There are no restrictions on foreigners buying property in Colombia. Real estate transactions are handled by a notary, and an attorney of the buyers’ choice should write the offer.
Foreigners buying Colombia real estate can qualify for a Colombian residency visa as well.
There are a couple important points to remember when buying real estate in Colombia as a foreigner. The Colombian marketplace is not over-leveraged. Deals are done in cash and there is no substantial discount for paying in cash, if any.
Forget your North American expectation that if a property has been on the market for a long time, you can negotiate hard and get a good deal. A Colombian will sit on a property, unless there is a really urgent need to sell, or until he receivers an offer for what he believes it is worth. As the prices rise in the marketplace, sellers will continue to raise their own price. This is a cultural view in Colombia and not something you will change.
Do not try a tactic of saying you will need a lower price because you need to do a lot of maintenance or remodeling. The seller most often thinks there is nothing wrong with his home.
The process for buying real estate in Colombia consists of:
- Verbal offer
- Price on the deed
- Amount of the deposit
- How the road improvement tax will be paid (Medellin)
- When the Promesa de Compraventa will be signed, the deposit, and the date for the closing.
Escrow & Title Insurance
In Colombia, there is no title insurance and no escrow. You need to hire an experienced lawyer who understands real estate law to do a title search and a series of other background checks.
Once the title search is done, the lawyer will prepare the document called the Promesa de Compraventa. This will outline all of the details above. It also includes a penalty clause, often of 20%, that is applied for default to either party. The deposit goes to the seller.
The final step for buying real estate in Colombia as a foreigner is the signing of the deed (escritura).
At this point you will finalize all of the paperwork, make the remaining payment, and receive the keys.
Banking & Finances
Foreigners without a Colombian ID generally can not obtain bank accounts. Because banks charge higher for handling of funds entering Colombia, it is recommended that you open a brokerage account.
Opening a brokerage account requires patience and the government is very strict. It can be a bit tedious, but this is the safest and most secure way to bring money in and out of Colombia.
As long as you have not been in the country for more than 6 months in one calendar year, you can register funds coming into Colombia as a foreign investment. This is important to know if you are planning to apply for a Colombian residency visa based on a foreigner buying real estate in Colombia.
The Colombia Investor Visa
The Colombian residency visa based on real estate investments (Colombia Investor Visa) uses the yearly minimum wage as part of the calculations. This Colombian residency visa is renewable up to five years.
The Colombian residency visa must be registered in the deed. It Is not unusual for a Colombian to want to register a lower sale price on the deed. You and your agent must pay close attention to this in your negotiations if you intend to apply for a visa based on your purchase.
You need to register the property in your name. It can not be purchased through an L.L.C, S.A.S., Panama S.A., or a foreign trust if you want to apply for a visa based on a property purchase.
You can purchase real estate in Colombia through L.L.C., Panama S.A., a foreign trust, or S.A.S. (Colombia corporate structure). If for tax purposes, or for reasons of privacy, you wish to manage your affairs in this manner, this is completely legal in Colombia. You will have to supply all foreign corporate documents, duly translated by an approved translator and legalized (probably with the Apostille seal).
If you are just interested in making a simple investment in Colombia, buying real estate in Colombia in your own name is the best way to move forward. If you intend to buy a few properties to rent out, then you might wish to incorporate a company to manage this business. A Colombian residency visa can only be applied for with property purchased in your name.
You must first obtain permanent residency by an investment of approximately US$150,000 in Colombian real estate or as contributions to a Colombian company. After five years as a permanent resident, you and your family may apply for naturalization. Check if your 5-year visa is good if you are out of the country for a period of time.
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This article is based upon Flex MLS reporting, legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.Harriet Murray