Buying real estate is different in different countries. Regulations, procedures, licensing, legal systems, property rights, ethical principles, and language are just a few aspects that you may struggle to understand. To give you an idea of what these differences may entail, here are some of the most important issues to be aware of before attempting to purchase property as a foreigner in another country.
1. Ethical principles
Buying real estate as a foreigner in an unfamiliar country is, in many ways, an act of faith. Even if you have the time and the resources to go to a place and investigate for yourself what all is available, what fair prices in the markets are there, and what specific pitfalls may exist, you will ultimately be at the mercy of the people you are dealing with.
Of course, there are scammers everywhere in the world, as well as people who are willing to lie because they are desperate for money. But in some places, there is a cultural mentality that encourages taking advantage in order to get ahead. Although this kind of deceit is not focused just on foreigners, it will most certainly be aware of the disadvantages inherent in being a foreigner. In Panama, it is called “el juego vivo,” the Game of Life. In Argentina and Uruguay, the term is “la viveza criolla,” which is a form of pride in being clever and unscrupulous. These attitudes are not universal, but they are something to be aware of, particularly in urban atmospheres.
Another cultural habit you may encounter is when honest, forthright people seem to be habitually dishonest according to a strange ritual based on their idea of politeness or because of a lack of deference to time.
The best way to ensure that your project will go as smoothly as it can is to do your best to learn about the situation you are entering into, have patience, and be very careful about choosing a real estate agent and a lawyer that you can trust to represent your best interests and carry you through the entire, complicated process.
2. Legal systems
Legal systems vary, and it is difficult for many to comprehend a system where procedures are the focused rather than substance and registration of a property is more important than the deed to the property. In a civil law system, it is possible, for example, to own the title to a parcel of land, yet if the title is not registered properly, then you are not actually the legal owner of the land. In Costa Rica, there are two documents that define a property; one describes the parcel of land in words and the other is the plat map. If either of these is not registered, or there is a discrepancy between the two documents, or a physical survey of the property proves to be different in any way, then the title is not proof of ownership of the land. You will need to be sure that such minute procedural details are attended to, with the understanding that the rules and regulations may be constantly evolving. They may also be open to interpretation by the bureaucrats who seem to enjoy lording power over your need for their stamp of approval.
3. Clear title
Titles can be tricky. Ownership of title to a property is not the same as the right to possess it. Although a proper title and registry may not fully protect you from people who claim their right to possess the land that you have purchased, there are steps that you can take to protect yourself from these kind of surprises.
First of all, it is imperative that you verify that the seller of the land is actually the full and clear owner of the title. You may come across land that has not changed hands in many years and is not titled. But registering untitled land can be very difficult, complicated, and expensive when there are multiple claims to the land. A similar scenario can occur when the land is properly titled and registered, but it is owned by several people who do not agree on the price or even if the land should be sold at all. This can occur when a property is inherited by relatives of the deceased owner or when married couples separate. Your financial transaction with one individual and ownership of the title does not prevent the others from making their claims, again resulting in a complicated and expensive legal battle that you are not guaranteed to win.
Also, be sure that there is no designated time period after a piece of land has been titled and registered for the first time during which claims can be made on the title, as is the case in Costa Rica. There, the period is ten years, and this law applies to parcels on previously undivided properties, making newly subdivided real estate a rather risky investment.
Evidence that all prior mortgages, liens, and judgments have been lifted may or may not be among the documentation required for closing the deal, but these issues should be ascertained before any money is exchanged in the deal. You should also ask to see all utility and tax bills to get an idea of cost and verify that they have been paid up to date and there are no outstanding debts. Property rights also come with certain responsibilities.
4. Title v. right to possession
Some countries where rural land has been in use for many generations are still in the process of bringing these lands into the system, so by registering this land, peasants have the “right to use,” or the “right to possession” of land that is legally owned by the government. If the land is not kept up according to certain rules or is not used, then the right to possession is forfeited. This land can then be purchased and properly titled, but it is an arduous process that is not recommended for those who are not well versed in the complications of Latin American civil law and land reform practices.
There is also the possibility that your right to possess the land that you own the title to requires diligent and ongoing maintenance, so that the title alone is no guarantee of your rights. Costa Rica’s Civil Code grants the right to possession of a property to those people who have occupied and “improved upon” non-cultivated or unimproved land. These squatters rights are given priority over property owners’ rights, the sympathies of the police and the judicial system are usually with them, and the situation is complicated by the nebulous definitions of “non-cultivated” and “unimproved.” So if you own a large piece of property in Costa Rica, or you do not live full time on the property, which effectively requires that you have residency in the country, then you will need to hire a dependable caretaker as an employee – with full benefits (otherwise, the caretaker may end up squatting on your land!).
5. Understand the real estate climate
Panama serves as a good example here, as there are several aspects of Panama’s booming real estate market that are very important to be aware of.
Licensing: Protectionist law makes it more difficult for foreigners to get licenses than for Panamanian citizens, so many foreign real estate brokers do not have a real estate broker’s license. They refer to themselves as “real estate consultants,” and they are allowed to list and show properties, but not to close the sale. However, these consultants are often more experienced and better qualified than licensed brokers who have simply taken a seminar and passed a test, and they can work for an agency that does have a license. The best advice is to use a reputable real estate agency with a sound track record and knowledgeable agents, so do your homework.
No MLS: Panama has no multiple listing service, which is a centralized database of all properties for sale. To find out what is available, you have to look at each real estate agency’s individual inventory. Sellers often list their properties with different agencies at different prices, and listings are not regularly kept up to date as a way of presenting more properties than the agency actually has available, so again, do your homework.
Do more homework: Panama is very popular at the moment, which is all the more reason to be extra careful, take your time, look around, and check every detail that you can out in person. You need to physically go to a property in Panama several times, in different circumstances, and don’t rely on the impression of a property as it appears on paper. Be aware that pre-construction condo sales may be an invitation for disaster, so find out about the track record of the developer and take a good hard look at the construction in process. Don’t let aggressive sales pitches pressure you into doing anything rash. Find a good real estate agent and a reputable, independent lawyer, and be thorough.
6. Find a real estate agent
Unless you have a specific seller with whom you will be dealing directly, you need to source out a real estate agent that you can have confidence in. You should feel assured that this agent knows the market well, understands local attitudes and mentalities, will engage in negotiations with the seller on your behalf, and will skillfully guide you through the entire legal process.
Start out your interaction with a prospective real estate agent as if you were interviewing them for a job. Not only do you want to make sure the agent seems competent and knowledgeable about the market you are looking at, but you should also press for a few details about their professional history. Your interest in these details will send a message that you are someone who does do their homework and is not going to be easily taken for a ride.
You might want to inquire about how they operate as far as chasing down titles, coordinating documents, knowing about the banking system, digging through the fine print of contracts, etc. Do they have any support staff? If they are working alone, then you should seriously question their ability to get everything done properly themselves.
When you ask, “Who do you represent?” the answer should be “You, the buyer, of course.” If they give any other answer, then you should thank them very much for their time and continue looking for someone who will represent your best interests.
7. The lawyer
Because of differences in ethical principles combined with the probability of there being frustratingly convoluted and ambiguous bureaucracies, you should get a lawyer involved as early in the game as possible. Whether you are working with a real estate agent or negotiating directly with the seller, you should always hire a reputable, diligent, independent lawyer who is licensed to practice in the location where you are buying. Ask for recommendations and be sure to speak to several current and former clients, if possible.
Hiring a lawyer does not mean that you will be leaving everything up to them. You will need to continue to be involved in the entire process. Keep your own paper trail and insist on seeing all paperwork, licenses, contracts, building plans, and anything else that might be involved.
With a lot of research, a good deal of patience, a reputable real estate agent, a meticulous lawyer, a measure of trust, and constant oversight, you will be able to navigate through the maze and end up with your little piece of paradise.
About the author: Susan Beverley is a writer and editor for Escape From America Magazine and also writes for and maintains Expat Daily News – the expat news blog for EscapeArtist.com. She traveled extensively before becoming an expat herself having found a place to call home in South America where she has lived since 2005. She understands the concerns, needs and difficulties that expats face from first-hand experience and is dedicated to supporting and encouraging anyone who is looking for a new nation to call home. [ send her an email ]