Horse trading is an unethical practice in CRE. It describes the instance of agents disclosing confidential information that provides one side with an unfair advantage.
Agents are required to act with integrity, professionalism and good faith.
Horse trading examples:
Example 1 of horse trading
Buyer A is buying a property through agent X.
Similarly, Buyer B is competing to buy the same property.
Buyer A makes an offer for the property for R500M.
Agent X discloses Buyer A’s offer price and terms to Buyer B.
Buyer B makes an offer on the same terms for R501M.
Buyer B wins the deal.
This is unethical behaviour.
Example 2 of horse trading
As above, but then Agent X discloses to Buyer A that Buyer B has offered R501M.
Buyer A raises his offer to R502M.
This is unethical behaviour.
Solution to horse trading
Both parties to attempt to buy the property at their highest numbers, on their cleanest terms.
A good agent can, upfront, together with the seller, define “clean terms”.
An ethical agent will never prejudice the earlier offeror by disclosing her deal numbers or terms to her competitors.
