Buying Property in Ecuador
Understanding foreign real estate transactions.
It is important that the foreign real estate buyer have a working understanding of the process of buying real estate in Ecuador. Most buyers will find that buying property in Ecuador is simpler than in their home country. This simplicity, however, comes with the burden of due diligence to assure clear title and properly executed documents. We will make certain proper procedures are followed and that the attorney and notary we work with protect the interests of our clients. It is a requirement of Ecuadorian law that that purchasers of real estate fully understand all aspects of the closing. A translator can be provided for non-Spanish speakers.
Once an agreement to purchase has been negotiated but the buyer is not yet ready to pay the seller the full price, the buyer's attorney will prepare a Promesa de Compra-Venta, or promise to buy. The Promesa de Compra-Venta document is similar to the sales contract in North America, although it is more formal and much more binding on both the buyer and seller. It is customary that the buyer delivers 5-10% of the purchase price at the signing of the Promesa de Compra-Venta. The Promesa de Compra-Venta, which is a notarized document, states the sales price, the closing date and lays out penalties for default. Unlike a North American contract, there are fewer avenues for opting out of the deal and getting earnest money back.
If both parties are ready to close the sale at the time the price is negotiated, the Promesa de Compra-Venta can be eliminated, and the Compra-Venta, the final closing document, can be executed. This saves time and legal fees. The Compra-Venta is also signed in the office of a notary and all outstanding money due the seller is turned over. A brief point of explanation: in Ecuador, as in much of Latin America, a notary is an attorney with advanced training. Generally, you pay the notary at the conclusion of the notarization. The fee generally runs between $50 and $100 and any additional cost for needed documents.
The buyer's attorney is responsible for researching the title of the property, making tax payments from funds the buyer has provided and, after the signing of the Compra-Venta, registering the property with the Office of Land Registry. The attorney will present two notarized copies of the Compra-Venta to the Land Registry. One will be filed at the Land Registry Office, the other returned to the buyer and serves as the property deed.
If the buyer is unable to be in Ecuador at the signing of documents, he or she can sign over Power of Attorney to an attorney or representative. Most of our clients choose this option as it is much easier to get the power of attorney done here then to have to go to your nearest Ecuadorian Consulate in your home state.
Closing Costs and Taxes
Closing costs and fees and taxes are similar to what a real estate buyer will pay in the United States for similarly priced property. A buyer should expect to pay about $2,500 to $3,500 total to complete the transaction.
Taxes are based on an assessed municipal value, generally 2% to 2.5% of the purchase price. The value will vary by area of the country and by such factors as whether the property is located in a rural or urban area. In other words, an urban house costing $170,000 has a tax value of $4,250.
Property taxes are very low in Ecuador. The owner of a $170,000 house in a rural area pays about $110 annually.
The majority of buyers of real estate in Ecuador will find that all fees, taxes and legal fees for a real estate purchase will amount to about $2,500 to $3,500.
Ecuador Home Sales Explanation of Fees and Costs
Fellow Adventurers, This is a newly revised explanation of fees.
I am including this as an explanation to costs and fees for the real estate market here in Ecuador. As some of you might know there is a new MLS (multiple listing service) but not all properties are listed here. We have to search out new properties all the time. As buyer representative we/I have to go and seek every listing we show, make numerous phone calls (you never reach the owner on the first call...sometimes, but few and far between), have the buyer give us a realistic selling price they expect, and spend many hours driving the entire province in search of the requests we receive. Once you are here you will better understand our quest to find your "place in paradise". We are trying to educate the Ecuadorian seller and have them follow the real estate model from the states and the rest of the developed world. The fees we have are 6% and the seller covers that fee in the selling price just as it is done in the states. We also lower our rate on sales over $300k to 5%. So this will be very close to what you have experienced in the states or your home country.
On another note: not all agents in Ecuador are licensed. This is something they are working very hard to change. This only assures you get the most honest and reliable service. That being said, not all agents show other companies' listings making it difficult for you to get a true picture of what is available. We just feel you spend way too much time and money to get here to be shuffled around from one agent to another.
Traveling is also a bit different here since we are usually covering a region not just a city. If we go looking on the coast for property, that means we might travel 400 kilometers looking for your new home/property here since it stretches for miles. We also suggest taking as many days as you can afford to see the many incredible places there are to see.This will insure you get a chance to view the incredible variances in coastal areas or places inland.
Our primary concern is to help you find a wonderful place to call home or vacation.
Let the adventure begin!
We look forward to meeting you and helping in whatever way we can.