The standard commission a real estate agent charges to list a seller's property for sale is 10% on the north coast of the Dominican Republic (fees in Santo Domingo and other parts of the island are closer to "normal"). This is, on average, DOUBLE what other markets charge. I am from the US, and I was a realtor in Las Vegas a while back. The full service fee in the US ranges from 5-7%. But there you get superior service, in particular because of the MLS system. With MLS, you list with one broker, and the broker lists the property for all other brokers to see, and should any broker find a buyer, the commission is split according to the agreement. Simple, efficient. Good for everyone - the buyer, the seller, the agents.
I spent the past two years in Panama. The standard fee in Panama is 5%. This is the standard fee in most countries you want to buy/sell real estate. Although there is no MLS system there, I mention Panama to compare how other "developing countries" offer their real estate agency services.
I hope I don't have to explain simple mathematics here. The difference between 5% and 10% is the difference between good deals, bad deals, and no deals. Its the difference between an efficient market and an inefficient one.
Most real estate markets in developing countries that depend on foreign investment from the US, Canada and Europe have been slow the past few years. Even Panama, with its hot economy and #1 ranking as best country to live & invest outside the US, has a slow real estate market for high end (aka "gringo" approved) properties. (The low/middle market in Panama is actually on fire right now, but that's a different story).
The north coast Dominican Republic has had a depressed economy for a long time now, and the 10% Real Estate Agency Cartel Commission Rate is killing an already dead market in the Puerto Plata, Sosua, Cabarete, Cabrera areas. Don't try to negotiate this fee with the big name brands like Century 21, ReMax or Coldwell Banker. If you even TRY to suggest 9%, they will spit in your face and blacklist you from ever doing business with them again. (That might be a lil exaggeration, but you get the point - there is NO NEGOTIATING the 10% fee. None.)
Lets say you are smart or lucky and you buy a property for $300,000 and it goes up 10% which is a great return over a few years. So now its worth $330,000, but you sell it through a DR Realtor. After they take their fee, how much profit did you make? Well, lets see... the realtor gets 10% of $330,000 which is $33,000 so you get only $297,000 so even though the price of your house went UP TEN PERCENT, you LOST MONEY - to the tune of $3,000 but your real estate agent MADE $33,000!
At 10%, the buyer loses, the seller loses, and the agent wins huge. The buyer loses because the minute he/she pays $300,000 the value of the property already dropped 10% - the realtor's fee. So now even if the buyer now wants to sell at the same price, his net return is only $270,000.
I am trying to sell my condo in Cabarete. I am using the best agents I have come to know through referrals and research. This article is in no way a shot at them personally. They are doing their jobs as real estate agents. They did not set the cartel fee at 10%. People more powerful and greedy than the agents that are listing my property for sale made that decision. In fact, some of these agents will tell you they agree with me about how this excessive fee kills the market, but they wouldn't say it in the presence of their broker. When I was a financial adviser with Morgan Stanley and Wells Fargo Private Client Services, I had to remind many of my clients why my fees are much higher than my competitors; I added value. If this were not true about lots of products and services, then we would all buy the cheapest car, bread, or beer. We pay more when something is worth it.
As good as my friends in the real estate business are here in the DR, I am having a very hard time finding the justification in the DOUBLE RATE sellers have to pay here for the SAME EXACT SERVICE. Lets face it. All a real estate agent does is posts pictures and summary of a property on their web page and hope that somebody calls to inquire about it. Just like the internet made travel agencies obsolete (now you can book your flights and hotels online instead of through a brick & mortar travel agent) so too can a really good FSBO (for sale by owner) web page make "full service realtors" obsolete.
