Colombia Real Estate
OWNING REAL ESTATE IN COLOMBIA
Under Colombia Law, your right to: Buy, Own, Record, Sell, Rent, etc. real estate, and return the sale proceeds to your country of origin, is the same as if you were a Citizen of Colombia! Colombia is the longest established democracy in South America, and boasts the second airline formed in the world.
In many ways Colombia is considered very progressive, and in other ways, the old colonial culture and charm are features of life, that many move here to savor and enjoy.
Can a foreign citizen buy property in Colombia?
Answer: Yes, no problem. Any non-Colombian citizen can buy and own real estate in Colombia. The state will protect your private property rights.
NEW LAW: Now it is even easier for foreign citizens to buy property in Colombia!
The old law required foreign citizens to have a Colombia Cedula (ID), or have someone with a Cedula, to act as their official agent, when signing the Deed. This Law was recently repealed. The new Law makes it even easier to purchase real estate in Colombia. Under the new Law, Buyers will feel more comfortable when signing their Deed themselves.
BUY and SELL CONTRACT
When both Buyer and Seller are in complete agreement, it is customary for both parties to sign a BUY / SELL CONTRACT in which the agreed Price, Terms and Conditions are clearly stated. Usually the two parties sign the BUY/SELL CONTRACT in front of a Notary. A good faith deposit (down payment) of between 10-20% of the agreed upon price is presented to the Seller. With completion of the Buy/Sell Contract, it is normally considered by all parties, that the “the deal is made”.
The Contract gives the Seller time to bring the property up to the agreed condition, and to pay past due taxes, utility bills, etc. and, finally, to move out. The Buyer uses this time to arrange for funds to be available locally to complete the purchase. The BUY/SELL CONTRACT normally contains a Penalty Clause of 50% of the total Sale Price to be paid by either the Buyer or the Seller, whichever backs out of the Contract! At the agreed upon day and time, as stated in the Contract, both parties meet, normally at a Notary office, to begin the transfer of title to the Buyer and pay the money to the Seller. At this time, according to the terms of the CONTRACT, the Real Estate commission is also paid.
WHAT ABOUT TERMS?
The short answer: "FORGET ABOUT TERMS"
For an explanation as to: WHY, read on … Currently, the bank loan rate for real estate in Colombia is between 20-25% annually. Loans are short term, usually 5 years or less, and are made primarily to Colombians. There is no "owner financing" except loans made within families. Perhaps now you understand why you are advised to: "FORGET ABOUT TERMS"? Make the TWO "systems" (Colombia’s, and yours) work to your advantage
In most countries, interest rates are at an all time low. Many people with limited funds are taking advantage of low interest rates by borrowing against the built up equity they may have in their homes. Home Equity Loans are being offered at rates of 5% and less. If you have the ability to repay these loans, even if you lose your job, or have a major illness, this can be a great way to utilize your net worth by investing in bargain priced property in prime locations such as Cartagena ... In Cartagena, real estate prices are slowly on the increase, but the city remains a "Buyers Market". Prime residential properties, in the best locations can be had for around $200,000 u.s. There are few Colombians with this kind of money, and those that have it would be equal to multi-millionaires in developed countries. Prices of prime properties are 25 to 35% of the cost of equal properties in developed countries. The quality of construction is equal, and often better. AND, the cost of "living the good life", while enjoying a much higher "lifestyle" than you may be used to, is reality.
In Cartagena, Colombia the price spread goes from over one million u.s., to as low as $15,000. for a studio apartment. Depending on WHAT you are looking for, and WHERE you are looking, many properties within this wide price range represent bargain prices when compared with "back home"!
LOCATION, LOCATION, LOCATION remains the three most important factors effecting real prices, even in developing countries!
Forget about terms. If you have it - Cash is King!
If everything is in order, the Closing can be completed in as little as 10-15 days. However, sixty to ninety days is more common. Closing dates are made at the convenience of the Buyer, Seller, Attorney, or Notary, etc., who may be assisting with the Closing. Final payment is usually made in the form of a Cashiers Check, wire transfer to the Sellers bank account, personal check, but not cash. If a personal check is used, it must first clear the local bank in Colombia. The Closing Agent will then go to the government Registry Office where the Title will be recorded.
Closing in Absentia (without the Buyer actually present at the closing) can be completed with a Power of Attorney Document, which has been notarized by the Embassy, or Consul of Colombia in a major city near yours.
Notary expenses are paid and shared equally by Buyer and Seller. Seller pays for, and presents to the Notary, the proper amount of Sales Tax. This information is recorded by the Notary, and within 48 hours the Notary will release the documents for Registration with the Government Registry Office. Along with the documents, a receipt showing that the Buyer has paid a Fee, which is used to support Public Health, is presented to the Registry Office. In about one week the Registry Office will have recorded the documents, and at this time the Buyer can claim the documents showing that title has been legally transferred to the Buyer. The total amount the Buyer has to pay in taxes and title fee is about 2% of the agreed upon Sales Price.
WHAT'S A FAIR PRICE?
A common question asked, even before looking at a residential property is: “what is the average cost per meter”? The answer can get you in trouble, but it is a starting point.
This year, 2007, and for the past couple of years, the average cost per meter for residences in good condition, and in the more desirable locations is approximately 1,000,000 Pesos per square meter. Many foreign buyers are more familiar with area size expressed in square feet. Pesos one million are currently, about $350. u.s. per meter, or about $32.50 per square foot. This figure will become more meaningful if you consider the variables that make up building costs: bathrooms and kitchens per square foot are the most expensive areas. Larger areas cost less per square foot than smaller. Apartments with features such as a swimming pool, dedicated parking space, garden area, etc. will cost more per square foot. And, of course, the location can have a large effect on the per square foot price. A property that fronts right on the Caribbean in Cartagena, one of the most popular cities for foreigners to own property, a home on the ocean will be obviously more expensive than one that is across the street from the beach, and a quiet
location that is more “residential” in appearance but close to shopping, will usually cost more than one that is in the middle of the city. Regarding monthly administration fees, an apartment building with hundreds of units for example will cost less per unit to maintain and secure, than one with 20 or so.
Current construction costs in the U.S. are about $100 per square foot, which does not include the cost of land, permits, design, etc., and can go up to $350 per square foot for custom luxury construction.
Construction quality in developing countries is often better than “back home”. Here, engineers and designers will typically “over design”, because they are required by law to personally stand behind their work for five years. To reduce or eliminate potential structural problems, they will specify more steel and concrete than commonly used in developed countries where insurance will cover any “errors and omissions”.
The big reason for the difference, of course, is the cost of labor. Workers wages in Colombia can be as little as 10% of cost per hour in your country. Labor cost is normally one half or more of construction cost. Lower labor costs often means that the design is more ornate and labor intensive than boxy “cookie cutter” designs that are economically common back home. Look at the hundreds of photographs of apartment buildings and homes on Colombian web sites and you will notice a large variety of designs including many that are curved which may be more of a challenge to furnish (ever try to buy and hang a traverse rod drawn curtain, covering a round window?),
but which is the most expensive type of construction when it comes to material waste, and more importantly, higher labor costs. Colombians take pride on being “unique”!
The caveat to the rough price guideline, of course is that you must compare the property with others in the same general area, to establish a better idea of relative value. This is where depending on a reputable Real Estate professional, that has full command of your language, and is a graduate engineer from a respected U.S. university, can be a big plus. And never forget the three most important rules that apply all over the world, relating to real estate value: location, location and location!