|Things you should know about buying property!|
Understanding foreign real estate transactions.
It is important that the foreign real estate buyer have a working understanding of the process of buying real estate in Ecuador. We recommend that potential buyers purchase a copy of the Ecuador Owner's Manual, published by International Living (Go to http://www.internationalliving.com/ to order). The book provides an excellent overview of buying property in Ecuador as well as overviews of the visa process and relocating from another country to Ecuador. The Manual was written by U.S. citizen and Cuenca resident Lee Harrison.
Unlike the U.S., Canada and most Western European countries, there is no multiple listing service (MLS) of properties for sale in Ecuador. It is not uncommon for a real estate agent in one part of the country to have no information on properties for sale in another part. Since many properties are offered directly by the seller, it is not even uncommon for agents in one part of a city to have no knowledge of properties for sale across town. Like many real estate agents in Ecuador, Ecuador Properties operates as a "buyer's agent." As a buyer's agent, we are able to assemble a larger offering of properties for the prospective buyer.
Most buyers will find that buying property in Ecuador is simpler than in their home country. This simplicity, however, comes with the burden of due diligence to assure clear title and properly executed documents. We will make certain proper procedures are followed and that the attorney and notary we work with protect the interests of our clients. It is a requirement of Ecuadorian law that that purchasers of real estate fully understand all aspects of the closing. A translator will be provided for non-Spanish speakers.
Once an agreement to purchase has been negotiated but the buyer is not yet ready to pay the seller the full price, the buyer's attorney will prepare a Promesa de Compra-Venta, or promise to buy. The Promesa de Compra-Venta document is similar to the sales contract in North America, although it is more formal and much more binding on the buyer. It is customary that the buyer delivers 10% of the purchase price at the signing of the Promesa de Compra-Venta. The Promesa de Compra-Venta, which is a notarized document, states the sales price, the closing date and lays out penalties for default. Unlike a North American contract, there are fewer avenues for opting out of the deal and getting the 10% binder back. It is important that the buyer complete all inspections of the property and negotiate any price adjustment prior to signing the Promesa de Compra-Venta.
If both parties are ready to close the sale at the time the price is negotiated, the Promesa de Compra-Venta can be eliminated, and the Compra-Venta, the final closing document, can be executed. This saves time and legal fees. The Compra-Venta is also signed in the office of a notary and all outstanding money due the seller is turned over. A brief point of explanation: in Ecuador, as in much of Latin America, a notary is an attorney with advanced training. Generally, you pay the notary at the conclusion of the notarization. The fee generally runs between $50 and $100.
The buyer's attorney is responsible for researching the title of the property, making tax payments from funds the buyer has provided and, after the signing of the Compra-Venta, registering the property with the Office of Land Registry. The attorney will present two notarized copies of the Compra-Venta to the Land Registry. One will be filed at the Land Registry Office, the other returned to the buyer and serves as the property deed.
If the buyer is unable to be in Ecuador at the signing of documents, he or she can sign over Power of Attorney to an attorney or representative.
Closing Costs and Taxes
Closing costs and fees and taxes are a fraction of what a real estate buyer will pay in the United States for similarly priced property. A buyer should expect to pay about 1.5% of the purchase price for these costs.
Taxes are based on an assessed municipal value, generally 2% to 2.5% of the purchase price. The value will vary by area of the country and by such factors as whether the property is located in a rural or urban area. In other words, an urban house costing $170,000 has a tax value of $4,250. The buyer will pay a registration tax of 1% of the municipal value of the property and a transfer tax of between 10% and 38% of the municipal value.
Property taxes are very low in Ecuador. The owner of the $170,000 house mentioned above pays about $110 annually.
The majority of buyers of real estate in Ecuador will find that all fees, taxes and legal fees for a real estate purchase will amount to about $1,500. Many pay no more than $1,000.
Ecuador Home Sales Explanation of Fees and Costs
Fellow Adventurers, This is a newly revised explanation of fees as of May 1, 2010
Traveling is also a bit different here since we are usually covering a region not just a city. If we go looking on the coast for property, that means we might travel 400 kilometers looking for your new home/property here since it stretches for miles. We also suggest taking as many days as you can afford to see the many incredible places there are to see. We don’t suggest that to make money, but to insure you get a chance to view the incredible variances in coastal areas or places inland.
Since we can cover quite a bit of territory in your search we do charge an hourly and/or daily rate which is reimbursed to you if you do buy something through us. The hourly rate is $15 an hour and that helps cover our basic costs of fuel and just maintaining our vehicle. We cap our daily rate at $100 if we go over seven hours with you (which does happen quite often). If you hired a car and driver you cost would be at least this much and you wouldn't receive any of the valuable buying information or be shown listings. We do this only because when we first started Ecuador Properties we were giving a LOT of "free" tours to people at our expense. We guarantee that if you feel we didn’t provide a valuable service to you then you don’t have to pay anything. The additional tips we give and knowledge of this market will save you much more than our fee.
Our primary concern is to help you find a wonderful place to call home or vacation. If we do not meet that goal or you feel we haven’t been worth the expense, we will do whatever it takes to remedy that.
If you have other questions or concerns please feel free to write or call with them. I understand the initial concern of paying for a realtor, but I also know now the benefit it brings here in Ecuador. Let the adventure begin!
We look forward to meeting you and helping in whatever way we can.
A Final Word
If you own real estate in Ecuador you should have an Ecuadorian will. Although it is very possible that your Ecuadorian assets will go to your heirs without an Ecuadorian will, this can be a long and painful legal process. You will pay less than $100 to have a simple will drawn up by an attorney and notarized. If you wish, you can write a "hybrid" will good in both the U.S. and Ecuador. Simply have the will notarized