I posted an infographic last week about simplifying and demystifying the buying process for foreigners looking to buy Colombian Real Estate and this week I wanted to focus specifically on the closing process itself. Across the entire buying process this is where mistakes are most likely to happen.
Across the web there are various sources of advice and opinions on what to do/not to do, the Form 4/5 (the right answer is almost always 4), taxes, notary fees and various other closing/registration costs. What worries me is that what you find on the Internet today about buying property in Colombia is not comprehensive nor consistent from site to site. The whole process from end to end isn’t difficult if you’ve done it before so we wanted to put some time and effort into making it easier to understand.
Generally speaking you’ll find some good info from Proexport and the IMF about registering property in Colombia and I’m going to take the IMF guide as a starting point and then illustrate with a recent and real example of a real property a client of ours recently acquired.
Real client purchase example:
When all was said and done the final negotiated purchase price on this particular property was $250,000,000 COP or about $125,000 USD. At this point you’re on step 6 of our 7-step guide and purchase monies have been transferred. There are now four areas where fees/taxes are applicable to the buyer.
Fee #1 – The very first step is a certificate of paz y salvo (roughly the “free and clear”) which basically means that a) property taxes and b) condo/strata/common fees are paid up. The owner should have already paid these for the most recent month (condo fee) or quarter (property tax) but don’t take that as a given. If your negotiation has crossed a date where one of these have come due then they need to be paid first. Your lawyer should handle the details here.
Fee #2 – Notary Fees. In Colombia you pay a notary fee based on the value of the property (0.153%) and then a bunch of paperwork fees. Here is a break down of all the fees our buyer incurred on this transaction totalling about $640,000 COP.
Fee #3 – Rentas departamentales. This is the property transfer tax (currently 1.1% of the purchase price in 2014) and is split 50/50 by the buyer and seller. Simple math for our buyer = 0.55% * $250,000,000 COP = $1,369,000.
Fee #4 – Registro. This is going to register the property in your name. Cost to the buyer is 0.5% of the purchase price ($1,250,000 COP) plus $76,000 COP in notary fees and taxes.
At this point you sign and receive the escritura (deed) and the property is yours – in this case with total closing fees of 1.35% – not bad! A couple of final notes to consider:
a) Make sure you transfer title of parking spaces if applicable or else they will remain with the previous owner and it’s likely neither of you will ever catch it.
b) Have your lawyer run a title search in a couple weeks across the matricula (unique property ID) and make sure the title transfer was successful. You don’t want to find out 5 years from now that something went wrong at the land titles office and they didn’t know how to contact you because you didn’t want to pay for a real estate lawyer.
Happy house hunting. Drop us a line at [email protected] if we can help out.
Brad Hinkelman – [email protected]
Founder/Owner – Casacol SAS