In my blog last week, I asked the question: “Do some real estate agents violate anti-trust or anti-monopoly laws in Mexico?” The answer is yes, some real estate agents in Mexico do violate anti-trust or anti-monopoly laws.
We hear more frequently about companies violating anti-trust or monopolistic practices here in Puerto Vallarta and other places in Mexico. Real estate company policies impact how their employees and management are trained to meet the goals of the company. But real estate agents themselves, sometimes unknowingly, do things that put fair market competition at risk.
First, let’s revisit what unfair business practices and unfair competition are.
Unfair business practices encompass fraud, misrepresentation and oppressive or unconscionable acts or practices by business, often against consumers and are prohibited by law in many countries.
Unfair competition is an unjust and often illegal attempt to gain unfair competitive advantage through false, fraudulent or unethical commercial conduct. Examples include below-cost selling, counterfeiting or imitation, dumping or misleading.
Here are the questions I posed last week and the answers. They should help you understand the choices your broker or agent must make to ensure fairness in your real estate transaction.
1. Two competitors in my market ask you to cooperate with them in setting a “standard” commission for the area. You refuse, but subsequently start charging the same rate that your competitors suggested. True or false?
Answer: The sales commission is decided between the seller and the listing agent. No other competitor or group can pressure agents to all use the same rates with no variance. An agency determines its costs and how it should price its service based on these costs and what profit is needed to stay in business and grow. A seller has the right to know what is included in the commission he/she pays.
2. Brokers agree not to cooperate with another company by not showing that company’s listings. They do not violate antitrust laws if they enter into that agreement because they consider the company’s aggressive “high-tech” marketing techniques to be unethical. True or false?
Answer: Brokers agree in their exclusive listing contract to offer the property to member agents of their association. This means the listing agent is telling the other agencies to bring their buyers to the property and they can expect to be paid a commission if a sale is consummated. If an agency is engaging in unethical conduct (as established by the code of ethics agreed upon by all members), the issue needs to be sent to the Honor and Justice Committee for resolution.
Brokers cutting out showing properties that are vetted for their clients to see, are steering or withholding information from their client. Is there anyone that doesn’t understand this is wrong?
3. If one of the salespeople participates in a price-fixing discussion, the associate and company can be held liable — even if the broker has no personal knowledge of the salesperson’s conduct. True or false?
Answer: The associate or broker is responsible for the actions of commission and omission of their agent. Neither the sales person nor broker is relieved of his/her responsibility.
4. If an agent entices buyers by offering them half his commission, is this bribing and preventing the use of a buy agent advocating for the buyer? True or false?
Answer: An agent offering a rebate to the consumer to go with him/her as his agent is unethical and this is a form of stealing buyers. The law would require that the buyer be disclosed as earning a commission on his/her own purchase. Otherwise not disclosing this compensation is a violation of international anti-laundering money laws.
5. Agent A tries to convince buyers already working with another agent to drop agent B and get a better deal with a discount off the price of the property. Does this mean the buyer will only see the inventory of agent A´s company and not what is available in the market? True or false?
Answer: If agent A wants to convince or bribe a buyer to work with him/her by promising him/her that he will get an offer accepted at a discounted price (by eliminating the buyer agent´s commission) the only properties Agent B can show are his/her company listings. This is unethical and warrants filing a complaint to the Honor and Justice Committee. The buyer is harmed, and this involves anti- trust laws, because the buyer is not able to see or have access to all properties on the market for sale.
6. When an agent takes an overpriced listing, as a way to get calls from buyers to sell other properties that are realistically priced, is this harmful and misleading to the seller who has the overpriced listing? True or false?
Answer: Using a seller´s property as the ¨bait¨ and then ¨switch ¨to more saleable properties is harming the seller and against anti-trust law. The seller has the right to receive information from the broker of what comparable properties are selling for in his/her market. The agent is using the seller´s property unethically.
7. There are two major brokerage firms in a small town divided by a river who decide that one will take properties north of the river, while the other stays to the south. Any such agreement violates the antitrust laws. True or false?
Answer: Any such agreement violates the antitrust laws by being a monopoly of a specific area. Cutting out fair competition is against the law and damaging to the market.
8. A broker responds to a customer inquiry about a commission, saying the price is standard or is what his real estate association suggests should be charged. True or false?
Answer: Real-estate associations can collectively set commissions.
This article is based upon legal opinions, current practices and my personal experiences. I recommend that each potential buyer or seller conduct his/her own due diligence and review.