Buyer Beware

Yes - with the right guidance you can successfully purchase property in Argentina and own a wonderful asset that grows with value over time.

However, investors must be careful to avoid the cultural pitfalls that make Argentina very much a "Buyer Beware" market. The following points are based on our ten years of experience but of course do not apply to all Argentines.

1. The buyer must spend his time and money to perform due diligence on a potential investment. Neither the seller nor the realtor will feel it is their responsibility to do so and they will not point out potential problems (in many cases, they will try to hide them).

2. It is not considered unethical in Argentina to take advantage of someone else's ignorance in a business transaction. In fact, a person who does not take advantage of another person's ignorance is considered a fool for missing an opportunity.

3. The seller of a product or service often puts his interests before those of his customer. For example, supermarket cashiers are instructed to tell customers they "owe them" when they don't have correct change rather than telling the customer that he/she can keep the difference and owe the supermarket.

4. Win-lose negotiations are common. For example, Marsans (the Spanish firm being forced to sell its stake in Aerolineas Argentinas to the Argentine government) placed the value of the airline at about $500 million. The government demanded that Marsans actually pay it $600 million for taking the troubled asset "off its hands."

English & Associates exists and has been successful precisely because of these cultural factors that are pitfalls for foreign investors.

Whether you hire us or another firm, we strongly encourage you to seek independent professional advice before purchasing real estate in Argentina. Below is an all too common example of what happens when one does not do so.

September 22, 2006
http://diariosanrafael.com.ar/3769
Translated from original Spanish version 

A Foreigner in Deceived in a Property Purchase

An American that decided to live in Mendoza was deceived by commissioned real estate agents that offer local rural properties on the Internet. They sold him property at almost double the market price and promised a crop four times superior in size to the real one.

It all began when the man (who asked us to conceal his identity to avoid additional problems), decided to choose a calm area around the world to move to with his family, and selected San Rafael among options such as Uruguay, Chile, and other parts of Argentina. On a Web site he found that rural properties were being offered, and eventually invested in two properties he had seen online. 

Following purchase last year, the difficulties began.

First, the American discovered through his own investigation that he had been deceived. It turned out that one of his properties had in fact been resold to him by one of his own real estate agents, who had acquired and then quickly “flipped” it for 40% more than the owner’s original sales price. In this manner, the real estate agent was a secret middleman who cost the buyer an extra 40%. 

Months later, when harvesting his first crop, the American realized that the Plum production would hardly reach 25% of what he had been assured. Also, the neighbors told him that the property had never even reached 50% of the production that the real estate agents promised. 

In a conversation with the San Rafael Newspaper, the American commented that he knows another American who fell victim to the same unscrupulous people in San Rafael and returned to the United States after selling his property for half of what he paid for it. 

The interviewee hasn’t turned to the judicial system because he and his family are alone in San Rafael. He decided to stay on because San Rafael is the place he chose to live and loves, and because he believes that many good and honest people exist here. For these reasons, he wants something to be done so that corrupt people can’t continue deceiving foreigners – especially since con artists will drive away well intentioned people who have an interest in residing in the area.

Something should be done 

A few months ago, San Rafael Newspaper covered the booming immigration of foreigners, mainly from the United States and Europe. Around 300 families have come to live in the region, and many have settled in rural areas. Others have invested but don't reside here. 

This makes it obvious that official government agencies such as the municipality or the Chamber of Commerce should provide advice to investors. Especially in the case of small and medium investors such as the American, a lack of information on legal issues and a tendency to trust in others’ promises (because they imagine that commercial agreements here are the same as in the United States) make foreign investors vulnerable to unscrupulous people.

It is also import to regulate and implement more control over real estate sales activities, since through the Internet additional potential investors can be victims.

At the moment, the Association of Real Estate Professionals is being formed, which will bring more order to the activity. But, it is necessary to reinforce training with another type of oversight since there are various individuals involved in swindling besides the middlemen. The questions is what will the reputable agents do to help reduce this type of activity on the part of their peers.