HOW TO BUY ECUADOR BEACHFRONT REAL ESTATE
It’s not hard to buy property in Ecuador. But to make sure your dream of buying amazing beachfront real estate Ecuador becomes a reality with minimal hassles and problems, you need a great team on your side.
YOUR REAL ESTATE TEAM
In any real estate deal you work with people to make it happen. So you’ll definitely want to have a trusted real estate team in country to handle essential business, research and due diligence for you:
- Real Estate Agent
- Real Estate Lawyer
Your Ecuador Real Estate Agent
The entire process of buying real estate in Ecuador works out much better, easier and in you favor when you have a trustworthy local agent on your side from the start.
Some people come to Ecuador believing they don’t need an agent. The industry works a bit differently than it does in the US, Canada and European countries. So there’s no law that you need one here.
Unfortunately, the people that come to the country expecting to buy property on their own without guidance and assistance – these are the people that get taken advantage of most of the time.
A professional and trustworthy real estate agent will have a lot of inside experience with the market, the laws, the people and the ‘way things are done’ in Ecuador and their local area.
Of course you’ll need to pay your agent a cut of the transaction. They work hard to find you great properties that meet your needs, find out the history of those properties, spot any issues and red flags that might come up, and – along with your lawyer – they’ll help guide you through the entire process.
You’ll almost definitely end up paying more if you don’t get real estate agent in Ecuador: whether in hard cash, time, or the bad experiences you could have avoided if you had one to help you.
Your Real Estate Lawyer
Once you have your agent lined up, one of the first things they’ll do is connect you with a reputable and trustworthy local Ecuador real estate lawyer.
Your lawyer works with all of the parties involved in the transaction. They’ll walk you through the process of getting everything together and making the transaction happen hassle free, and legal.
Their job is to guide you through the entire process in a foreign country where the laws, customs, and people are different from home.
Your lawyer will look back at the entire history of the property to make sure the mortgage and taxes have been paid off. They’ll also spot any other issues that could delay or even prevent the sale.
For instance – your lawyer will make sure that you can actually get a deed on the property. Some of the property in Ecuador is communal, and communal properties do not have deeds.
It’s important to make sure you’re working with a lawyer that comes highly recommended:
Find an attorney has worked successfully with many people over the years in the area you’re looking. The wrong lawyer could lead you down the wrong path and / or take advantage of you.
DOCUMENTS & FEES
Essential Documents for Buyers
Your Personal Documentation
Once you have your team in place – your next priority is to make sure you have all of your essential documentation with you in Ecuador when you come down to shop and do deals:
- 01 – Birth Certificate (original copy)
- 02 – Passport
- 03 – Bank Information
If you’re married and your wife or husband will be listed on the deed with you, you’ll both need to have your own original copies of birth certificate and passport with you.
Be aware that if you don’t original copies of these documents with you, you won’t be able to finalize the deal while you’re in the country.
So in that case, be prepared to give Power of Attorney to your lawyer. That way they’ll be able to continue the deal and sign things for you after you leave the country to go home.
About the Deed
The most important document in your real estate purchase is the Deed. In Ecuador this document is called the ‘Escritura’.
The Deed establishes your legal right to own the property. Your goal as the buyer in the real estate transaction is to get legal possession of the Deed to the property.
Deeds in Ecuador are fully owned by the legal purchaser. They’re also hereditary, which means you can transfer ownership to your descendants – or anyone you like – after you pass on.
Deeds can be owned without any issues by foreigners and foreign entities.
The Deed will be signed at the closing by you and the seller – or, your lawyers you have given Power of Attorney (see below for more on this).
Ecuador Real Estate Fees
There are some fees involved when buying a property on the coast of Ecuador. Some fees are paid by the buyer; others are paid by the seller.
Other than what we’re covering below, normally there are no other hidden charges and fees when buying property in Ecuador.
TIP: At the closing, make sure that you or your lawyer receive your own copies of all the most important paperwork:
- Receipts for each fee that you pay
- A copy of every document you sign
As the buyer of the property there are two main fees you’ll need to pay:
- Municipal Fees (‘Alcabalas’)
- Notary Fees
The municipal fees in Ecuador are for registering the Deed. The municipality will also use some of the fee to do a background check on the Deed to make sure it’s clear to register.
These fees normally run about $300.
At the closing, the notary will certify all of the documentation for your real estate deal – including the Purchase Agreement and the Deed – for around $250 to $300.
Your property might come with a Homeowners Association (HOA) fee. If the property is located in a neighborhood or building they’ll usually have a HOA fee that covers your water, sewage, garbage pickup and the like.
Also – you’ll be paying your lawyer for their assistance in handling everything. Naturally you’ll have this conversation with them and will know what to expect. And sales commissions for your real estate agent will run about 6% of the sale price.
Other fees in a typical real estate transaction in Ecuador are handled by the seller:
- Utility Fees (‘Utilidades’)
- Annual Taxes (‘Predios’)
- Proof of Solvency (‘Certificado de Solvencia’)
- Fire Department Certificate (‘Certificado de Bomberos’)
As the buyer of the property, the important thing to know about seller fees is that you cannot purchase the property until the seller has paid them off.
So unpaid seller fees are one of the top issues that can cause delays when you’re trying to complete the transaction for your new property.
The Utility Fees are charged to the seller by the municipality where the property is located.
One of the critical tasks your lawyer handles is to make sure the seller has paid any overdue utility bills, HOA (Homeowners Association) fees and the like.
Some sellers may want the buyer pay the overdue balances on their accounts. Depending on the circumstances, there are agents who may offer pay off the seller’s overdue accounts and get reimbursed after the closing to help make the deal happen faster.
Annual Taxes are paid to Ecuador’s federal government by the seller. These taxes essentially serve the same function as property taxes in the US and some other Western countries.
The annual tax rates are very low in Ecuador. For instance: taxes on a 1300 sq meter condo with three bedrooms on the water might be around $100 a year!
The assessed tax valuation (Predio Urban) of property in a city is typically around 50% of the purchase price. For a more rural properties – like many of the properties along the Ecuador coast – the tax valuation (Predio Rustico) can be as little as 10% of the sales price.
Proof Of Solvency
The Proof of Solvency fee (‘Certificado de Solvencia’) is for the seller to certify they don’t own any money on the property and there are no outstanding liens to pay off.
Fire Department Certificate
The Fire Department certificate shows that there are no serious fire damages and the property is fire resistant. The seller contacts the fire department, they’ll come check the property out and issue the certificate in exchange for the fee.
Rule #1 when it comes to money and buying Ecuador beachfront real estate is this:
Be prepared to deal with all Ecuador real estate transactions in cash
That means you’ll need actual currency, travelers check, or certified money order.
Never plan on using a credit card in these transactions. And it’s going to be pretty much impossible for you to get a loan from an Ecuador bank as a foreigner. It’s also usually problematic to get a loan in the U.S. or other countries to buy property in Ecuador.
So most buyers get their own capital ready from savings or other sources.
Some sellers might be willing to privately finance some of your costs. A common arrangement is for them to let you make a year of payments. But otherwise you can anticipate that all deals will need cash up front.
For the details on how to handle the deposit for you new property, see below.
THE BUYING PROCESS
Once you find a property you’re excited about and interested in buying, the process generally goes like this:
Lawyer’s Due Diligence
First – have your lawyer check the background of the property to make sure there are no:
- Taxes owed
- Liens on the property
- Issues with the Deed
Be aware that there’s no official requirement for a seller’s disclosure to warn prospective buyers about the condition of the property. So this is another area where your lawyer and agent will be invaluable for you to avoid any potential trouble:
Because of this lack of requirement, it’s even more essential in Ecuador that you have a local lawyer carefully check out the status of the property before you rush into the buying process.
Clearing the Property
Your lawyer will verify a clear Deed by reviewing the following documents:
Property Deed (Escritura De Propiedad Del Inmueble)
This is the Deed.
Property Registration Certificate (Certificado De Registro De Propiedad):
This confirms that the property is correctly registered with the local municipality.
Certificate of Ownership (Certificado Del Historial De La Propiedad)
A complete transaction history of the property. It’s rarely used, except in a case where you or your lawyer has reason to believe there may be a problem.
Property Tax Payment (Pago de Impuesto Predial ):
The receipt for the seller’s recent property tax payment.
Certificate of Liens (Certificado De Gravamenes):
This lists any liens, debts, claims, or restrictions on the property. The notary needs this before finalizing the contract. A lien or debt must be notarized and registered to have any legal validity.
There are some other documents that apply to larger development projects, but for the typical buyer these are the main documents that need to be in order before your transaction can move forward.
The Buy-Sell Agreement
Once the property and deed check out you can start working out the terms of the sale with the seller.
The ‘Buy-Sell Agreement’ is the document that works out the details of the deal between the buyer and the seller. It covers:
- The terms of the sale
- The due date you have to produce the down payment and secure the property.
The Buy-Sell Agreement protects both the buyer and seller.
For the buyers, it locks in your preferred requirements and terms of the sale to ensure the seller will not change the arrangement, or otherwise not follow through on what they promise when it comes time to close the deal.
For the seller, it protects them against foreign buyers who begin the buying process then leave the country and back out. That means most sellers will want to get an agreement signed with a deposit before the buyer leaves the country.
A Buy-Sell Agreement also states any penalties that apply. For instance – a common stipulation is that if you hand over the down payment – then suddenly decide you want to back out – you’ll lose a percentage of the deposit (usually 5-10%)
This format of the agreement will follow one of these two documents:
Reservation Agreement (Convenio de Reservación):
This is a private contract between the Buyer & Seller that needs to be signed by an Ecuadorian notary. This contract is often used to reduce costs the cost that come with a Promise to Buy and Sell (see below)
Promise to Buy and Sell (Promesa de Compra-Venta):
This contract differs from the Reservation Agreement in that it can be registered at the local Property Registry (local municipal offices).
Note that the Promise to Buy and Sell can add as much $500 to $750 to the closing costs after registration. To reduce costs, this document is often used as a private contract and isn’t registered.
However – if there a problem does develop between the buyer and seller the document must be immediately registered at the municipality.
A ‘Promesa’ of this type is typically used when entering into a contract for construction of a home.
TIP: Make sure you have your own copy of your Buy Sell Agreement. Keep it with you whenever doing any business with the seller, their agent, or their lawyer leading up to the closing!
CLOSING REAL ESTATE IN ECUADOR
In a perfect world, all of the parties to the transaction would meet at a Notary office to make the final transaction that gives you legal possession of your new property:
- You (the Buyer)
- Real Estate Agent
In actual practice in Ecuador it doesn’t happen that way 90% of the time. With buyers from out of the country, the buyer and seller often can’t be present at the same time in the same meeting.
This is another reason why having a great real estate lawyer on your side is so important. You can give them Power of Attorney (PoA)* so they can do all of the following on your behalf:
- Represent you and your best interests
- Review the documents to make sure everything is in order
- Sign the deed
- Hand over your deposit
- Pay the notary and real estate agent
- Register your new property with the municipality
Most often the seller will also have their own lawyer to represent their side of the transaction. The sellers lawyer will check everything out and sign the deed for them.
*Be aware that real estate agents will never usually take Power of Attorney for a buyer. The PoA is given to your lawyer, not your agent!
Closing from the Buyers Side
In order to close the deal on your new property you’ll need:
- Birth certificate (original copies)
- Passport (original copies)
- Municipal and notary fees
- Lawyer fees
- Real estate agent commission
- Cash, money order or travelers check for the down payment and fees
Your lawyer will prepare a document called the Minuta. This will be used by the notary to prepare the Deed.
Note that selling price listed on the Minuta will be the property’s assessed tax value, not the purchase price you agreed to in the Buy Sell Agreement.
This is where you want to make sure to have a Reservation Agreement, Promise to Buy and Sell, or private contract that clearly states the details of the transaction – even if you’re going to buy the property with only one payment.
Sales Tax Notice (Aviso de Alcabala)
Using the information from the Minuta, the notary will prepare a sales tax notice. This instructs the local municipality how much tax to charge. It’s generally 1% of the assessed tax value of the property.
Sellers Side Closing
The seller needs to have their Utility Fees, Municipal Fees, Annual Taxes and Fire Department Certificate handled and prepared for the Notary (see above).
Signing the Deed
Once the Notary has these documents they can prepare the Deed for signing: either by the buyer and seller that are present at the closing, or their lawyers that have Power of Attorney to sign on their behalf.
Once the Deed is signed, the Notary makes 3 copies:
- (1) copy of the Deed is stored at the Notary office.
- (2) copies of the Deed for the municipality’s Registration Office
- (1) copies for the new owner (you)
These copies ensure that the Deed – and your status as the new owner – will be protected with multiple copies existing in different locations.
Transferring the Down Payment
Once the Deed is signed you or your lawyer can hand over the down payment for the seller.
Just remember the second money rule when buying Ecuador beachfront real estate:
Never hand over the deposit until the Deed is signed by both parties!
The Notary serves as a neutral party that holds a copy of the Deed until the Seller confirms receipt of the funds. Once the:
- Deed is signed, and
- Seller confirms the receipt of funds
… your new property will be officially yours!
The best way to transfer the down payment is to wire the money. The best person to wire it to will be your lawyer whom you’ve given Power of Attorney (your real estate agent should never handle your money directly)
Once the Deed is signed, you can wire the deposit from your bank to the lawyer. Wire them the payment amount you agreed to in the Buy-Sell agreement. Then they’ll finish the whole process for you.
Your lawyer will attend the closing with a check that they’ll sign on your behalf. After they sign the deed they’ll hand over the check to complete the purchase.
If you do remain in the country and can attend the closing yourself, you can bring a check or travelers check. Give the check to your lawyer, and they’ll deposit it and pay the seller (minus your agent’s commission).
Just be prepared to wait 1 or 2 weeks for the check to clear before you can take ownership.
Some buyers will insist on paying the seller directly. In that case, if you have an agent be prepared to have their commission set as a stipulation in the Buy-Sell Agreement.
REGISTERING YOUR DEED
The final step in the transaction is to register your ownership of the Deed with the local municipality (Registro de Propiedades) where your new property is located.
Note that registration with the municipality is not a required step for ownership. However – it’s highly recommended that you do so. Registering as the owner with the local authorities protects you against any potential ownership disputes that could come up later.
If you want to register the property with the municipality yourself you can. But you’ll need to be Spanish speaking or bring a translator. Most employees in offices and municipalities in Ecuador are not English speaking 99% of the time.
If you have a competent and reliable lawyer on your team: they’ll know where the municipal building is, they’ll have no issues communicating with the employees, and they’ll use your registration fee to register the deed on your behalf.
When you’re in a foreign country there are many things you aren’t familiar with and might not (or cannot!) anticipate.
You can waste a lot of time – and possibly get yourself into trouble – unless you have someone in your corner to make sure everything is handed the right way without hassle.
Be aware that going to a municipality to register a property deed in Ecuador is a lot like going to the DMV – with the additional obstacles that everyone speaks Spanish, the policies are different than home and can be even more confusing.
With Spanish speaking lawyer in your corner you’ll go to the front of the line. Without one, at the very least you’ll probably find yourself waiting in the office before anything gets done.
At worst?: be prepared to have a ‘DMV nightmare’ story to tell…South American style!
In Ecuador there are some shady types that can show up at the closing in place of the seller. When the deed is written up they raise the price…then keep the remainder of the money for themselves.
Having a lawyer and agent on your on your team will also help protect you from con artists looking to prey on unsuspecting foreigners!
BUILDING YOUR HOME
If you’re buying a land lot with plans to build your dream home or business, here are a few things you’ll need to keep in mind.
It’s important to be careful when choosing builders in Ecuador. If you hire the wrong ones you can be taken advantage of.
Some builders are unreliable and can’t be trusted to do consistent quality work on time and on budget.
There are also builders who will keep padding up the costs of the materials and construction as the work progresses to give themselves a larger cut.
So it’s very important to have someone you trust in Ecuador to:
- Connect you with a reliable builder that does quality work at a great price
- Look over the plans and the work as it progresses
- Check in on the build site to make sure they’re doing the job right
One of the most common issues people have with builders in Ecuador is that they’ll tell you they’ve finished all the work you hired them to do … then leave the job site with things undone.
So it’s wise to have someone locally that you trust to go on the job site and inspect the work with a checklist on hand to make sure everything is complete…before the builders wrap up the job and you hand over the final payment.
If you’re investing in a property with plans to develop multiple units for sale over time, find a builder you can trust and get them to complete at least one unit to see how it works out.
Then – based on your experience with them and the results – have them build the rest of the buildings on your site.
ISSUES & RED FLAGS
Again, we need to emphasize what we told you at the beginning.
If you come to Ecuador and decide you don’t want to work with a real estate agent – because you’re not sure you can find one you trust – you run the risk of running into people that will take advantage of you in all sorts of ways you might not be prepared for.
The real estate market is not as tightly regulated as it is in the US and other Western countries. So – although most transactions are legitimate and everything turns out fine – the truth is Ecuador is more of a ‘wild west’ environment…where shady types can run scams on unsuspecting foreigners.
For instance: some have purchased properties for $100,000 or more from someone that didn’t actually own the property. They sign a counterfeit deed …and the ‘seller’ disappears with all of their money.
There are many other risks you’ll open yourself up to to unless you make it your first priority to find a knowledgeable, trustworthy local real estate agent and legal counsel – before you start looking for property and working on any deals.
An agent that has your back will help you find great properties that are genuine deals, and they’ll know what problems to look out for.
The best agents will also help you:
- Find you a great place to stay for a few weeks while you’re looking and doing business
- Help with transportation
- Recommend where to enjoy yourself along the way
A great agent will help you with all of the other essentials you’ll need in place for everything to work out in your favor without hassle while buying real estate in a foreign country.
So first of all – find a real estate agent with a reputable company. Then, call them to make your plans before you travel to Ecuador.
Your agent will help you set up your house hunt. They’ll discuss what kinds of properties you have in mind, the areas you’re interested in, and will help you with lodging and transportation.
Then, one of your first agenda items on arrival in the country will be to set up a meeting with a trustworthy real estate lawyer as soon as possible.
Hopefully now you have a much better idea of how the process of buying Ecuador beachfront real estate works. But a great lawyer will fill in the gaps, guide you through the details and past the obstacles that will inevitably come up with your individual deals and circumstances.
Your agent and real estate lawyer will help you avoid the pitfalls and make sure your dream of property ownership in one of the most beautiful and affordable places on Earth becomes a reality.
Buena suerte amigo! Please don’t hesitate to contact us if there’s anything we can clear up for you!
Coastal Living Ecuador
‘Your Partners for Ecuador Beachfront Real Estate and Daily Living Along the Coast’