I got this email this week from a subscriber in distress…
A definition of “woe” is “things that cause sorrow or distress; troubles.”
The suggestions that I am about to share are what my husband and I learned from our personal tale of woe as it relates to buying an apartment on the Ecuador coast.
Here are 10 suggestions that we learned on our odyssey to purchasing an apartment. For example, we learned the hard way that there can be a big difference between the purchase of and the owning of real estate in Ecuador.
We began the purchase process in January, 2011, and gave the final payment for the apartment June 2011. We are still waiting for the deed almost 3 years later.
Suggestion #1: Be weary of purchasing an apartment in an unfinished building. Just because a crew is working on a construction project today, does not mean that they will be there tomorrow, or that the project will ever complete. (It took 6 extra months to get our interior finished, but it is now finished.)
DOMS TAKE: THE RULE IN ECUADOR, ´DONT PURCHASE WHAT YOU CANT SEE (UNLESS YOU GET IT VERY VERY CHEAP AND ARE WILLING TO TAKE THE RISK)´ IS A GOOD RULE TO GO BY, SERIOUSLY! I FOLLOW IT.
Suggestion #2: A notary is an attorney, but he is not your attorney. A notary is responsible to review each contract from a legal perspective. That does not mean that they can keep you from signing away your rights, and apparently it also does not mean that they will make sure that real estate law is written into the contract.
Suggestion #3: Get your own attorney. Depending on where you are from, you may not be used to bringing an attorney to the closing. It is vital that you do this. In our case, our first attorney facilitated many meetings with the builder in the attempt to get our deed. I am sure he meant well.
DOMS TAKE: I DONT AGREE WITH THIS, ADDING AN ATTORNEY TO THE EQUATION CAN OFTEN BE A COSTLY MISTAKE AND FURTHER COMPLICATE THINGS AS MOST ATTORNIES IN ECUADOR WILL GLADLY TAKE YOUR MONEY WITHOUT HAVING THE SLIGHTEST CLUE OF HOW TO HELP YOU. ONLY ADD AN ATTORNEY TO THE MIX IF THEY COME HIGHLY RECOMMENDED BY A TRUSTED NEUTRAL SOURCE.
Suggestion #4: There are multiple levels of meaning in real estate contracts. There are the written words in Spanish, the literal translation, the verbal explanations to your questions, the actual law, and then real estate law that can be enforced.
For example, there was a clause in our contract about capital gains taxes. Despite the explanation at the closing, we later learned that the underlying meaning was that we were responsible for the capital gains tax for the entire apartment building up front, not just on our apartment and not just when we sold our apartment. This meant payment of the capital gains taxes when the builder registered it with the city. At that time, since taxes would need to be paid on all improvements to the bare land, we were on the hook to pay what was expected to be many thousands of dollars. We were able to get this clause in the contract changed later by a different attorney.
DOMS TAKE: THIS CAN HAPPEN IN ANY COUNTRY, I THINK THE PROBLEM HERE WERE THE THINGS LOST IN TRANSLATION BECAUSE MAYBE YOU DONT SPEAK GREAT SPANISH. GOOD TO HAVE CONTRACTS PROFESSIONALLY TRANSLATED BY A NEUTRAL THIRD PARTY YOU HIRE.
Suggestion #5: If you are buying any real estate that is under construction, make sure that you include a penalty clause for quality of construction and time to complete. You must make that penalty large enough that it has everyone’s attention. You must do this no matter what anyone tells you. If you cannot get this, then walk away. Walk away before you give them a penny.
While you are at it, get a penalty clause for delivery of the deed.
DOMS TAKE: BETTER YET DO AS ECUADORIANS DO AND FOR PRE-CONSTRUCTION ONLY AGREE TO FORK OVER A SMALL PERCENTAGE OF THE PURCHASE PRICE FOR RESERVATION, FOR EXAMPLE SAY $2,000 ON A $60,000 CONDO. PAY IN INTERVALS AND TRY NOT TO PAY A LARGE PERCENTAGE UNTIL THE PLACE IS FINISHED (ECUADORIANS ARE PARTICULARLY BAD AT FINISHING) AND YOU HAVE YOUR TITLE LEGALLY REGISTERED.
IF YOU LET THEM BULLY YOU INTO PAYING EVERYTHING OR ALMOST EVERYTHING UP FRONT THAT IS THE LAST TIME YOU WILL EVER SEE THEM, SERIOUSLY!
Suggestion #6: Have your attorney confirm that your building and apartment are legally registered with the city. Our first attorney said everything was ok, in that the developer owned the lot, the construction permits were proper, and it was legal for them to sell apartments. None of this was true. Make sure the attorney shows you the papers. Then have a different attorney check the papers. Update: Recently the land ownership, the permits, and the permissions have all been resolved with the municipio.
DOMS TAKE: THIS IS ACTUALLY EASIER TO CHECK THAN MANY REALIZE IN THE LOCAL MUNICIPAL OFFICES ALL UNDER ONE ROOF YOU CAN RESEARCH BUILDING PERMITS, BUSINESS LICENSES AND MORE.
Suggestion #7: This is really important. Do not make that final payment until you have the deed. Until you have the deed, all you have is a promissory note to someday get the apartment deed. You need the deed to sell the apartment, as well as to legally rent out the apartment, and to get an electric meter. The holder of the deed is on the hook to pay the alicuota (home owner’s fees.) If you are waiting to get the deed, you are not responsible for paying the alicuota.
We had been assured up front that we would get the deed on our apartment 3 days after we made our final payment and took possession. After we paid the builder the final check and moved in, they told us that we would get the deed “surely within 6 months,” or December of 2011. We are still waiting as of February 15, 2014.
While we are talking about payment, make sure that the checks are made out to the building company, not to an individual. Make sure they give you a signed receipt. Cancelled checks are not considered a receipt.
DOMS TAKE: A GOOD LAWYER CAN OFTEN HELP CLEAR UP TITLE ISSUES, BUT IF A PROPERTY LOOKS LIKE IT MAY HAVE TITLE ISSUES, STAY AWAY, ACTUALLY IT IS EASIER TO CHECK UP ON THAN YOU THINK, EACH PROPERTY HAS A TAX ID NUMBER (PREDIO) SURROUNDED BY OTHER PROPERTIES WITH TAX ID NUMBERS AND THE TITLE IS REGISTERED IN THE PROPERTY REGISTRAR WHICH YOU CAN VERIFY, IF IT IS NOT REGISTERED DONT BUY IT UNTIL IT IS.
Suggestion #8: Be careful of having your visa tied to real estate. Since we own a promissory note and not an apartment (because we do not have the deed/escritura,) it is fortunate for us that we do not have our visas tied to the apartment. We have been told that if a visa is tied to a particular piece of real estate, that a new visa would be required if that real estate is sold. There is a cost in time and money to transferring visas.
DOMS TAKE: AGREED! BEST TO GO FOR A PENSIONERS VISA BASED OFF A PERSONAL INCOME SOURCE OR A PROFESSIONAL VISA BASED OFF YOUR COLLEGE DEGREE. AN INVESTORS VISA SHOULD BE THE LAST CHOICE.
Suggestion #9: It has been our experience that there is no equivalent of real estate title insurance in Ecuador. Proving ownership of real estate is a problem in Ecuador. Hundreds years of European occupation, various coups and revolutions, discrimination and land confiscations have created a mess when it comes to proving property ownership. This is a huge ongoing problem.
How gladly I would have paid the few hundred dollars for title insurance. It would have been far less than the attorney fees we have paid and continue to pay.
DOMS TAKE: ACTUALLY ITS NOT SO BAD NOR ANY WORSE THAN IN NORTH AMERICA, THE USA WAS ALSO COLONIZED AND HAS HUNDREDS OF YEARS OF OWNERSHIP HISTORY. JUST DIFFERENT SYSTEM. ACTUALLY THERE IS TITLE INSURANCE (AMERICAN TITLE FOR ONE IS HERE) BUT NO ONE GETS IT BECAUSE IT IS VERY EXPENSIVE. I PREFER TO BUY PROPERTIES THAT HAVE HAD THE SAME OWNER FOR A LONG TIME AND BUY FROM OWNERS WITH ROOTS THAT INSPIRE A BIT OF CONFIDENCE AND ARE EASILY LOCATABLE IF YOU NEED TO FIND THEM.
Suggestion #10: Be lucky. We hired “experts”, we bought from one of the most famous builders in Ecuador, we hired translators, we stayed on top of the process, and we continue to nudge the building owners to do the right thing. We have been nice, we have been tranquilo, we have been polite pests. We have been impolite pests. So far, nothing has moved the builder to give us our deed.
DOMS TAKE: ITS DIFFERENT IN THIRD WORLD COUNTRIES LIKE ECUADOR. PEOPLE BOTH RICH AND POOR HAVE BEEN ON SURVIVAL MODE THEIR WHOLE LIVES SO THINGS LIKE ´ETHICS´ AND ´DOING THE RIGHT THING BECAUSE ITS THE RIGHT THING TO DO´ DONT EXIST.
THE ONLY THING THEY RESPECT IS FORCE OR THREAT OF FORCE, YOU GOT TO SHOW YOUR TEETH SOMETIMES DOWN HERE. IT IS WHAT IT IS.
THE GOOD NEWS IS AT LEAST ITS NOT AS INTENSE AND AS ´IN YOUR FACE´ AS OTHER COUNTRIES LIKE INDIA WHERE I HAVE WORKED. YOUD BE SURPRISED HOW FAST THEY START TO MOVE WHEN YOU STOP BEING THE NICE GUY.
THIS IS ALSO TRUE WITH GRINGOS WHO HAVE LIVED IN ECUADOR A WHILE WHO OFTEN ATTAIN ECUADORIAN-LIKE BUSINESS PRACTICES. NOT EVERYONE, BUT IT HAPPENS. DONT THINK YOU CAN TRUST SOMEONE JUST BECAUSE THEY ARE FROM YOUR HOME COUNTRY! MAKE THEM EARN IT LIKE YOU WOULD ANYONE ELSE. THIS WAS THE FIRST LESSON I LEARNED LIVING ABROAD WHILE IN THE DOMINICAN REPUBLIC.
Conclusion: Buying property can be a surprisingly simple, painless thing that takes less than a week start to finish (or it can be excruciatingly bothersome like the instance above). The key to avoid a similar situation is to not buy something you cant see and to only buy properties with a properly registered, easily verifyable and transferrable title. Hire professional help if you can find a recommended person.
And to learn how to find the unpublished property deals no one else knows about, subscribe to my weekly Ecuador Insiders Newsletter below, you can unsubscribe at any time: