A client recently complained to me about a real estate purchase he made from another developer. He made payment after payment only for construction on his promised townhouse to stall and then stop. Despite a further payment and a new assurance, work never ramped back up and now he has been forced to engage lawyers and begin unenviable legal action.

Another client embarked on building a beach house. He told me that it was the most frustrating experience he has ever gone through. It was the slow pace, the lack of attention to detail, the pilfering, and the poor quality of the final structure – which started to show worrying signs just a few months after completion – that pushed him to his limit. (see our previous article: If there is money in real estate, let’s all become developers!)

Each of these people approached buying real estate differently – one through a developer, one managing the build himself – and yet both ended up in unfortunate situations.

These stories, and many others, have led me to wonder about trust. Despite the pitfalls, Ghanaians seem remarkably willing to extend trust, which I attribute to a shared way of thinking: strong aspirations, an entrepreneurial spirit, unwavering positivity. This predisposes us toward positive expectation, which when further affirmed by a developer’s good-looking brochure or a contractor’s self-proclaimed experience, leads us into a purchase that seems destined for success.

But if we pause at the moment just before we are about to say yes, why are we choosing to extend trust? If we think about it, perhaps we can come to better understand why we trust and improve our ability at extending or withholding it.

The critical mistake that people make is they think of trust in one dimension. For example, they might see a former schoolmate building a block of flats for the first time and think this is someone I can trust. Or they get introduced to an architect and perceive him to be a good person to deal with because he understands the business. Both of these conclusions are wrong because they are arrived at in isolation of one another.

Think, rather, of trust as a three step, multi-test process. Step one is assessing personal integrity. Is this person someone who I feel I can trust? Ask for referrals. Talk to friends. Make sure that you have multiple touch points to validate the individual’s personal integrity beyond your own intuition.

The second step is assessing professional credentials. Look for tangible proof, something that certifies one’s ability in a given profession – an engineering degree, years of verifiable work experience, a solid track record. A professional, by virtue of name, must be able to “profess,” so ask questions and expect intelligent answers. Enlisting the help of a friend or family member in the same field is always a good idea. No one vets an engineer better than another engineer.

The final step is assessing capacity, either organizational or individual. If you’re looking to buy an apartment at the eighth floor, does the company have the financial strength to see this development through to completion? Is the individual you are counting on to supervise your house build so busy with other works that he might outsource it to a less qualified colleague?

We get into trouble when we don’t keep these trust tests separate. No matter how much you believe in someone’s personal integrity, that cannot influence your assessment of their professional ability. Similarly, someone who used to work for a respected developer who is now striking out on his own might have both the personal integrity and relevant experience, but not the organizational capacity to guarantee delivery.

In Europe and the US, criminal proceedings against fraudsters take months not years. Markets are well-regulated with building codes firmly enforced and laws that require developers to have professional liability insurance. Furthermore, developers will not even be issued a permit unless they demonstrate a certain level of financial capacity. To put it frankly, there is no way to eliminate risk. But realize that in Ghana and in most emerging markets, there aren’t reliable safeguards in the background to protect you the way there are in more developed nations.

That doesn’t mean you need to be deterred, but you do need to be incredibly thoughtful about how and when you trust. Don’t let a big smile and a beautiful rendered image cause you to not do proper due diligence. Make extending trust a three-step process and remember that trust must be earned, not freely given.

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