The article last week was intended for the public and real estate agents. We hear more frequently about companies violating anti-trust or monopolistic practices. The company policies impact how the employees and management are trained to meet the goals of the company. But real estate agents themselves, sometimes not knowing, do things which put fair market competition at risk.
Let’s go back to unfair business practices and unfair competition.
- 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, misleading.
- 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.
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 and grow in business. A seller has the right to know what is included in the commission he pays.
- Brokers agree not to cooperate with another company, by not showing that company’s listings. They violate antitrust laws if they enter into that agreement because they consider the company’s aggressive “high-tech” marketing techniques to be unethical.
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 which 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?
- 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.
The Associate or broker is responsible for the actions of commission and omission of their agent. The sales person is not relieved of his responsibility, nor his broker.
- If an agent entices buyers by offering them half his commission, this is bribing and eliminating an advocate for the buyer.
An agent offering a rebate to the consumer to go with him 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 own purchase. Otherwise not disclosing this compensation is a violation of international anti-laundering money laws.
- 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. This means the buyer will only see the inventory of agent A´s company and not what is available in the market.
If agent A wants to convince or bribe a buyer to work with him by promising him 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 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.
- When an agent takes an overpriced listing as a way to get calls for buyers to sell other properties realistically priced, this is harmful and misleading to the seller who has the overpriced listing.
Using a seller´s property as the ¨bait¨ and then ¨switch ¨to more saleable properties, is harming the seller and against anti-trust law. Seller has the right to receive information from the broker of what comparable properties are selling for in his market. The agent is using the seller´s property unethically.
- 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 by being a monopoly of a specific area. Cutting out fair competition is against the law and damaging to the market.
- A broker responds to a customer inquiry about a commission saying the price is standard or it is what his real-estate association suggests to charge. Real-estate associations can collectively set commissions.
This article is based upon Flex MLS reporting, legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.Harriet Murray