The complete legal guide for buying property in Ecuador.
Below are legal steps you can take to protect yourself from potential fraud when buying property in Ecuador.
Note: Many steps are optional and are up to your discretion; in addition note that you the buyer will have to pay for them. You should base your decision on the level of confidence you get from the people you are dealing with, and the financial amount of the transaction. More so how much a potential loss will mean to you. Do not confuse friendliness with honesty and professional knowledge. It is quite often that Ecuadorian display a very nice appearance combined with huge friendliness, but behind that, there is lack of responsibility and thorough knowledge, even honesty and true desire to help you. Do ask what specific experience they have; do not fell embarrassed to ask for references; and do ignore all the polite friendly gestures.
So where do you get started?
1. Prior to making an offer, go to the property register and ask for a certificate of the property. Or ask the seller or your real estate agent for it. Go to the Municipio and ask for tax payment. This document details everything about the property, and guarantees that there are no liens or court orders preventing the owner from selling. Experience taught us this one… it hurt to think about how this simple and very inexpensive procedure would have save us many months of grief and thousands of dollars. Do yourself a favor and make sure you have these document before putting up any money. Often you will find that the person selling is not the legal owner. Do ask for copies of ID (cedula) to go along with it. If you do not promptly get this, do not proceed.
2. In addition to the above, ask for copies of the property title. No if or buts, the seller must give you copies, otherwise do not proceed.
3. The buying process starts by you making an offer to the seller. In the case of dealing with a realtor, you may want to provide a small deposit check along with a written offer. The amount of the deposit should be 5% of the sale price, and should be fully refundable if the buyer does not provide you with a written promise to sell document within 5-10 days. Often sellers do not take offers seriously, therefore the value of providing a check along with a written signed offer. Note: You lose your deposit if you do not follow through with the purchase.
4. Seller must provide you with a promise to sell document. This is a legal document and should be done by an attorney. “NOTE” it is your only guarantee of why you are giving money to the seller, and it is the single most important document. The document must have ALL the same details as the final property tile will have, i.e. exact location of the property, all sales conditions, price, promise that there are no liens, etc. The more details the better. Here are several options that can go along with this document, but that are rarely asked/used by buyers. Do keep in mind that this is your only legal recourse if the seller refused to go through with the sale. Option 1. Use your own attorney. Option 2. Have the document signatures verified by a public notary ($10). This is a simple an economic procedure done by the public notary (who is also an attorney) this steps gives you additional security that the signatures are not falsified. Both parties must appear in person to the notary with ID. Next step (which is rarely used) Option 3. Have the document registered with the legal register of public documents, which is the Public Notary. This gives you two additional protection, one that the notaries attorney will read it to verify that it is legal, two it is now a public record. Note: This document you detail the form of payment, cash, check, bank deposit, wire-transfer, and how much time you have to make payment.
Note: The above procedure can and is quite often skipped altogether, but it is the best and simplest way to make payment. The other way is to make payment at the same time of the signature of the property title. Note: Often sellers will only accept cash, making it a risky thing to carry around large amounts of cash.
5. You make payment as agreed to the sellers account, and the sales commission to the realtor. When dealing with large amounts of money it is best that you make deposit into the sellers account at your convenience for which you need a proof of reason for your security, otherwise it can be treated as a gift, and that is the promise to sell document. Your deposit receipt together with the “promise to sell document” is your proof of purchase. Note: this still does not give you rights to the property; you must follow through with the following steps.
6. An attorney puts together a document titled “minuta” which will have almost the same information as the promise to sell. Note: You can pick your own attorney or the sellers attorney, if for any reason whatsoever you are not 100% comfortable, do get your own attorney to read it, same goes for the “promise to sell” keep in mind that your promise to sell is your only guarantee, once you make payment. The “minuta” now goes to the second attorney the Notary, the notary takes this information and makes it into a property title document; copies stay at the notary and become public record. This is your property title. Both parties must be present with ID and sign it. NOTE: This document does “NOT” have the real purchase price. This document usually shows a very small fraction of the actual cost of the property, for example you could be buying a property in the tens of thousands of dollars and this document may only show $100-200 for the purchase price. This document first goes to the attorney who did the minuta to take it to the property register (Registrador de la Propiedad) optionally your realtor can do this for you, or you can even do it yourself. But for the sellers protection it is often done by the attorney and/or realtor, because there is still one more document. After it is taken to the property register, which may take 1-5 days, often only one day, it is taken to the Municipality tax register.
7. The attorney now does another minuta, with the actual “real” sale price, this goes to the notary, and once more you need to go to the notary to sign it together with the seller. This is a step that is very often NOT done, and that should be done for the protection of both the seller and the buyer, because it states the actual selling price and it is your receipt of what you really paid for the property. NOTE: This information though public, it is not used for taxing purposes at all. The amount stated in the property title is used as a reference for property taxing purposes, along with a municipal property appraisal; rural properties are usually only taxed based of the land value, which is minimal. Most rural properties only pay a few dollars per year in property tax.
In the event of not making full paying, the property title should have all the details as how you are going to make payments. This will also be in the property registry in the form of a lien (prohibition to sell). The lien can only be removed by the seller upon completion of payment. In the even that for some reason the seller denies you this right, you must sue with proof of payment as specified in the property title.
In the event of doing installment payment for lets say a new house, same procedure should be followed. All conditions should be detailed in the property title, even if it takes twenty pages. This is the document to put it in. Both parties should agree on all the conditions, type/size/style/materials of construction, durations, fees, payment schedule, penalties for both parties, etc. Architectural drawings should also be attached and signed by builder/seller and buyer.
Often many attorneys use a simplified buy/sell contract as the first document, we prefer the above method as it offer more secure steps for both parties.
Be sure to keep receipts of all your payments.
Other areas to be aware of that are legal but…
It has happen many times that people sell rights to a property and not the full property. This often happens when it is an inheritance. For example parents die and leave an inheritance, this give the inheritor a document very similar to a property title, except that it says rights and stocks (derechos y acciones) do learn those two words… What happens is that you are tricked into buying (even with all the above documentation) but what this property title says is that you just became partner with others to the same property and does NOT details which share of the property is yours, in fact it will have all the same information, except for this little detail. This is legal grand theft, do beware…
A few more things you can do:
Hire a court approved property appraiser. Though property appraisers vary enormously in their appraisals, they can often give you a good reference point and a tool to negotiate with. Also are a must for financing. If you are going to be seeking financing, do this first, and use the banks approved appraiser.
Do demand that the buyer provides you with topographic drawings of the area you are buying. This you can demand in your offer to buy. Even if you have to pay for it before you buy. Cost is minimal and well worth it. $50-100 / hectare. Often sellers tell you to pay for it and discount it from the sale price.
When buying into a condominium or residential area, do make sure to read the regulations and by-laws. Note: These must also be part of the property title. Remember you are also buying into the common grounds, which implies responsibilities as co-owner. In this case, there should also be a topographic layout drawing (detailing all the property and what all the common grounds are) registered at the property registry.
Title insurance is yet another option. Title insurance is rarely used, but it is an option. More important than a title insurance, is that you follow all the above steps very closely. For example you could have title insurance into a shared property and end up being a victim of a legal theft.
If you do not know Spanish, you can have all documentation translated to English and simultaneously sign both. This work should be done by a court approved professional translator. At your additional cost. At the very least, have someone you trust to translate it all to you.
Needless to say, for your protection, it is best to use a professional Real Estate Agent, to help you along all the steps. As part of our service to you, we not only give you tour of the city and nearby towns, but we are also there next to you, at the attorneys, notary, property register, and we provide verbal translation service to you at no additional cost.
A few more FAQs:
What will we need to have with us should we decide to become full-time residents?
The most important item you will need is a Police Record. Marriage certificate “if” married. The Police Record is a must for the visa application. Children’s passport, if applying for them. Bank statements, credit report, bank and credit companies reference letters, present and/or past employers reference letters, copies of professional licenses, university degrees, etc. are all useful items. The Police Record is a must have for the visa, note: not for buying. You will also be asked to provide an HIV Negative test, which you can get locally.
To buy the only thing you need is your passport and a cashier check or cash. You will need to state if you are married or not. If married, be warn, to sell, your other legal half must be present or you must have a power of attorney. Otherwise best to say you are not married. You can also do wire-transfer, but this complicates maters a bit and it takes longer. Regular checks, also work, but complicate maters a bit too, since they often take weeks to clear. Best to open a local bank account as soon as you get here, or from the states in the case of some banks like Banco del Pacifico, Barclay, Citibank. Note: Some are only located in Quito and Guayaquil, one or two in Cuenca.
Large cash advances and checks are available from some credit card companies, like MasterCard, but only in Quito/Guayaquil and maybe in Cuenca. WesterUnion works quite well, but to save money it takes 5 working days.
You can leave the US with up to $10,000 per person, no question asked… Just make sure you deposit it ASAP once you get here. If you do this, do it in Quito or Guayaquil, around here they do not let you deposit much at once time. You may be asked to fill some affidavit declaring where you got the money from. If you do carry large amounts of cash, travel only by air inside of Ecuador. Buses are not safe enough.