Buying a home in Colombia and working with real estate agents in Colombia as a foreigner can be challenging. There are several common mistakes foreigners make when buying real estate in Colombia.
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 much English. So, there are several mistakes foreigners make when buying real estate in Colombia.
The following is a list of 17 common mistakes foreigners make when buying real estate in Colombia, which is based on my discussions with many real estate agents and foreigners who have bought real estate over the past several years. Note this list of mistakes foreigners make when buying real estate is in no particular order.
1. Buying Real Estate Too Quickly
Some foreigners that move to Medellín or other cities in Colombia buy properties quickly. I have seen a few foreigners buy properties within a month after arriving.
Before buying property, we recommend a trial of living in a neighborhood and also spending more time researching the market to find out what is available and what you like.
Furnished apartment rentals are readily available in many neighborhoods in Medellín and other cities in Colombia, which makes it easy to trial living in a neighborhood.
Relocating to Medellín or other city in Colombia and buying real estate are not decisions to be taken lightly. Investing in a foreign country can be exciting and rewarding but also involves some risks.
2. Not Using an Experienced Bilingual Real Estate Lawyer
It is important to involve an experienced bilingual lawyer who understands real estate law in Colombia to do a title search and other background checks. In our guide to buying real estate in Medellín we recommended engaging a real estate attorney at step 1: negotiation and verbal offer.
A lawyer will check the 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.
Also, a lawyer will draw up a purchase agreement, known as a promesa de compraventa. In addition, a real estate lawyer can help to ensure funds used to buy real estate are popularly registered with the Central Bank of Colombia.
In addition, make sure to negotiate legal fees in advance. So, there are no unpleasant surprises.
3. Working with a Local Real Estate Agent Not Experienced with Foreigners
Many real estate agents in Medellín and Colombia have never experienced a foreigner client, as foreigners reportedly represent less than 1 percent of buyers in Colombia. Also, many local realtors won’t speak English.
So, we recommend working with bilingual real estate agents that have experience working with foreigners. It is surprising that this is one of the common mistakes foreigners make by trying to deal with an agent that doesn’t speak English and doesn’t have experience working with foreigners.
4. Buying an Investment Property that Doesn’t Permit Short-Term Rentals
Not all buildings in Medellín or other cities in Colombia permit short-term rentals. Short-term rentals (by the day or week) for furnished apartment investment properties are important for higher returns.
Rentals of less than 30 days in Colombia have specific laws that apply, which makes it essentially illegal in Colombia unless both the building and the unit itself meet a checklist of requirements from licenses to fire extinguishers. Also, many apartment building administration bylaws do not permit short-term rentals.
There have even been crackdowns in the past in Medellín on illegal Airbnb properties in buildings that didn’t permit short-term rentals. Tourists were given the order to vacate and owners were told to cease operation or comply with laws.
Colombian law states that 70 percent of the owners in an apartment building can change the reglamento (bylaws) of a building to their liking. So, if 70 percent of the owners of a building vote to increase the minimum rental to three months there’s really nothing an individual owner can do.
5. Not Properly Registering Funds with the Central Bank of Colombia
Not registering funds properly will cause problems with taxes, investment visas and repatriation of funds in the future. Experienced real estate lawyers will know the correct process to register funds so you don’t run into issues.
6. Buying New Construction
New construction tends to be substantially more expensive than older properties. We recently surveyed new apartment pricing in Medellín and found that new apartments in El Poblado cost 6.9 million pesos per square meter on average and as high at 10.2 million pesos per square meter.
In addition, we found that new apartment prices were 36.9 percent lower per square meter in Sabaneta compared to El Poblado, 35.3 percent cheaper in Belén and 22.9 percent cheaper in Envigado.
But it is possible to find older properties (10 to 15 years old) that can be purchased for prices that can be up to 50 percent less per square meter than new properties.
In addition, old properties can be better located than new properties and may be near shopping malls and restaurants. Also, some of the older properties may have wood flooring, higher ceilings, bigger balconies and other desirable features. However, some older properties may need some remodeling but the bottom line can be much lower priced than new properties.
7. Not Finding Out the True Value of a Property
There is no Multiple Listing Service (MLS) in Colombia. So, if you are buying or selling this can make it challenging to find comparable property sales and understand market prices.
It is important to get expert advice on the true market value of an apartment or casa (house). Some properties can be over-priced compared to similar properties.
Also, there can be some hidden factors that can affect the price and future resale value. This can include administration fees (HOA fees), taxes, rental restrictions, new construction in the area and trends in the real estate market in the area.
8. Not Having a Local Bank Account
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.
9. Not Understanding that Estrato 6 Represents Only 3 to 4 Percent of Housing
In Colombia, residential properties are ranked on a 1-6 socioeconomic scale (with 6 being the highest). These are known as estratos. The expensive (for Colombia) estrato 6 properties being touted by some real estate agents focused on expat customers – like in El Poblado in Medellín or Zona G in Bogotá – are not the typical housing for Colombians.
Only about 3 to 4 percent of residential properties in Colombia are rated as estrato 6. The majority of Colombians live in estrato 2 or 3 neighborhoods, which represent about 65 percent of housing in the country. We have a separate guide to estratos in Colombia.
If you buy a property in estrato 6, keep in mind when it comes time to sell there is a limited pool of buyers in Colombia that can afford these properties that are expensive for most Colombians.
However, if you are buying a rental property, location is key. And well-located buildings in popular areas for expat tourists like in El Poblado in Medellín or Zona G in Bogotá can do well as rental properties.
10. Assuming Sellers will be Impressed with a Cash Deal
Most real estate deals in Colombia are all-cash deals, as the mortgage market is very small in Colombia. So, sellers won’t be impressed with your all-cash deal.
Only about 3 percent of the adult population in Colombia has a mortgage. In addition, mortgages are more common for new construction projects in Colombia as builders help arranging financing and mortgages are less common for used homes.
In the U.S., only about 40 percent of homes are free and clear of mortgages. In Colombia, over 90 percent of homes are free and clear of mortgages.
11. Not Providing Sufficient Purchase Requirements to a Real Estate Agent
It is important to provide your purchase requirements to a real estate agent so they can find properties that meet your requirements. Loose requirements are not helpful as there is a wide-range of properties available in Medellín and other cities in Colombia. Also, you shouldn’t use a real estate agent as a tour guide.
It is important to let the real estate agent know the following details:
- Number of bedrooms and bathrooms
- View or not
- Apartment or casa (house) or finca
With insufficient requirements much time can be wasted looking at many properties. Also, there are no lock boxes with keys in Colombia for viewing properties. So, it can take time to arrange to get keys to show properties.
Also, keep in mind that real estate agents who show you properties for free are paid by commission and are not tour guides.
12. Not Understanding that it can be Quick to Buy Properties but May Take a Long time to Sell
It can be relatively quick to buy real estate in Colombia. I have met several expats that have bought properties in about four weeks in Colombia after finding a place.
However, it can take much longer to sell properties. For example, in 2015, an article in the New York Times reported that the average time to sell residential properties in Bogotá was 270 days. And Fincas and high-end properties can take even longer to sell.
Even new homes in Colombia take a long time to sell. A recent study in 2019 of new home buyers in Colombia by Asociación Bancaria (Asobancaria) and Galería Inmobiliaria found that at the end of March 2019, the average sales time in estrato 4, 5 and 6 in Colombia was 8.9 months for apartments and casas (homes) – see in Spanish.
13. Not Knowing that New Property Development May Take Years to Complete
One risk of buying property in new development projects in Colombia is that some projects may take longer than originally planned and a few never complete.
For example, I am aware of some apartment buildings in Medellín that took three to five years to complete when the original plan was two years.
In addition, I know of a few property refurbishment projects that took double the original planned time (two years instead of one year). Don’t trust the completion dates touted by property developers or real estate agencies in Colombia. In many cases the promised dates are optimistic.
The perfect example of this is the incomplete Luciérnagas apartment building project of Grupo Monarca in Sabaneta (south of Medellín). Over 110 apartment buyers bought homes in this building, which had an original planned completion in 2009. And buyers reportedly have been trying to get their money back.
This incomplete building is totally abandoned. Also, it has been subject to the weather for about 10 years now. And I haven’t seen any activity at the building in the past several years.
14. Believing a Verbal Offer is a Done Deal
A buyer is not protected with a verbal offer from a seller. 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.
A promesa 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.
Also, 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.
15. Not Understanding that There is No Title Insurance and No Escrow in Colombia
These 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.
16. Not Knowing the Investment Requirements for Investment Visas
Some foreigners looking for real estate in Colombia are looking to invest in real estate to receive a Colombian investment visa. But some foreigners don’t know the investment requirements for visas.
There are two type of real estate investments that qualify for two types of visas:
1. Migrant visa – If you are applying for a Migrant (M) visa for investment in real estate you will need to invest at least 350 times the Colombian minimum monthly salary, which is 289,840,600 pesos in 2019 or $86,726 USD at an exchange rate of 3,342 pesos per USD. In addition, you will need for the visa application:
- Certificado de libertad y tradición of the real estate property that proves ownership.
- Communication issued by the Department of International Exchange of the Banco de la República, which records the direct foreign investment for the purchase of real estate in the name of the foreigner applying for the visa.
2. Resident visa – if you are applying for a resident visa (R visa)for a resident investor you must provide with your visa application a communication issued by the International Exchange Department of the Banco de la República that records the direct foreign investment in the foreigner’s name in an amount greater than 650 times the Colombian minimum monthly salary, which is 538,275,400 pesos in 2019 or $161,063 USD at an exchange rate of 3,342 pesos per USD.
17. Thinking Can Buy Property in El Poblado for $15,000 USD
Some real estate agents I have talked to in Medellín have told me that some foreigners have unrealistically low budgets for real estate in Medellín and other cities in Colombia.
For example, one foreigner thought it was possible to buy property in El Poblado for only $15,000 USD. But El Poblado is the most expensive neighborhood in Medellín and there are no properties available for that low of a price.
However, it is possible to find some properties in Medellín for $15,000 USD or even less. But these properties will be located in low estrato neighborhoods that would not be suitable for most foreigners. Also, the quality of such properties would be less than what most foreigners are accustomed to.
It is possible to educate yourself online about current property prices in Colombia. For example, the website Espacio Urbano is used by many real estate agencies to list properties to sell in Medellín. So, you can see prices and photos of properties for sale in Medellín and get a better feel for market prices.
Are You Looking to Buy or Sell Real Estate in Colombia?
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- 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. In addition, RE/MAX agents walk customers through the buying and selling process in Colombia.
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Medellin Guru’s Guide to Buying, Selling and Renting Apartments and Choosing a Neighborhood
On the Medellin Guru website, we have a comprehensive and up-to-date guide to buying, selling and renting apartments and choosing a neighborhood in Medellín found in several articles, including:
Buying and Selling Apartments
- Medellín Real Estate: 2020 Property Buyer’s Guide for Foreigners
- Selling Real Estate in Colombia: A Guide to Selling for Foreigners
- Top 17 Mistakes Foreigners Make When Buying Real Estate in Colombia
- 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
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
- 2019 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
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: Top 17 Mistakes Foreigners Make When Buying Real Estate in Colombia
The bottom line is do your own due diligence before buying real estate in Colombia. Also, it is important to understand the top mistakes foreigners make when buying real estate in Colombia. You can learn from the mistakes foreigners have made in the list above.
Also, it is very important to make sure you understand how the real estate market operates in Colombia, which we previously covered in our property buyer’s guide. Otherwise you may be taken advantage of as a foreigner.
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