Real Estate Scams in Latin America to Avoid
Real Estate
It’s no secret why thousands of people choose to move to Latin America each year to invest and retire. The pleasant weather, fresh food, welcoming locals and great property deals all are big draws. But buyer beware, here are a few of the common scams out there to watch out for when looking for your dream beach house.
1. The Bickering Sibling Scam: This scam is very prevalent all over Latin America. This is when the house is owned by various people (often left to children in a will) and some of the owners try to sell the property while other legal owners don’t wish to sell. This can lead to big problems for you if you pay someone before getting this legally cleared up.
To avoid being burned by this scam, work with a good lawyer and make sure they null the legal rights anyone has to the property.
2. The Uncle Larry Scam: Often a house is sold without informing an active tenant, and the tenant simply refuses to leave. The police in many countries of Latin America don’t help much in these cases. So before you buy, make sure there are no active tenants. Or if there are, make sure the current owner gets them out before you hand over the money. This can be one big headache for a new home buyer.
3. Shanty Town Scam: This has been happening ever since the Spaniards first arrived hundreds of years ago. You will see that in some areas of the coasts, the cheapest beachfront real estate is inhibited by make-shift shanty towns. Many of these people have been here for decades, yet they don’t actually have the title to the land. This opens the door to someone coming along and buying the land without their knowledge and reselling it right out from under them. Uprooting these people is extremely difficult, and this difficulty should be avoided if possible.
4. The Invalid Contract Scam: This is when you sign a document or contract in Latin America, but don’t officially register it with the corresponding Municipality, rendering it unenforceable! Using a good lawyer can help prevent things like this from happening.
5. Multiple Sale Scam: In most Latin countries, once you purchase a property you have to register it officially with the local Notary and the Office often designated the “Registro de Propiedad.” If you don’t, the seller could sell the same property multiple times, and the first one to register the property with the local authorities gets the official deed to property. To avoid, make sure as soon as you buy to register the property.
6. The Useless Property Scam: This is where someone sells you a property that has some governmentally imposed building restriction, rendering your purchase useless. A good lawyer can help you avoid this scam. In other cases your property may be on the base of a large, unstable mountain of sand that will collapse on you once you start construction. To avoid, always visit a lot before you buy it, and don’t commit to anything over the internet.
7. False document scam: In Latin America, anything can be copied. Identical-looking passports can be made for around $150. Needless to say, some people may try to sell you a property with false title and registration documents. The way to prevent this is to always work with a trustworthy lawyer.
Don’t let this list of scams scare you off. Moving to Latin America was the best choice many people, myself included, ever made.
Domenick Buonamici teaches expats how to find the hidden beachfront property bargains of Ecuador through his e-Book “The Insiders Guide to Ecuador Real Estate” available for immediate download at www.EcuadorRealEstate.org
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I live in Ecuador and it is a wonderful country. Its people are so nice and kind, they will give you the most warming welcome. I have put together a helpful fact sheet, and also an article on Ecuadorian manners and customs
There are a lot more risks than those mentioned in the article. A lot of the real estate agents are not licensed and do not have insured escrow accounts. So if they flee with your earnest money, there is no insurance and you will probably not recover anything. This has happened before. A lot of the closing agents do not have insured escrow accounts. So if they flee with your money, they is no insurance and you will probably not recover anything. In Mexico, there are Ejidos, communal farming land, that can be privatized. If it is not privatized properly or if some farmers change their mind after the property has appreciated, it can take years to get a decision from the court system and it may not be favorable. That is what happened near Ensenada. Then there is the issue of underreported transfer prices or transfer of shares of corporations. If buyers aren’t careful, they can get stuck with the seller’s capital gains taxes. They may not realize they have a problem until they try to sell. Also, if you buy in Mexico through trust, there are additional tax forms (3520, 3520A) that you have to file with the IRS that are not in tax software preparation forms and that most accountants are not familiar with-a minor issue but a $10,000 fine if you don’t do it. Prosecutors in Latin America are not interested in problems of Gringos so don’t expect the police to help you if you get ripped off. If you want an investigation, you usually have to pay for it.