From The Magazine: A Dishonest Deal: Price Padding, Hidden Commissions And Dual Agency

Jul 11, 2016 - 4:07 AM

Jane* will never forget finding out what the actual price tag was on her favorite amateur horse. She’d flown to the Midwest to try a plain bay 11-year-old.

“He was an adequate mover, but he jumped just the way I rode. It was like magic, me getting on him,” Jane said. “I talked to my trainer in the aisle after I tried him and said, ‘He’s 11. He’s never shown on the East Coast. He’s not pretty. $50,000 seems like a lot,’ since that was the top end of my budget.

“He told me, ‘I’ve already tried to get the price down, and they’re firm at $50,000.’ ”

So, Jane paid to have her East Coast trainer’s veterinarian (and his assistant) flown out for a pre-purchase. When the horse passed the exam, she wired $50,000 directly to her trainer. “He then wired it to the seller’s trainer, who then paid the seller,” she recalled.

Six months later, Jane was chatting with a fellow amateur rider. “She said to me, ‘Oh, you beat me by one day. I was all set to fly out to try that horse. I got the call to not bother going because he was sold,’ ” Jane recalled. “Since I knew she had been looking for a long time, and that she had $20,000 to spend, I—in total innocence—asked her why she would be looking at a $50,000 horse when her budget was $20,000. That was when she told me that the seller’s asking price for the horse was $20,000.”

Jane realized she’d paid more than twice the asking price for the horse. She’s not sure where that money went, but she left her trainer immediately. “I certainly thought of suing, but I was a little fish, and my trainer was a big one. And these things happen,” she said. “If you come out with a story like that, you’re definitely the David to the Goliath.”

She showed that horse in the amateur-owner hunters. “I loved the horse, and he became the horse of my lifetime,” she said. And the experience was a big part of her decision to become a lawyer.

That deal happened in 1980, but, “I don’t think anything has changed one bit,” said Jane, who continued to show as an amateur.

“I was watching at a show one day recently with two trainers near me talking. One trainer asked the other, ‘I’ve got a customer looking for a horse with XX and YY traits; do you have anything that would suit?’ The other trainer said, ‘Well, I might. What’s your budget?’

“That’s how it starts,” Jane said. “It’s not about what value the horse might be; it’s about the budget of the buyer. When a horse is for sale, prices aren’t mentioned because if a price is mentioned, it’s locked in, and there’s no room for padding commissions or the price. It’s pervasive. It’s a huge problem.”

The Wild West Of Financial Transactions

Lack of transparency in horse sales—whether it be price padding, hidden commissions, dual agency, undisclosed ownership or some other deception—is a problem in the horse world.

“It’s not with everyone, and not all the time, but I have first-hand knowledge that this is going on,” said Debbie Bass, chair of the U.S. Hunter Jumper Association’s Joint Owners Task Force. “I also have first-hand knowledge of times clients have come to our barn, and for example they’ve purchased a $100,000 horse that we full well knew was a horse priced at $40,000.”

Horse prices in the six figures have become routine at the top end of the sport, yet there is no standard operating practice for paperwork surrounding those purchases. Some horses cost as much as a typical house. In every state, there are real estate laws and commission oversight regulating purchases of homes for similar price tags. You have to fill out reams of paperwork to buy a house, and all the financial details—including an agent’s commission—are in writing.

But in the horse world, you can just write a check or wire the money, and the horse is “yours,” even if you don’t demand a simple bill of sale. “There’s no regulation in the horse industry,” said Bass.

* Names and identifying details have been changed to protect individuals.

This is an excerpt from the article “A Dishonest Deal: Price Padding, Hidden Commissions And Dual Agency,” which appears in the July 11 & 18 issue of The Chronicle of the Horse, which is our annual Amateur Issue. If you’d like to read the article in its entirety, you can subscribe and get online access to a digital version and then enjoy a year of The Chronicle of the Horse and our lifestyle publication Untacked. Or you can purchase a single issue or subscribe on a mobile device through our app The Chronicle of the Horse, LLC.

If you’re just following COTH online, you’re missing so much great unique content. Each print issue of the Chronicle is full of in-depth competition news, fascinating features, probing looks at issues within the sports of hunter/jumper, eventing and dressage, and stunning photography.

Also in the July 11 & 18 Amateur Issue: an informative look at what’s allowed and what’s not in terms of logos on saddle pads as an adult amateur competing in dressage; a profile of the foxhunting amateur rider who has built a model cat rescue organization in Washington State; a tongue-in-cheek look at how to break up with your farrier; and the tale of Able Sportsfield, one amateur eventer’s unlikely horse of a lifetime who saw her through some of the toughest times of her life.

CLICK to see the entire Table of Contents of the July 11 & 18 issue.

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