We provide a buyer’s guide to Medellín real estate for foreigners including the steps involved in buying property in Medellín and typical closing costs.
Medellin continues to attract more and more foreigners each year ranging from entrepreneurs to couples and digital nomads and even some families.
In addition, Medellín attracts more foreign retirees each year as a top foreign retirement location with its low cost of living, “eternal spring” climate and good healthcare with nine of the top 58 hospitals in Latin America. Also, Medellín has been described by a number of publications including U.S. News, Huffington Post and CNN Money as a top foreign retirement location.
I have lived in Medellín for over eight years and there are many reasons for living in Medellín. And I previously wrote about 27 reasons why I decided to live in Medellín.
The real estate market in Colombia operates differently than the real estate markets in the U.S. and other countries. And many real estate agents in Colombia don’t speak English.
We previously looked at 11 things that real estate agents in Colombia may not tell you. Buying or renting a home in Colombia and working with real estate agents in Colombia as a foreigner can be challenging.
On the Medellin Guru website, we already have an extensive series of articles about renting apartments (both furnished and unfurnished) and articles about neighborhoods in Medellín but we haven’t yet covered buying real estate.
Many Medellin Guru readers have asked about buying property in Medellín and the steps involved. So, we now provide a Medellín real estate buyer’s guide.
How to Buy Property in Colombia?
Foreigners are permitted to buy property in Colombia. The process for buying in Colombia is essentially the same for foreigners and Colombians.
The government in Colombia has recognized that foreign investment is important. And all you need to buy real estate in Colombia is a passport. Residency isn’t required to buy real estate but buying real estate can qualify for a Colombian investment visa.
However, there are two important notes for foreigners to be aware of when buying real estate in Colombia. In Colombia there is NO title insurance and there is NO escrow (except for new construction properties).
So, it is very important to hire an experienced lawyer who understands real estate law in Colombia to do a title search and other background checks.
Why Buy Real Estate in Medellín?
There are many reasons that foreign investors buy real estate in Medellín. Here are some of the most common reasons for foreigners:
- Investment property that produces a monthly income
- A place to live in full-time and avoid paying rent
- A place to live in part-time and rent out when not in Medellín
- An older place to renovate and sell (flip) or turn into a rental property
- Want a visa for investing in real estate
We do not recommend buying real estate in Medellín solely for the purpose of getting a visa or residency with a local cedula identification card. Buy real estate if you think it’s a good investment for you or provides you with a place to live that meets your requirements. If you need a visa there are many other Colombian visa options.
Also, it is important to understand that when buying real estate for an investment, smaller apartments in an area popular for tourists (such as El Poblado or Laureles) are generally better investments. However, these types of investment properties may not be where you would want to live.
Large apartments including penthouse apartments or fincas in the Medellín area that have many amenities can be great homes to live in, but generally are not the best investment properties for rentals. Also, if you want to buy an inexpensive property to live in an area not frequented by foreigners, this may not be a good investment property.
Where to Buy Real Estate in Medellín? Location, Location, Location
Once you have decided why you want to buy real estate in Medellín, it is time to decide where to buy. Like any other location in the world, real estate pricing in Medellín varies by location and amenities.
Medellín has a wide range of properties available from luxury homes that can cost $1 million USD or more to relatively low-cost small apartments in inexpensive but relatively safe neighborhoods for foreigners that could cost less than $50,000 USD.
Also, real estate prices in Medellín can vary depending on the neighborhood and also estratos (a socioeconomic scale).
If you are looking for investment properties we recommend the El Poblado and Laureles neighborhoods, which tend to have the most demand from business travelers and foreign tourists.
In addition, for investment properties it is important to be near shopping malls, entertainment and other amenities. Also, it is important to look for properties that permit short-term rentals for higher returns. Not all properties in Medellín permit short-term rentals.
If you are looking for a property to live in, the five most popular neighborhoods in the Medellín area for foreigners are El Poblado, Laureles-Estadio, Envigado, Sabaneta and Belén.
I surveyed over 200 expats living in Medellín in late 2016. And I found that 26 percent of the surveyed expats living in the Medellín area at that time lived in El Poblado. But 74 percent chose to live elsewhere in the metro area.
Foreigners live in many other parts of the Aburrá Valley and nearby and not just the five most popular neighborhoods. Over the past eight years, I have met foreigners living in Barbosa, Bello, Buenos Aires, Giradote, Itagüí, La América, La Candelaria (El Centro), La Ceja, La Estrella, Rionegro and Robledo.
Choosing a place to live in is a personal choice and everyone has different requirements. Also, we have a series of several articles about the neighborhoods in Medellín.
The bottom line is no neighborhood is perfect and each neighborhood has benefits and downsides. Also, we recommend trying out a neighborhood on a trial basis before deciding to live there.
Finally, where you decide to live can have a big impact on your cost of living in Medellín and the Aburrá Valley.
Buying Old Properties vs. New Properties
Medellín has a range of ages for real estate properties in the city. Some properties may be well over 100 years old and some properties may be only a few years old or recently built. Also, there are many new construction projects in the city.
The age of properties can be a major factor in pricing. Older properties tend to sell for a lower price per square meter compared to newer properties.
However, it is possible to find some beautiful and well-located properties in older buildings and casas (houses) in Medellín. But some older properties may need extensive renovations. And some older buildings may not have many amenities.
Newer apartment buildings in the Medellín area, tend to have many amenities including pools, gyms, balconies (sometimes with great views) and modern layouts. But newer apartment projects tend to have higher prices per square meter.
Also, new construction project prices vary by neighborhood. We recently looked at new apartment construction pricing in Medellín and found that pricing ranged from 4.5 to 10.3 million pesos per square meter in El Poblado with an average of 6.9 million pesos per square meter, as seen in the following table:
In addition, we found that the pricing per square meter for new construction on average was 36.9 percent lower in Sabaneta, 35.3 percent lower in Belén, 22.9 percent lower in Envigado and 12.2 percent lower in Laureles-Estadio. This demonstrates pricing differences between neighborhoods.
Transferring Money to Colombia to Buy Real Estate
If you are a foreigner buying property in Colombia, it is nearly impossible to get a mortgage in Colombia. So, you will most likely need to buy with cash.
If you are planning to buy Medellín real estate or real estate in any other city in Colombia it is important to set up an account in Colombia so you can transfer funds to buy.
I have talked to some foreigners that have started looking for real estate and found properties and started to negotiate without having a local bank account. And some deals fell through because of the inability to pull the trigger fast enough due to not having an account set up.
One of the most popular types of accounts used by foreigners to buy real estate is a brokerage account with Alianza. Alianza is very experienced in handling foreign investments and working with foreigners and they have English speaking staff. Also, it’s possible to open an account with Alianza with only a passport.
What are the Steps to Buy Real Estate in Medellín and Colombia?
The are four primary stops to buying real estate in Medellín and Colombia, not including moving money to Colombia to buy a property:
Step 1: Negotiation and Verbal Offer
This is when the buyer negotiates with the seller for the price and terms. And this is when a buyer should involve an experienced lawyer who understands real estate law in Colombia to do a title search and other background checks.
This is when a lawyer will check a certificado de tradición y libertad, which is a history of the property, and a certificado de paz y salvo predial that states municipal property taxes have been paid and a certificado de paz y salvo de valorización that verifies that taxes related to increases in value of the property have been paid.
Some properties in Colombia can have hidden complications, including debts or a questionable history of ownership. If you interested in a property with some type of issue, it is normally a very long process to fix things. So, we recommend not trying to buy properties with issues.
Also, if buying in an apartment building or gated community, it is important to check if there are a lot of unpaid administración fees (HOA fees). Some apartment buildings or gated communities do not do a good job of collecting HOA fees from owners resulting in not having sufficient funds for maintenance.
If everything checks out with the lawyer it is time to negotiate price. Nothing is binding at this point. Also, it is important to understand if an owner is desperate or patient. The owner may say the price is negotiable. And you can make an offer lower than the listed price to feel out the owner.
Step 2: Promesa de Compraventa – the Purchase Agreement
After you have a verbal agreement on price and terms for a purchase, your lawyer will draw up a purchase agreement, known as a promesa de compraventa.
This is a binding contract where you state the intention to buy or sell at a given price and the seller states the intention to sell.
Keep in mind that Colombians are sophisticated negotiators. So, it is not uncommon for Colombians to be renegotiating right up to signing the promesa de compraventa at a notary. You can also make changes if you feel they are needed before signing the purchase agreement contract at a notary.
What is Included in a Typical Promesa de Compraventa?
There are several common clauses in typical real estate purchase agreements in Colombia, including:
- Price and what items are included – is the parking, storage, appliances, curtains, etc. included? Keep in mind that parking may have a separate title. Also, the owner can remove anything not physically part of the apartment including light bulbs and appliances. So, make sure what you want is included in the contract.
- Down payment – anticipo – this is essentially a down payment to secure the deal and is usually 10 percent but can be 20 percent or even higher. But this is negotiable.
- Penalty Clause – cláusula penal – the penalty clause covers if the buyer does not proceed with the deal and could lose the down payment of 10 to 20 percent. And if the seller does not proceed, the seller can be sued for a lien on the property for the penalty amount agreed to, usually 10 to 20 percent.
- Settling of mortgages and liens – it is not possible to transfer property in Colombia to a new owner unless it is free of mortgages, leans, taxes and administration fees (HOA fees).
- Commercial and declared value – valor comercial, valor catastral – in Colombia and many other countries in Latin America there is a gap between commercial values (what a buyer pays) and declared values (what the government thinks the property is worth for taxes).
- Taxes, HOA and rent are prorated – this is just a calculation that depends on the purchase date – taxes are paid yearly and prorated, administration (HOA fees) are paid monthly and prorated. If a rental property, rent should be prorated.
- When to sign at the notary – the promesa de compraventa will included a date, time and location for the final closing when all parties exchange final payments (typically by Cheque de Gerencia issued by a bank or a bank transfer – keep in mind there is no escrow in Colombia), and the title is signed over from the previous owner to the new owner.
Step 3 – Closing at a Notary
If things go as planned in the promesa de compraventa, the closing happens on the date specified in the purchase agreement with signing of titles, exchanging of funds and the new owner receiving keys to the purchased property. However, sometimes issues arise and this closing date may slip.
Step 4 – Getting Your Title
If all things go smoothly with the closing, your lawyer will take steps to ensure everything is done correctly with the Registro de Instrumentos Publicos, which handles titles in Colombia.
Once the new Certificado de Tradición y Libertad is issued, a buyer can rest assured the property is his/hers. It typically requires about week for a new Certificado de Tradición y Libertad to be ready.
What Are the Closing Costs Involved in Buying Real Estate in Colombia?
Purchasing real estate in Colombia involves closing costs, which include paying some taxes and fees. Closing costs at the time of purchase include notary and registration fees as well as legal fees and real estate agent commissions.
Closing costs in Colombia include:
- Withholding (Retención en la Fuente) – 1 percent, paid by seller
- Registration (Registro) – 1 percent, split 50-50 by seller and buyer
- Government tax (Rentas) – 1.05 percent, split 50-50 by seller and buyer
- Notary fees – usually less than 1 million pesos, split 50-50 by buyer and seller
In addition, there is the real estate commission of 3 to 4 percent normally paid by the seller. Also, there are legal fees for a title study, purchase contract and closing/title change, which typically cost between 2.3 to 3 million pesos depending on the value of the property.
For a 300-million-peso property, the closing costs would be roughly:
- 6 million pesos for the buyer
- 5 million pesos for the seller
In addition, the seller would be responsible for paying at least a 3 to 4 percent commission to the real estate agency. And the buyer would be responsible for legal fees of approximately 2.6 million pesos.
So, the buyer would roughly be paying about 2.9 percent of the purchase price for closing costs and legal fees and the seller would be paying at least 4.7 percent of the purchase price for closing costs and the real estate agency commission.
Steps for Buying are Different for New Construction
When buying pre-construction projects in Colombia, it is important to understand that the buying process is different than when buying existing properties.
The process for buying construction projects starts with signing a “hoja de negociación”, which is essentially a letter of intent with the builder. This typically requires a payment of 1 to 5 percent that is normally deposited at a fiduciaria account.
Fiduciarias in Colombia are usually insurance/banking companies that provide an escrow-like service to builders and handle all the money and contracts associated with new housing development projects.
Fiduciarias offer protection to buyers, making it possible to get some or all of your money back if there is an issue with a project. Also, fiduciarias also ensure that buyers keep up with payments.
The process for buying new construction uses an encargo with the fiduciaria, which is a contract similar to a promesa de compraventa used when buying exiting properties. Also, there are typically other documents to sign specifying the new construction apartment including dimensions and amenities.
New construction projects may require only 1 to 5 percent at the time of signing of the hoja de negociación. And 25-59 percent of the total purchase price would normally be paid in monthly payments for a period of up to two years.
When construction is complete, you are required to pay the balance of 40 to 70 percent to the fiduciaria. And when payment is complete the builder creates an escritura (title) that gets put in your name.
Are You Looking to Buy or Sell Real Estate in Colombia?
Medellin Guru partnered with RE/MAX Coffee Realty to offer real estate services to foreigners and Colombians interested in buying and selling properties in Medellín and Colombia.
Several Medellin Guru readers have asked about real estate and advice about buying and selling real estate. So, we partnered with RE/MAX Coffee Realty to offer reliable real estate services to readers.
We decided to partner with RE/MAX Coffee Realty for services for buying and selling real estate for several reasons:
- RE/MAX is the largest real estate company in the world and is a well-known brand for foreigners.
- RE/MAX is one of the largest real estate companies in Colombia with 35 offices in six cities (Medellín, Bogotá, Cali, Cartagena, Barranquilla and Bucaramanga). So, RE/MAX can offer real estate services to readers in many locations in Colombia.
- In Colombia, RE/MAX has over 350 real estate agents including more than 70 agents in Medellín. Also, RE/MAX has agents that are bilingual and speak both English and Spanish.
To use this real estate partner service from RE/MAX, just click on the button below.
Fill out a very short form and RE/MAX offers a free consultation to provide information about the local market, current pricing information and tips for buying or selling properties.
Medellin Guru’s Guide to Renting and Buying Apartments and Choosing a Neighborhood
On the Medellin Guru website, we have a comprehensive and up-to-date guide to renting apartments, buying apartments and choosing a neighborhood in Medellín found in several articles, including:
Renting Unfurnished Apartments:
- Apartment Rental Guide: Renting Unfurnished Apartments in Medellín
- Guide to Finding Unfurnished Apartments in Medellín and Casas
- Guide to Overcoming the Fiador (Cosigner) Requirement in Colombia
- 2018 Unfurnished Apartment Rental Costs in Medellín
- 6 Inexpensive Neighborhoods for Unfurnished Rentals in Medellín
- Furnishing Apartments: A Guide to Furnishing Apartments in Medellín
- Apartment vs Casa (House) Rentals in Medellín: Pros and Cons
Renting Furnished Apartments:
- Furnished Apartment Rental Costs in Medellín – 2019 Survey Results
- Guide to Finding a Furnished Room for Rent in Medellín
- Medellín Real Estate: 2020 Property Buyer’s Guide for Foreigners
- Current Costs to Buy New Apartments in Medellín – 2019 Update
- Rent vs Buy: Downsides of Renting and Buying Property in Medellín
- 11 Things Real Estate Agents in Colombia May Not Tell You
- How to Obtain an Investment Visa for Investments in Real Estate
Choosing a Neighborhood in Medellín:
Also, we have several articles that can be used to help foreigners choose a neighborhood in Medellín:
- What are the Safest Neighborhoods in Medellín and the Aburrá Valley?
- 5 Best Neighborhoods in Medellín: A Guide to Choosing a Neighborhood
- 8 Downsides of El Poblado: Living in Medellín’s Expensive Neighborhood
- Estratos: A Guide to Understanding Estratos in Colombia
- El Poblado vs Laureles: Which is the Better Neighborhood to Live in?
- El Poblado vs Envigado: Which is the Better Neighborhood to Live in?
- El Poblado vs Sabaneta: Which is the Better Neighborhood to Live in?
- El Poblado vs Belén: Which is the Better Neighborhood to Live in?
- 2018 Unfurnished Apartment Rental Costs in Medellín in 5 Neighborhoods Popular with Expats
- 6 Inexpensive Neighborhoods for Unfurnished Rentals in Medellín
The Bottom Line: Medellin Real Estate: 2020 Buyer’s Guide for Foreigners
Relocating to Medellín and buying Medellín real estate are not decisions to be taken lightly. Investing in a foreign country can be exciting and rewarding but also involves some risks.
We provide the above guide to buying Medellín real estate with the steps involved. If you are buying real estate in Medellín, it is important to understand the steps involved in Colombia and also the closing costs required.
Also, the exchange rate for the Colombian peso (COP) at the time of publication of this article is about at a record high at over 3,500 pesos per USD, which makes real estate pricing in Medellín and Colombia cheaper in terms of USD compared to a year ago or even several years ago.
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