Twenty Questions To Know The Answers To Before You Purchase Real Estate In A Foreign Country
Twenty Questions To Know The Answers To Before You Purchase Real Estate In A Foreign Country
Before you invest in a piece of real estate in another country, be sure you know the answers to these questions (because you can’t take any of these things for granted):
- What is the drive time from the nearest airport?
- What is your access and right-of-way?
- Is the property accessible year-round, including in the rainy (sometimes called the “winter”) season?
- Where is the nearest medical care facility? Nearest hospital?
- Is there enough water and water pressure? Is there hot water?
- What distance are you from day-to-day services (grocery stores, dry cleaners, pharmacies, banks, etc.)?
- Will you need a car living in this place? Does your budget allow for a car?
- What’s included with the property? In Argentina and Panama, for example, when you buy a home, you buy bare, stripped walls and empty rooms–no lighting fixtures, no appliances.
- Can you buy title insurance for the property from a reputable title insurance company?
If you’re buying into a private development, also confirm:
- How will security be provided?
- Is there a building requirement? What is it? Does it fit with your retirement timeframe and plan?
- What construction and design standards are in place? Zoning is almost non-existent in Latin America. If you’re buying into a private development, you want building covenants.
- What is the current, existing infrastructure? Understand what’s planned but understand, as well, that you’re buying only what you see. Promised infrastructure doesn’t always materialize.
- Likewise, understand what amenities exist and what amenities are promised but, again, recognize that you’re buying only what exists. If there’s no marina when you buy, there may never be a marina, no matter what the developer’s brochures and watercolor renderings may indicate.
- What are the plans for a Home Owner’s Association? What will the monthly fees be? Are these enough to cover the developer’s responsibilities? You don’t want to pay high HOA fees, of course, but neither do you want to invest in a development where the developer has so underestimated his costs that the HOA fees don’t cover them. The result can be that essential maintenance and services (for example, security) are reduced.
- Is the development company financially sound? Do they have a track record? What else have they built?
If you’re buying land with the intention of building your own home:
- Will you be in the country during construction? If not, how will you manage the building process from thousands of miles away? Who will oversee the work for you?
- What’s your timeline and budget? What are your contingency plans if the project takes longer and costs more than you’re planning? (It will. Take my word for it.)
If your plan is to live in the place only part of the year:
- Who will look after the property while you’re away? At what expense?
- Will you be able to rent the place out while you’re elsewhere? If you buy somewhere with a reliable rental trade, you could earn enough in rental income during the months you’re living elsewhere to cover the property’s annual carrying costs.
The markets of Latin America, the Caribbean, and Asia are unregulated. When it comes to the purchase of real estate, this is the Wild West. Anyone can be a property agent, and sometimes it will seem as though everyone is.
In places like Nicaragua, Panama, Ecuador, and the Dominican Republic, every guy you meet in a bar is going to try to sell you a house…or a beachfront lot. Assume that he’s not a licensed agent. And don’t take for granted that he owns or legally represents the piece of property in question.
Don’t be scared off by this fact, simply accept it. Make no assumptions and take nothing on faith. You don’t have the safety nets that you have when buying real estate in the United States, for example, nor the process checks and balances.
Your best defense is your own attorney. Engage one who speaks fluent English and who has experience helping foreign buyers navigate the local property purchase process. Don’t use the attorney of the seller or the developer you’re buying from. His attorney works for him. You want to find an independent attorney who works for you.
The best way to accomplish this is through expat referrals. Ask every expat you meet in any country where you’re considering a real estate purchase if he’s bought himself. If he has, who was his attorney? How did he find his attorney? And was he happy with his attorney’s work?
In addition, invest in title insurance. It’s available now most places where you’d want to buy. It’s a safeguard that is well worth the cost (typically about 1% of the property purchase price). I recommend First American Title, www.firstam.com.
Kathleen Peddicord
