every transaction should have title insurance, management of all debts as mortgages (i.e. liens), contracts that are contingent upon delivery of a clean title and title insurance, and professional closing services or legal counsel, and property inspections. Skipping any of these steps usually means that the buyer's entire investment is at risk."
"Baja Fair Trade agents must disclose any family or professional relationship with any developer. Also, Baja Fair Trade standards prohibit certain referrals for compensation. An agent may not receive compensation for referring customers to any escrow agent, structural pest control firm, home protection company, title insurer, controlled escrow company, or underwritten title company." |