A growing number of real estate agents in hot markets like Barcelona are fighting dirty over a shrinking supply of homes for sale, with harmful consequences for the market.
I read about this problem in a recent article in Catalonia’s leading daily La Vanguardia, though it’s not the first time I’ve heard agents grumbling about it.
“We’re back to a free for all,” says Inma Amat, head of Amat Immobiliaris, one of the longest-established real estate companies in Barcelona, in comments to La Vanguardia describing the current state of the property market in Barcelona. She used the Catalan frase ‘campi qui pugui’, which you could also translate as ‘every man for himself.’
Rising demand, new entrants into the business, and a shortage of property for sale in Barcelona and other cities is causing a growing number of agents to fight over a shrinking number of marketable properties.
The real estate agency business in Spain is notorious for its low barriers to entry. Anyone can setup as an agent, and in the last three years the number of agents in Barcelona has exploded on the back of rising demand. “We have returned to almost as many real estate agents as there were before the crisis,” explains Joan Ollé, President of the Catalan Association of Real Estate Agents, and head of the real estate company Ollé Bertran. The association estimates that the number of brokers selling property in the region has risen by more than 45% since the recovery started three or four years ago. “But there’s no room for everyone, and as there have been so many new entrants, others have been forced out of business,” says Ollé. “There isn’t enough product to go round.”
Desperate estate agents are resorting to dirty tricks to get listings, such as misleading vendors on price expectations, and offering bungs to introducers.
The most common practise is promising vendors a high sales price in order to get an exclusive contract with a fixed commission. “Vendors are dazzled with a high figure that prices them out the market but encourages them into signing a contract with a fixed commission,” explains Inma Amat. “Then, of course, the property doesn’t sell so they are convinced to drop their price…yet the commission is fixed, and now at a percentage much higher than average for the sector.” So vendors have to be wary of agents promising high sales prices and asking for fixed commissions.
Part of the problem is the mismatch between supply and demand. In Spanish regional capitals, and especially in Barcelona, “we now have a market with buyers but no product,” explains Javier Llanas, head of the Spanish property portal Habitaclia. Pent-up demand from the crisis years has been released, along with demand from foreign buyers. Well established agents have their contact networks and brand for attracting vendors, but new agents don’t, and are resorting to tricks like paying bungs to neighbours and doormen to bring them vendors, says Joan Ollé.
With the number of agents at record highs, the average portfolio of properties agencies have for sale has dropped from 70 to 25 or 30, yet below 30 listings most agents struggle to survive. Attractive properties that are priced to sell go in a couple of months, and there are not enough of them to go round. Many new entrants close within a year due to lack of product to sell, but not before they’ve done their bit to damage the market with their unprofessionalism and ignorance.
The lack of professionalism is a big problem in the sector, an obligatory registry of estate agents in Catalonia notwithstanding. Inma Amat points out that many agents work for companies, but in theory are self employed and working on commission alone. “For those agents, without a fixed salary or product to sell, anything goes,” says Inma Amat, whose company has been going since 1946.
Though the article in La Vanguardia doesn’t go into it, this situation is bad for the housing market, including buyers and vendors, some of whom fall into the hands of agents who don’t deserve their business. Even good agents are forced to overprice properties to get listings, creating inflation of vendor expectations that discourages buyers and reduces the velocity of sales, which is the most important factor in the market. In a market with so little transparency, I suspect that many potential buyers just walk away because they don’t understand values in the Spanish property market.
For what it’s worth, my advice when buying or selling property in Spain is pick one good agent as your lead agent, and work with them alone. Most good agents collaborate, so you don’t limit your choice by working with just one agent, but you do save yourself a lot of time and effort, and help motivate your chosen agent to give you the best possible service.