Real estate agents
My wife and I arrived in Cayman in 2005. We found that finding somewhere to rent was difficult and everything suitable was very expensive. Within a week, however, we found a two-bed condo in Prospect at a monthly rent of $2,400. After three months the owner told us that she was selling and offered us first refusal. We agreed to pay the assessed value of $259,000.
Our monthly repayments amounted to about the same as our rent had been and we hoped that with rising prices we would certainly not lose money and might even make some when we eventually sold.
In February last year we decided to leave the island permanently. I approached several real estate brokers. They were all very keen to act for us but every one of them quoted 7% as their commission. Not one of them would negotiate on this rate.
This is price fixing at its most blatant.
In 2003 we had moved house within London. The average rate charged by estate agents at that time was 2.5% but after shopping around, we found a reputable company who charged us 1.5% for selling our house, the only proviso being that they were the sole agents.
Cayman has a population of around 55,000. Lowestoft, the town that I grew up in, has a population of 73,000. It is a town on the east coast of England and in some ways it is rather like an island. The nearest towns to it are 10 miles north, 8 miles west and 25 miles south. It is surrounded by sparsely populated farmland.
Lowestoft has 8 estate agents with just one office each. Cayman appears to have more than 40 realtors and around 90 offices.
In April last year our condo was assessed independently at $304,000. We were worried that the market seemed to be sinking and as wanted to leave by July, we decided to ask for $296,000. I put up a sign on the main road advertising that a condo was for sale and giving my cell phone number. I advertised on CNS. I can’t remember the rate now but I didn’t pay more than $200 in total. We also took out one ad with a photo in the Compass at a cost of $380.
If we sold for $296,000 through a realtor, that realtor would have got nearly $21,000 in commission and for doing what? Putting a couple of ads in the paper and making a few phone calls, that’s all. They’ll say that they do a lot more than that but none of them could ever tell me what, exactly. “It will go on our web site,” was the best they could come up with.
I started getting phone calls but they were nearly all from real estate brokers. “Will you sell it for 4%?” I asked them. “No.” “6%?” “No.”
Two of them were rude and they all told me that we wouldn’t manage it on our own. One of them turned up one day, unannounced, with a couple whom they showed around the grounds and then asked me if they could see inside. I explained to the couple that I would sell to them but only if they paid the realtor’s commission. They weren’t keen.
After two months, as a result of the ad in CNS, we accepted an offer of $275,000. Ironically, the purchaser is the senior partner in one of the largest realtors on island. I think we sold just in time. Why anyone would sell through a broker is beyond me. In the UK such a ‘ring’ would be illegal.
Cayman is a very small place. Anyone wanting to move house will be looking at the private advertisements in the papers as a matter of course and an ad with CNS, accompanied by photographs, will gain the attention of many people who may not even have been thinking about moving until that time. We got calls and visits from people who had seen the six photographs online, thought that it looked nice and then, for the first time, thought about moving.
An island the size of Cayman can’t support so many realtors. If there were fair competition, the only businesses to suffer would be the incompetent and the inefficient. The customer would always benefit.
These restrictive practices are rife. We bought most of the goods for our refurbished kitchen at a large store but they didn’t sell wall tiles. We were told that if they did they would undercut a nearby business and so put them out of business.
In how many other places are prices kept artificially high? I think you could be looking at Cable TV, car hire, electrical goods, bars and restaurants for a start.
Category: Viewpoint
Some real estate agents realize they are over paid and if you shop around then you can find even CIREBA agents that will go against the cartel and give you a kick back. When we sold our property the real estate agent gave us 1% back in cash the commission we paid him. 1% isn’t great but on 500,000 it was better than a kick in the nuts. I just didn’t have the time to try and sell it myself so it was the best I could do. Our place also sold for a bit more then I thought it might so it was a win win.
Overall though I agree that real estate agents in Cayman take way more of our (sellers) precious capital than they deserve. In Canada (and US UK I might suppose) the comission is lower but we have capital gains tax etc, so I guess you get screwed either way if your property hasn’t appreciated nicely. Given the lousy state of the economy I forsee a lot of people getting screwed.
Mr Wilton, perhaps you are not aware that most estate agents in the UK get a basic wage and commission on top, most realtors in Cayman are on commission only. Plus there is a much higher turnover of sales in the UK than Cayman. Realtors here also work with other agents in co-brokes at no extra cost to the buyer or seller, where as in the UK you would probably have to retain an agent to see every property for sale, with the seller still paying the full commission. And please dont forget that in both countries it NO SALE NO FEE so if the sale falls through they dont get paid, even though the lawyer, banks and surveyors do. XXX
There are no laws requiring any realtor/broker to be a member of CIREBA. There are no laws setting commisions for realtors. There are no laws requiring buyers or sellers to use CIREBA realtors or any realtor at all. So if you don’t think it is fair or right or ethical then simply don’t use them as several posters have stated they have done so succesfully. Ifenough of the market moves that way then CIREBA will most likley revise their commision structure. Whining about the need for Government to “fix” this horrible injustice is laughable. Last time I looked they ain’t exactly doing too many things all that well. Do you really want the Government to start telling people in the private sector how much they can earn or charge. Careful, you might be the next person/business they fix.
What about ETHICS?
I don’t about others, but I’ve found a certain realtor on island to be overpriced AND unethical. Two months after purchasing our home, I found out that the realtor was in a relationship with the seller and actually used to live in the home with her…after our purchase they moved into a new home together. Not married, but close enough! Never once was this disclosed to us, despite our questions…he was unethical in his negotiations and clearly had other motives. We love our home, but feel cheated none the less. We will surely be going at it alone next time around!!!!
There needs to be a restriction on the category of work-permits for real estate agents.
This category of work needs to be reserved for Caymanians only.
that would only make a bad situation worse….
I say that the seller was just plain lazy. I sold my home 8 years ago to move. I wanted everything I could have given to a real estate agent.So, I put signs all around my home for 2 months. I refused to give a % to any body for doing what I could do. And yes, I did it. I had a total of 4 couples to come and look at my home and the 4th one bought it. I was happy, I paid off the bank and still came out great. And I was able to smile and say gee, I can sell a house! And I would do it again. It is a lot better than what you did, and it was not frustrating at all.
Mr. Wilton, thank you for sharing your experience. For years I have argued this very real fact – real estate agents are the primary reason that real estate prices in the Cayman Islands are so high. In the interest of maximizing their own exhorbitant commissions, they simply advise a seller to set a speculative price and if the property sells anywhere near that price, it sets the tone for all surrounding property prices and so on and so on. Thus the market is artificially inflated but has a direct impact property evaluation and, by extension, the general cost of living. I would venture to bet that many property owners will now find the market values of their properties less than the mortgaged value – exactly as has occured in the US.
Because of the greed of a few, the many must suffer.
I wasn’t a Realtor, until today. I’ll take all your listings for 5% commission.
Send them on over and lets get selling!
"There has never been a better time to buy!"
Ready to send my portfolio over..first a few questions. Where are you going to advertise? is it in colour? on TV? radio? overseas? What magazines? How long will it take to sell my house? can you guarantee that? Are you going to help me qualify who shows up to see it? can they afford it? will you ensure everyone on the island knows about it? Can you print extra brochures so I can have some for my friends? do you have copies of the contract that I can use? how many open houses are you going to do? will you bring the drinks and food to all of them? balloons on the roadside? fresh flowers? can you do the inventory for me? can you value it? by the way, I am off island this weekend, can you check the house for me? respond to the alarm company of needed? can you make sure my electricity and telephone accounts are crossed over to the new purchaser? I expect you are going to share you commission with Realtor B? Will you give our mutual friend a referral fee? after all they knew me first. Will you be complying with “Know Your Customer” legislation? Will you keep the files for 7 years as required? Will you go to jail if need be?
oh by the way, if you do not sell it I am not giving you anything. In fact I am going to list it with your friend “Unemployed, As of tomorrow”–he probably can do it for 4%! Sorry you got nothing out of all that BullS**tI just put you through. Maybe the next property, or four or five downline, you might be lucky.
The grass is always greener on the other side. Careful what you wish for.
Cry me a freaking river. If you couldn’t afford to put food on the table I bet my ass you would lower your commission. Until I see that happen I will continue to believe that you are doing just fine.
Generalizing any profession is not objective or fair. There are good and bad individuals in every business. There are many dedicated, excellent and knowledgeable realtors in The Cayman Islands. Most sellers and buyers do not understand the complexity of the commission system. Commissions are split between two brokers or agents and sometimes there are referrals as well. agents are independents so they pay the brokerage a fee and advertising and marketing is very expensive. Good agents will qualify sellers and purchasers to ensure that a smooth transaction occurs. in Cayman I know of many realtors who have adjusted there commission down in order to make a transaction work for both parties. In California most gross raw land commissions are 8% and residential 5% these days. The average commission netted by a CA agent is 2.1%. Mr. Wilton, I believe "some" of your comments do not have merit.
Rather predictably, some real estate agents are coming out with “you don’t have to use a realtor, you can do it on your own”. This really is a vapid argument. If I go to a local restaurant and get food poisoning I wouldn’t expect the proprietor to say “you don’t need us, you can cook your own fish”. If I hire an attorney to represent me and he messes up I would expect a bit more than “well you don’t HAVE to have an attorney, you could have represented yourself. Think about it for a second; If the only argument that these posters can come up with in response to poor, over-priced service is “you shouldn’t have hired us in the first pace” then haven’t they shown that they have lost the argument from the start?
I would encourage evrybody selling a house though an agent to go with a non-CIREBA agent who will charge a more reasonable rate. 7%is extortionate and inexcusable. Or how about a set fee? if an agent sells a house for $200,000 has he really done DOUBLE the work than if he had sold a house for $400,000. Of course not. So why does he expect double the pay?
yet they are continually lobbying Government to reduce the transfer duty and are flat against a community services fee – whereas they have it in their own power to provide any stimulus that a reduction in the costs of property sales might produce.
I’m not a Realtor, but I understand simple arithmetic: you are complaining about $21k in sales commission (your figures) after eventually accepting an offer $30k below your property assessment value plus your costs and time. Congrats on the sale, but this doesn’t sound like a great lifelesson for everybody.
you fail to understand that they would have lost 7% on the sale if it had had of been sold through the realtor…..unless you believe in the realtor would have ‘magically’ achieved a higher sales figure…..
Sellers have a choice. Either list and sell with a broker of your choice or advertise, retain a lawyer for a proper contract and sell yourself. Its an easy choice.
I think you’ll find that the $21k sales comission is not only my figure but other people’s too (7% of 296000 = 20720). There is no way that last April we would have got the asking price.
We would have agreed to $250000 while hoping for $260000, we were so worried about the declining market and we were desperate to leave. 7% of $260000 is $18200. That means that we would, in effect, have sold for $241800 through an agent which is $33200 less than we actually received. Luckily we had two interested parties.
I am not trying to teach a "life lesson". I am probably just asking what exactly agents do for their hefty commission and how they are allowed to operate in the way that they do.
I am not a realtor, but I play one on television.
The companies doing valuations on Cayman are providing poor assessments. I’ve has a few done in the last few years and there are notoriously unreliable (other than as a selling tool aimed at unsophisticated purchasers who are unfamiliar with how Cayman real estate “works”).
This property was going to sell at $30,000 under the asking price ANYWAY, and a realtor could do nothing to change that (though they will swear otherwise), so this seller has sold at market and avoided the $21,000 screwing they would have gotten from the realtor on top.
CIREBA days are numbered, they have this very high commission rate and dont want to negotiate because of greed. There are a few independant Real estate companies others owne by true Caymanians that are not part of CIREBA who treat clients fair. CIREBA is a cattel and must go, Government must do something about this and soon
Ever noticed that 99% of agents are non Caymanians. They dont want Caymanians to work in the business. They will bring in people who are retired people from Canada and over look the the locals. Now here is where Mr. Premeire can make a difference with the economy, hire Caymanians and keep the profits right here.
Hmm? No one can stop Caymanians from hanging out their own shingle.
Don’t worry, it is starting to catch up with a few of those real estate agents as they can not control supply and demand and they all will have to start putting in a good days work to earn their living just like everyone else.
I agree that some realtors are over zealous and they along with some valuators drove the prices of real estate in Cayman over and above what they were worth. I also agree that they are quite rude many of them in the CIREBA association, and unfortunately this association is what makes the rules and policies they must follow. Although, as an independant realtor myself I must say that the only rules and policies that they follow are those of the rate of commission, and never their own ethics policies.
I would suggest that you can look outside of a CIREBA agent to indepedant realtors they will negotiate a lower percentage or a flat rate, there is no rule that states you have to use an Agent, but it helps to get your property out there and it definately gets noticed.
Alternatively, there should be some percentage or fee that an individual sellor should pay to the Govt. as a form of tax for eg a flat fee of say $100 or so when they sell their property. In saying that I feel that every realtor should also pay this same tax to the Govt. because CIREBA Agents must pay a small percerntage of i believe 1% of the gross sale to the association as a fee so why shouldn’t the Govt. also earn something from all these sales.
I hope the Govt. considers this and although they are getting a stamp duty from the sale, and a $100 transfer fee, they should get another little bit as well as a commission tax and it should be paid by the sellor.
I must add a few comments here even though I am not a realtor but I have sold property in the UK as well as here.
1. First off there is no requirement to use a realtor in the Cayman Islands. The monopoly argument therefore is not even on the table. Use one if you want. Do a sale on your own if you want.
2. The UK realtors that one can negotiate with do not provide the services that the Cayman realtors do. Typically there is no MLS. So sellers must walk by high street to hopefully see your property in the window. Most real estate is sold to those in the neighbourhoods or to those coming into the neighbourhoods. The realtor next door does not promote nor even know about your property. In Cayman, once your property gets listed in MLS all realtors know immediately, and thus your chance of sale increases exponentially. The higher commissions pay for that MLS service.
3. In the UK, I found that the realtors in fact charge much less but they also offer less. A more or less “ala carte” system. If you want photos, that is extra. If you want adverts in the paper, that is extra. If you want brouchures, that is extra, want market research, that is extra and so forth. In Cayman the marketing costs are carried by the realtors. Another reason why this comparison could have done with some research by the writer.
The UK realtors also use a system to ensure bidding occurs. They actually price way below market rate and then get several persons to get into a bidding war. The result is the final price is usually a new ‘market value”. The purchasers do not know what the final price is nor have any idea if they will even get to purchase the property. In the UK it was in the realtors interest to maximize the bidding war to get their highest fee. This is great if you are selling but a huge disadvantage if you are purchasing. See Gazumping in Wikipedia–the writer surely was disadvantaged when he returned home. In Cayman, the list price is the maximum you will pay. You work down from that point. Seller advantage. So in the UK there are more real estate issues than simply the level of commission. Many in the UK have called for the system to change to something akin to the Cayman/US/Australian model.
4. Now one of the biggest differences. It has been proven that owners tend to “underprice or overprice” their properties because they are not fully aware of the market. Underpricing and it is sold very quickly with little marketing- this is actually the most common mistake. Overpricing it stays on market for a long time. First off the local realtors are not going to overprice the properties because they have to pay for all that marketing while it sits on the market for years. This is a persistent myth locally that realtors want to list at a high price to increase their commissions. My local realtor actually asked me to price our property lower than we originally thought to ensure it would sell – we wanted a price far above the market we found out. It has also been shown that by pricing a property correctly, the owners do not actually get less because of the commission is usually on a higher amount and it it sells quicker.
It does seem ironic that the writer actually accepted a price that would have covered the local realtor commission on the original price.
5. Not all realtors are they same. We interviewed several locally and in the UK before selecting them. Some did not impress us. I am sure there are many bad stories about realtors here and there. There are also many good ones. Select carefully. Obviously the writer had a bad local experience.
6. Regarding the fees, yes I wish that they were less here however having sold properties in both countries, I do realize that the comparison made by the writer is not a fair nor informed one.
I agree. Technically CIREBA is not really a cartel because Realtors don’t need to subscribe to the MLS and there are non-MLS realtors.
However, having bought numerous properties in the UK, it’s not that much hassle to go to multiple real estate offices and it’s easily worth the cost saving to vendor and buyer. This is a better model.
Hopefully the MLS is in a downward spiral as more people use independent realtors and buyers realise it is no longer the only game in town. The benefit of the MLS is not worth the dramatic increase in cost.
There is however rightmove.com and many apps’ for your phone which effectively opperate as the MLS system.
Having sold homes in the UK, US and Cayman the UK system is far cheaper and far more fair. I would however sell my own home and have done!
"…. I am not a realtor …."
Oh yes you are, Jimmy (as we say in Glasgow).
I think there are a lot of people who will agree with what you’ve said. The fact is that there is no need for estate agents in the internet age and they are using agressive tactics to cling to an out of date business model because it is so lucrative. The only difference between them and used car salesmen is that at least you get a warranty on a used car.
In my experience Cayman estate agents are slow to post things on their web sites, upload few if any photos, are difficult to deal with, late for appointments and unrealistic about the market.
It is actually easier to sell the way the author of this article did. Put an ad in the paper, put an ad on ecay, take lots of photos and prepare an e-brochure to email around your friends and colleagues. You will find the process to be much easier without the agent and of course save tens of thousands of dollars.
One thing to note: if you advertise privately and an agent turns up with a potential purchaser you are under no obligation to sign any contract with the agent or pay them a commission if their client purchases the property, although they will try to intimidate you into doing so. To avoid conflict it is best to tell them (and their client) that you won’t be paying the agent’s commission as soon as you open the door. The client is free to come back on their own. If the agent is pressuring you to pay commission mention it to the lawyer doing the conveyancing for you.
On top of the price fixing, the knowledge andinterest of the cireba brokers is limited to waterfront.
One of them told me i could sell my apartment for 179k, but in the end it was only valued at 145k. A complete lack of knowledge of the inland market.
The same experience I had with land.
Most brokers aren’t even interested if the property is below 500k.
I love reading comments which are flagrant opinions filled with lots of assumptions.
A few misconceptions:
Not all realtors are rich – just ask someof the ones in CIREBA about that. The ones that are ‘rich’ have been working hard for years and it’s finally paying off for them. Isn’t that what everyone wants after years of dedicating themselves to a job – good rewards?
Not everyone "makes a killing" in real estate and many have other jobs to have a steady income. There are a huge amount of bars and restaurants too, all competing for your business, none of which negotiate the prices of their entrees or alcohol.
Some people sell real estate because it’s a way of promoting their country and helping people who live in or visit it. They are people-persons that enjoy working with others.
A good realtor, a genuine one, wants what’s best for the buyer AND seller. If you are making comments such as these about how realtors don’t care about anything but the sale, you haven’t met or used the right agent.
I know several realtors that walked away from a deal because the offer was TOO HIGH and the transaction didn’t feel right – it might be disappointing that it didn’t work out but all the time and effort they’ve put into it netted them ZERO pay.
How many of you work for nothing, or sometimes lose money by going to work? Realtors can go months without a sale while still paying expenses because they are technically all self-employed.
It’s a fact that when a realtor is involved, 9 times out of 10, the property sells for more than what the seller wanted because emotions are taken out of it, facts and figures are used in negotiations and the ‘middle man’ supports and helps both parties tremendously during every step of the sales process.
‘Price-fixing’ as you call it levels the playing field to allow for fair competition in a large industry. How variable are interest rates at our retail banks? Yes, they too are pretty much all the same, price-fixed at 18% pa for credit cards, usually 3% over prime for mortgages. It comes down to the service/value for money. Grocery stores, banks, hardware stores and furniture stores are fairly competitive across the board. It comes down to what you want to get for the money you spend: some places offer a better shopping experience so it’s worth the extra money to shop there. Some realtors offer full-service sales advice and paying their commission gets you peace of mind that all the details of a transaction are covered, the legalities, correct documentation and more. Shop around for a realtor offering full service and sound advice and you’ll see a difference, just like you would at any retail store.
Real estate is a huge economic factor for our island. The global marketing that is done to showcase what Cayman has for sale brings tourists here. Real estate advertising is probably doing a better job of promoting this country to the world than anything the Tourism Department is putting out. When people buy property, they come here, visit, spend money on improving their property and contribute to the local economy – what do you think ‘stay over’ tourism is: mostly condo/home owners. Trust me, they didn’t get here by looking on ECAY!
Locally, real estate agents help to grow the economy by spending more than you can imagine to make sales – marketing eats up a massive portion of the commissions.
Funny, I don’t hear anyone complaining when big store owners build huge houses and stop giving discounts to their customers; I don’t hear people commenting on who exactly is driving these fancy cars and the places they work. Try using an attorney, accountant or banker – have you noticed THEIR fees?
Try walking a mile in some else’s shoes before you judge and insult people who work hard for their money.
If you haven’t guessed it, I do speak from experience, both having used a realtor several times with fabulous results and having worked in the real estate industry in the past. I’m not biased, just honest.
I agree with your distaste for merchants that build wacko big houses and stop giving discounts to their customers… but I think a lot of people complain did about it and I and at least a few other people just source materials from the US as a way of not helping such merchants pay their electric bill on their wacko house, or buy a 3rd or 4th (or 5th?) refrigerator for it.
But you have failed to address the price fixing in your own industry. You have only pointed out the other criminals in the prison.
I don’t disagree with article or the replies but what is the difference between what realtors are doing here and what unions do in the UK and the US. The answer is absolutley nothing. In places in both countries if you want to work in a certain trade or for a certtain company you have to be a member of the local union, which means the employer has to pay a fixed minimum. The union member pays dues to the union, meet certain requirements just like CIREBA members here. So please don’t rant about how this does not go on in the UK or US because it absolutley does.
I could not agree more. The high cost of realtor fees is causing some of the economic problems in the country as it is a barrier to both buying and selling.
Combine the 7% realtor fee with the 7.5% stamp duty, a buyer would need to expect capital appreciation of 15.6% just to cover these costs (if the math looks wrong, imagine you bought for 100,000; you would need to sell for 115,600 to cover the 7,500 stamp duty and 8,100 realtor fee at 7%).
Because building your own home avoids both of these costs (bar stamp duty on the land) building (or buying pre-contruction) offers significantly better value. Therefore, supply continues to increase while demand continues to fall in line with the population. The economics could not be more straightforward: prices will continue to fall till the population begins to increase faster than residential inventory.
Last time I sold a property in the UK I paid the realtor (aka "estate agent") 0.75% (plus the cost of newspaper ads). And for that they produced a professional colour brochure for the property showing internal and external pictures and a plan of the layout with room dimensions and descriptions. All you get in Cayman is a laughable one page summary and a picture on the net if you are very lucky. Most of the time the information is incomplete and/or incorrect.
UK estate agents can make a profit on 0.75-2% when Cayman agents charge between 3 and 8 times as much.
I agree that the commission rates are over the top. That is the real reason that there are so many agents. CIREBA is a cartel and they encourage sellers to go for high prices. I am amazed that some of the Real Estate companies do not break away and really compete. Lower commissions would lead to a boat load of listings.
There are several professional real estate companies in Cayman that are not part of CIREBA that charge lower commission rates. The problem is CIREBA has a campaign against them. CIREBA will not co-broke with these companies and tries to make buyers and sellers think there is something illegal or wrong with companies that do not participate in the cartel.
I fully agree with this statement, as i have in the past sold real estate in cayman, as an independent,and there was no way that a Cireba Listed company would cooperate with you,if they did they wanted to hold he deposit funds even when it was not their listing.It seemed as if they thought if one was not a Ceriba Agent you was not trust worthy.I have always had the belief that this organization an oppressive one particularly if you are not one of the big name company,s . And more so if one is a local person. the management just does not local ,s in the organization. I do fully agree this organization needs to be put out of buisness and all the companies operate as indivuals.
realtors are the equivalent of used car salesmen…they are only care about the sale going through and getting their commision…….
however no one is forced to use them…….
ever wonder how they can survive in such a bad market?…it’s because they made such a killing during the good times and they are hoping the market will pick up again……
You are correct that the fixing of commissions like this would be illegal in other countries. I don’t know about the UK but certainly in the U.S. there are antitrust laws that stop groups of real estate agents doing this – it is most common in small towns, which, as you say, are somewhat like islands. Check here for some examples
http://www.justice.gov/atr/public/real_estate/enforce.htm
Agents who sell boats are even worse.When I sold my boat on island the broker wanted 10%, they all charge the same, it is an arrangement between themselves.