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The Expat Guide to Buying Real Estate in Ecuador

expats guide to buying real estateEcuador is a breathtakingly beautiful country that has it all!   A small country with a total population of slightly less than 15 million people, Ecuador is smaller in size than Colorado and a little larger than Wyoming as far as land mass is concerned.  Because of its diversity of climate and its low cost of living, Ecuador ranks consistently (for the past 10 years) as one of the most desirable retirement  destinations in the world!  Here are some rules of the road on how to buy Real Estate in Ecuador.

Welcome to the Wild, Wild West

Ecuador, under President Correa, has experienced tremendous growth in the last 5 years with massive government projects on roads and infrastructure. The GDP is growing 4-6% annually. The country is experiencing growing pains and some industries are playing catch up.  The Real Estate industry is one such industry.  There is not much regulation or oversight, at present, concerning the sale of Real Estate.  Licensing is available for agents in the larger cities and only a handful has licenses.  The vast majority of “agents” are not licensed nor have they had any prior experience selling Real Estate for any extended period of time.  So, it’s Caveat Emptor (Buyer Beware!).  The blogs are full of horror stories of gringos that came here and got ripped off while trying to buy Real Estate.  What’s even sadder is that a lot of this is gringo on gringo crime.  Yes, you have to look out for the Gringo Realtors as well as the native Real Estate agents.  First and foremost, make sure you are working with a reputable and honest person.  Ask a lot of questions.  Ask for referrals.

MLS, What MLS?

There is no MLS (multiple listing service) at present in Ecuador and not all agents play well with others.  There isn’t a sense of community in the industry here (yet) and some agents simply refuse to work with others.  Since there is no MLS it becomes extremely hard to discern the fair market price of a particular piece of property.  There are no CMA’s (competitive market analysis) of properties here.  If you were to ask for one, you would probably get a blank stare and a look of bewilderment from the other party!  You will need to spend a lot of time doing your due diligence or select a Real Estate Buyer’s Agent who is a professional with a track record in the industry.  Good luck!  They are hard to find!

Listings

Ecuadorians are not comfortable with exclusive listings. They prefer open listings or choose to go the “For Sale by Owner” route.  They are reluctant to list with anyone and will try to sell their property themselves.  This is one reason, I believe, that Real Estate companies from the US are having a hard time getting established here.  They aren’t flexible and don’t adapt well to the local culture.    There has been an explosion of new Real Estate web sites on the internet, just in the last two years.  They are almost all made up of open listings.  As a matter of fact, with a little digging, you can find the same property on several different sites and at different offered prices.  Also, the prices sometimes are inflated to compensate for the lack of a set commission.  What’s a buyer to do?

Commissions

Ecuadorian property owners, as a rule, don’t like to pay a commission for the sale of their property.  Instead they prefer a net listing.  It’s a cultural thing.  They will establish their bottom dollar price of X and tell you that your commission is anything over X.  This is a gray area and some of the people selling real estate have abused this practice and overcharged buyers by double dipping.  They double dip by charging the commission to the buyer as well as make a profit on the spread between the net price and the sale price.  Beware of this practice.  There is no set standard for commissions.  They can be all over the board with the average commission being 5% of the sales price. This is split 50/50 between the listing agent and the selling agent.  The commission can be paid by the seller, by the buyer or split between the two of them.  A sales commission is a small price to pay in the big scheme of things when you consider all the pitfalls that are involved.  Look at it as insurance and peace of mind.  Choose a professional to work with and let him/her do the heavy lifting.

Showings

Since there are no industry regulations and rules, every Real Estate company handles the actual showing of properties differently.  Agents oftentimes will conduct a “free” tour of local properties and charge a fee if there is traveling involved. Others charge to show their “listings”.  These fees can range from $15.00 to $20.00 per hour to extended tours that can be $150.00 to $200.00 plus expenses. Some Realtors will refund the fee if you purchase through them.   There are also several Real Estate tour companies that don’t actually sell Real Estate.  They are usually paid a fee by the sponsoring development or project.  I have heard that these tours are biased towards certain locations while ignoring others. You don’t really get an unbiased look at the market this way.

Agency

Just who does the Realtor represent?  There are three types of agency: Seller’s Agent, Buyer’s Agent and Dual Agency.  In the US, most agents represent the seller. The agent has a fiduciary responsibility to the seller and a moral/ ethical responsibility to the buyer.  Here in Ecuador, the agents usually work as dual agents, representing buyer and seller equally.  This can become sticky and loyalties become clouded if the Realtor is also a developer, builder, or speculator.  Just where do his loyalties lie? Usually (and its human nature) they promote their own properties or projects first.   Thirdly, there is the Buyer’s Agent.  Buyer’s Agency has become big in the US and is beginning to catch on here.  Signing a Buyer’s agency agreement gives you peace of mind knowing that the agent is working in your best interest.  This works well also if you are engaging an agent to work for you here while you’re still in the US/ Canada or if you have a specific criteria.  The agent will work in your behalf to find the exact property you are looking for. A buyer’s agent will also negotiate in your best interest and get you the best negotiated price.

The Offer

In the US an offer is written up and presented and if accepted it becomes the actual sales contract.  You then proceed to closing.  Here, in Ecuador, the process is different and in most cases, simpler.  Once you have selected a property, the agent will prepare a “promise to buy” document called The Promesa de Compra-Venta.  Once the seller and buyer agree on the terms and conditions then this document is notarized and registered with the property registrar.  All legal documents must be in Spanish and be notarized to be recognized as binding by the courts here. A notary here is different than in the states.  A notary here is an attorney with advanced training and carries more legal responsibility.   An earnest money deposit, usually of 10% of the sales price, is required at this time.  Since this is also considered a down payment, these funds can be held in escrow by the agent, the closing attorney or the seller.

Closing

Since financing is close to impossible to obtain by a gringo (unless it’s owner financing) the sale is all cash.  Closings can happen in a week or less but usually take 3-4 weeks. A word of caution:  It is of the utmost importance that you select an honest, competent attorney that does Real Estate closings.  Title searches are critical and can give you peace of mind or give you nightmares.  It all depends on how thorough your attorney is.  Ask for references from property owners and your Realtor when selecting an attorney.  Sometimes the cheapest one is not always the best one.  As a rule of thumb, closing cost can run you 1.5% to 2% of the sales price and this includes all taxes and fees.  Taxes here are extremely cheap!  You pay tax on assessed value versus sales price and it can be 15% to 50% of the sales price.  As an example, the annual real estate tax on a $150, 000. house or condo may be as low as $250.00.

Choosing a Realtor

There are web sites that promote “how to buy real estate like a local and save big” but I would caution you to be very careful trying to go it alone. You may save a few dollars early on, only to spend thousands later trying to correct a problem.   The process here is different and the unknowns will bite you in the butt if you’re not careful so it’s critical to choose a competent, knowledgeable Realtor.  Be prepared to interview the Realtor and ask a lot of hard questions.  How long have they sold Real Estate?  What other businesses or activities are they involved in?  Have they been, or are they now, a party to a lawsuit?   Are they receiving other compensation in addition to the sales commission?  Do they have references? Etc., Etc.

Why Choose Dave Causey?

Why in the world did I Retire in Ecuador only to start a Real Estate business, of all things?  Especially since the market here IS the Wild, Wild West filled with scallywags and incompetents and downright dishonest, so called realtors.  It’s a fair question!  I don’t want to sound like an avenging angel or a syrupy do gooder but some of my motivation is altruistic.  I’ve had an active Real Estate license in the US (Virginia) for over 28 years and in all of that time I’ve not had ONE complaint or trouble with the Board of Realtors.  I’ll give you my license number and you can look it up for yourself!  If I can help someone purchase their retirement home and help them avoid all the pitfalls that I have heard of and seen, then I’ve done a good thing.  People come down here to Ecuador with stars in their eyes and then it goes from bad to worse.   I’ve heard so many Real Estate related horror stories that I just couldn’t turn a blind eye so I got involved.  I’m helping people move to a foreign country and making the transition as smooth as possible.  Real Estate sales are an offshoot of that.

I sold Real Estate actively and full time for twelve years and have renewed my license every two years by taking a mandatory 40 hour continuing education course.  I DO feel that I know of what I speak.  Another important reason that I sell Real Estate is that I hope to establish a slush fund, aside and apart from my retirement income, for any of my family who may want to move to Ecuador.  The Real Estate industry was very good to me in the states and I have a high regard for the profession.  I take pride in helping others make, what can be, one of the largest financial decisions of their life.

Plan Your Escape to Ecuador

There are a lot of North Americans, reaching retirement age realizing that their nest egg is just a shadow of what it once was.  They have a real fear of outliving their money in a country they no longer can afford to live in.  That’s one reason so many Baby Boomers are moving here. The cost of living is about one third of what it is in the US.  Others want to live out their twilight years on an adventure in a new land!  That’s why Miriam and I are here and what an adventure it has been!  I’d like to help you make that move!  Feel free to call me or write me with your questions.  I’ll try, to the best of my ability, to answer all of your questions.  If I don’t have the answers, I’ll get them for you.  I want to help you make the transition as smooth and stress free as possible.  Come join us!  Let the adventure begin!

Email us at info@EcuadorPropertyConsultants.com .  You can book an appointment to talk directly with us one on one, or call toll free from the US 804-858-4289. Within Ecuador Contact Dave at 098-285-6951 or Miriam at 098-289-6208.

Skype for Dave-dmcausey      Skype for Miriam-mmmweaver

Dave & Miriam

Dave & Miriam moved to Ecuador in January of 2011 & have been helping expats make the transition to living abroad as smooth as possible ever since. If you are looking to rent or buy in Ecuador be sure to contact us. We promise to tell it all...the good, the bad and the ugly! Call from the US 804-858-4289; from Ecuador 098-289-6208 for Miriam or 098-285-6951 for Dave. Email us at info@EcuadorPropertyConsultants.com.

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2 Responses to The Expat Guide To Buying Real Estate In Ecuador

  1. Hi Dave,
    I am retiring soon and am looking at both Ecuador and Costa Rica for a place to land. I want to live at a high enough altitude to have cool weather and purchase as large a property as I can afford. I will be living on a pension from the State of Florida and can get early Social Security in 2 years so financially will be okay.
    I am just ready for a change of culture, change of pace, lifestyle etc. I am single and don’t want therefore to live someplace too isolated i.e. far from a clinic or someplace to buy food. I have zero desire to live in any gated enclave, near any city, on the beach, or near malls etc. I am looking for a rural type of community and a property with pasture of about 25 acres; ideally I would love to have as much primary forest on my property as possible as well. You probably hear it all the time—a pristine property perched in the cloud forest etc etc. Were I a younger woman I would buy the 100 hectare cloud forest property I found online for $100K however I have to be somewhat realistic about personal safety, so neighbors within screaming distance is good (in case I fall off my horse and break a leg or something). My budget is around $200K: if no abode is on the property that will need to be covered in that amount. I don’t want a large house–2 bedrooms, a bathroom and probably open floor plan so it won’t seem as small as i inend for it to be. If a good clean water supply is on the property, all else is “irresistable” and the price is right I’m looking into investing in solar because I imagine that not needing to be on the grid would allow me more property options at a better price.
    My Spanish is fair so that’s a plus. Have a great aweekend! Just wanted to introduce myself and get on your radar in the event you see a property that might be of interest to me. No computer at home so I won’t be able to reply until Tuesday, Monday being MLK holiday.
    Cheers,
    Carol Bickerstaff

  2. greg Black says:

    Hello,
    I am not sure if my message went thru or not, I just wanted you to know that Sue and I have every thing in place such as pass ports, tickets, hotel reservations and car reserved and will be there April 19th. We will relax the first day then we want to look at the house we want. We will call you when we are there. We are very excited.
    Thanks
    Greg Black & Susan Sparrow

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