Buying real estate in Colombia like anywhere else is a process. There are cultural differences, legal differences, technology differences, but that doesn’t mean it’s any easier or harder. We invested some considerable time in this post to clarify and to simplify the Colombian real estate purchase process down to 7 major steps. We went through all our old notes and paperwork from previous purchases we made for either ourselves or on behalf of clients, consulted our in house legal team, bankers, accountants, home insurance brokers and notary friends to make sure we got it right.
For those of you in the market for Colombian real estate, we hope this infographic and accompanying detail helps!
Step 1 – Research and find an agent
This is the fun part. It’s also the easiest. You log onto Casacol, you set your filters you pick a budget and you’re off. Casacol uses synchronous webservices to connect to our clients inventory so what you see is actually available from the listing agents. My good friend Mauricio Jaimes published this guide some years back (nothing has changed) which is probably still the most comprehensive English guide to buying real estate in Colombia. If you’re one of those people who needs ALL the info.. go and buy it and he’ll send you the PDF.
Find an agent: Easier said than done. Like any other country, buyers who don’t have an agent or sellers who don’t use an agent aren’t taken very seriously – not to mention a pain in the butt to deal with. They’re often not experts at buying/selling either and when the blind leads the blind, mistakes happen. This is also where fraud takes place – use an agent!
Finding a really good agent isn’t easy either and using your friend’s sister who sells apartments as a part time hobby (called a comisionista) is probably not a wise course of action. You can also use the Casacol agent search (currently in Medellin) to browse the profiles and credentials of professional agents. And even if you want to go the DIY route you should utilize a flat rate legal service to make sure you dot the i’s and cross the t’s. Our agents include this for free if you’re using Casacol as your buying agent.
Step 2 – View properties
Also easy, and fun, but don’t let an agent waste your time trying to hawk her cousin’s apartment to you as the Taj Mahal either. Based on your needs (a place to live, long/short term investment, a rental property, etc.) and budget there should be a fairly finite number of buildings you are looking in. Picking a good building (solid construction, liquidity factors, easy to insure) is hard which is why your agent should be making this part easier for you.
Step 3 – Negotiate
Maybe you’ve viewed 5-10 apartments and there are 2 that you’re really happy with. It’s time to negotiate like a Colombian. Your agent/lawyer team will be able to do a couple of things for you here. First, your lawyer can pull titles (called a title study) and purchase records which – good data points for negotiating. And who is the real owner? The man himself, his wife, uncle, friend? You want to know this now. Your agent should also use their Casacol tools run some comparables in the building for recent sales in order to determine if the owner is asking 0%, 5%, 10%, or 20% more than market value. Many Colombians can be dreamers when it comes to selling prices and don’t have agents that know any better. You and your agent has to know better.
Regardless you are probably a cash foreign buyer which means you are firmly in control of the negotiation. Don’t be disrespectful if the property is priced correctly but don’t worry about offending anyone here – if you want that property rest assured the owner wants your money. A cash purchase also allows that owner to do some funky (100% legal) maneuvering that saves them some taxes too.
Step 4 – Notary: Start the fine print
You’ve settled on price at this point, probably meeting the owner for the first time and shaken hands. Now it’s time for the next step called the promesa de compraventa (purchase agreement – or literally “promise to buy/sell”). Your lawyer should have already completed the title study and verified that you’re actually dealing with the owner of this property. If the seller is sophisticated you/your agent might be dealing with their lawyer and you should have your lawyer involved as well. The seller/selling agent/lawyer will now present you with a draft of the promesa de compraventa. Now the “typical” agent will just tell you to accept the terms and sign it (these are the terms!) and you usually do, but if you don’t like what you see then negotiate that. The seller may want a deposit on signing transferred within 48 hours, stipulate terms on how they want money transferred and to whom, timeline, etc,. Once again if you don’t like it, then your lawyer counters with a new promesa.
There may also be a chance that you have to leave the country during this process and that can also hurt your ability to negotiate with the seller. I would highly recommend that you sign a power of attorney strictly for the matters related to the apartment so that your lawyer can act on your behalf. Do this early if you suspect you will need it.
Step 5 – Send Cash
Nothing says I just bought/sold an apartment like a bunch of zeros moving around the SWIFT banking network. Be mindful of foreign exchange fees at this point. With a large sum of cash the Colombian bank is not going to convert it into pesos and give it to the owner until someone has made a phone call to the Forex desk. I would recommend that you/lawyer be with the seller at their bank when they do this (put it in the promesa!). Unfortunately you have to negotiate with the bank and if the USD/COP has moved since you sent the money then you may have too much/too little. My experience with large money transfers (HSBC -> Bancolombia) has been about 1.50% fee over spot rate at that minute. So pad that into your transfer or the owner will be whining about you not sending enough money and maybe cause delays.
You or your lawyer (the typical agent is nowhere to be found) want to collect all the paperwork at this point so that you can file a Form 4 (Forumlario 4) with the central bank for tax and/or visa purposes.
Step 6 – Notary: Finish the fine print
You’re not done yet – the title is still in the name of the seller and the seller has all your money! At this point you return to the Notary’s office and both parties pay all taxes due (you need to budget about 1.5% of purchase price) and you sign the title/deed of the property into your name. Your lawyer will need to collect a bunch of paperwork to ensure all taxes and building/condo fees are paid up and current. You’ll also want to review my post on closing costs in Colombia to round out this step.
Step 7 – Congratulations
How hard was that? Get the keys, and start furniture shopping. Don’t forget home insurance that covers both contents and other perils. If a tenant or guest does something stupid in your apartment one day you want to be covered. Once again we can help guide you here. Finally have your lawyer perform a 2nd title search after the Notary has filed the title (escritura) with the land titles office. You don’t want to be the guy who think he owns an apartment when he really doesn’t. Yours truly is speaking from personal experience here.
I hope your house hunting experience in Colombia is as good as mine have been. We would be thrilled to help.
Brad Hinkelman – [email protected]
Founder/Owner – Casacol SAS