Buying or renting a home in Colombia and working with real estate agents in Colombia as an expat can be challenging. 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, it’s important to understand the real estate market in Colombia.And there are several things that real estate agents in Colombia may not tell you.
The following list is based on my own experiences with real estate agents over the past eight years in Colombia as I moved to Medellín. In addition, this list is based on research and on my discussions with many expats over the past several years who have bought real estate in Colombia. The following list is in no particular order.
1. There is no MLS in Colombia
There is no Multiple Listing Service (MLS) in Colombia. So, if you are buying or renting this can make it difficult to find all the properties available in the cities in Colombia. And real estate agents may not know about a perfect property for you that is available for sale or rent. Not having a MLS can also make it challenging to find comps and understand market prices.
However, in Medellín the popular website Espacio Urbano is used by many real estate agencies to list properties for sale or rent. So, this site can be used by expats to understand market prices in different neighborhoods in Medellín. This can help to ensure you aren’t paying too much to buy or rent.
The bottom line is there is no Multiple Listing Service (MLS) in Colombia. So, if you are looking to buy a property it is nearly impossible to know even a majority of the properties available and agents won’t know all properties available.
2. Most Real Estate Buyers in Colombia are Local
Foreign buyers of residential real estate in Colombia are very limited. It is important to understand this as a foreign buyer. Reportedly in Bogotá and Medellín it is estimated that foreign buyers represent less than 1 percent of the property buyers in the market.
The market with the largest percentage of foreign buyers in Colombia is likely Cartagena, where I have heard foreign buyers may represent up to 2 to 3 percent of buyers. In addition, many agencies don’t have much experience with foreigners.
3. There are Few Exclusive Listings in Colombia
Unlike the U.S. that has exclusive listings with real estate agents, in Colombia most listings are not exclusive. So, a real estate agent can represent many available properties.
It is not uncommon to have three or more agents working to sell a property in Colombia chasing a 3 percent commission. And it’s not uncommon to have several real estate agents trying to rent the same rental property.
4. 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 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. Well-located buildings in popular areas for expat tourists like in El Poblado in Medellín can do well as rental properties.
5. It’s Relatively Quick to Buy, But It May Take a Year or Even Longer to Sell
It can be relatively quick to buy a property in Colombia. I have met several expats that have bought properties in about four weeks after finding a place. However, an article in the New York Times in 2015 reported that the average time to sell residential properties in Bogotá was 270 days. Fincas and high-end properties can take even longer to sell.
I have talked to several expats this year that have been trying to sell their high-end estrato 6 properties in Medellín and Bogotá for more than one year.
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.
6. Real Estate Prices are Now Dropping in Colombia
The growth in real estate prices in Colombia has come to an end due to the coronavirus pandemic.
According to Banco de la República the index of used home prices in Colombia dropped from 141.91 in Q1 2020 to 133.06 in Q2 2020 (not factoring in inflation). This is a drop of 6.2 percent in one quarter. This is the largest quarterly drop in the index of used home prices in Colombia in the past decade.
The Banco de la República house price index includes nine cities Bogotá, Medellín, Barranquilla, Bucaramanga, Cucuta, Manizales, Neiva and Villavicencio.
There are few buyers currently in the market based on conversations we had with several real estate agents in Medellín recently. Agents we talked to expect that prices are likely to drop even further with so few buyers in the market.
The real estate market in Colombia had been growing quite well for the past decade until coronavirus hit. However, real estate is a market that goes up and down based on a lot of factors.
Due to the coronavirus pandemic, Colombia is currently a “buyer’s market” with the supply of homes on the market is more than the pool of buyers. This is when prices typically drop.
Nobody can predict the future. How much more will prices drop? Will the economy in Colombia recover quickly or slowly from coronavirus.
7. There is no Strict Regulation of the Real Estate Agents Profession
There is no licensing of real estate agents in Colombia. Anyone can create a real estate agency by selling his/her own house or the house of a neighbor.
In addition, anybody can earn a commission as real estate agents including friends and relatives of the seller, attorneys and others. So, conflicts of interest and misinformation is possible when purchasing real estate in Colombia. And it is possible to find real estate agents that aren’t very professional and don’t really have much experience.
8. Real Estate Agents Tend to Work for Sellers and Owners
According to Colombian business custom, the seller of properties should pay all real estate commissions, unless otherwise agreed to differently. The typical real estate commission in Colombia is 3 to 5 percent for urban residential properties.
Real estate agents that work for buyers are rare in Colombia. So, real estate agents in Colombia tend to be biased to sell more expensive properties so they get a bigger commission. For example, in Medellín the majority of the property listings of real estate agencies selling to foreigners tend to be in the most expensive neighborhood of El Poblado.
In addition, the property price quoted can vary between real estate agents. For example, one expat told me recently that an agent told him the price for a property he viewed was a fixed price. But this expat found the same property listed on another website for 30 million pesos less.
Also make sure to get in writing all costs including taxes, fees, commissions, etc. or you may get a surprise at signing time when buying.
For rentals in Colombia, real estate agents will have a contract with the owner. And they will have a separate contract with the renter and pocket the difference between the contracts as the “commission”. So, the higher the agent can make the rental price, the more “commission” the real estate agent receives.
The bottom line for expats working with real estate agents in Colombia for buying or renting it is important to understand market prices to ensure you aren’t overpaying.
9. Some Agents May Take Advantage of Foreign Buyers
Buying the right property at the right price is perhaps the most critical part of succeeding as a real estate investor. It is critical not to overspend on the purchase price or a renovation, if needed.
Also, keep in mind that agents work for buyers and are paid on commission. So, there is no incentive to try to lower the price for buyers, even though it is currently a buyers market. Knowledgeable buyers should be able to negotiate lower prices with some motivated sellers.
In addition, be very careful when buying real estate in Colombia as a foreigner. We are aware of one unscrupulous real estate agency that increased the price of a property by 50 million pesos due to the buyer being a foreigner and not knowledgeable about the market. The foreigner thought he was getting a good deal based on real estate prices in the U.S. But the unscrupulous agency pocketed the 50 million pesos increase in price.
We recently heard about another agency that essentially did the same thing. This agency increased the price by 30 million pesos for a foreign buyer. We talked to the seller who was very unhappy about this, as he didn’t get any of the increase in price.
10. Some Foreign Real Estate Investors Have Lost Money in Colombia
Some real estate agencies in Colombia have been touting 8 to 10 percent (and even higher) annual returns for investment properties used for rentals including factoring in property appreciation. But keep in mind that property appreciation is in the local currency and doesn’t factor in the currency risk.
The Colombian peso has been weak over the past few years. Due to this currency risk, foreign investors who bought properties several years ago in Colombia may have lost money in terms of U.S. dollars (USD). This is even though properties may have appreciated in terms of Colombian pesos.
For example, I talked to an expat investor recently that bought an investment property in Medellín back in 2014 when the exchange rate was about 1,885 pesos to the USD. The exchange rate is now 3,723 pesos to the USD.
This investor said his property has generated profit from rental income until coronavirus hit. But this investor believes that his property has not appreciated very much in terms of Colombian pesos over the past six years due to the recent impact of the coronavirus pandemic on the real estate market.
So, if this investor had to sell now, he believes he would likely lose at least 40 percent of his original investment in terms of USD.
The exchange rate may be favorable now as it has been in a higher range over the past eight months than in the prior nine years. But exchange rates are very difficult to predict.
What happens if the Venezuelan crisis become worse and many more Venezuelans come to Colombia? What happens if there is another global financial crisis in addition to the coronavirus pandemic? Or what happens if Colombia elects a business unfriendly president?
11. Property Websites are Not Updated Regularly
Properties listed for sale or rent on real estate agency websites in Colombia may no longer be available for sale or rent. Many real estate agencies in Colombia are challenged in keeping websites up-to-date. So, properties that have sold or are no longer on the market may still be listed on websites.
Several expats I have talked to have been frustrated by this. They see a perfect property that meets their requirements on a website. And then they find it is not available for sale or rent.
12. It is Possible to Rent Without a Fiador
Most real estate agents in Colombia will require a fiador to rent an unfurnished apartment or house. A fiador is a cosigner who is a local property owner. Under Colombian regulations a real estate agent is responsible for collecting rent.
A fiador guarantees the tenant’s rent payments, so the agent can go after the fiador if the tenant stops paying rent. Fiadors are common in several countries in Latin America, not just in Colombia.
But it is possible to rent unfurnished apartments in Colombia without a fiador. I have done this for over seven years. And I have met many expats living in Colombia that also rent apartments without a fiador. We have a separate guide to overcoming the fiador requirement.
The most common ways to avoid the fiador requirement include paying rent in advance with an agent or renting directly from an owner. There is also insurance available and some may accept a deposit. We plan to provide more details in a guide to apartment rentals in a future article.
13. New Property Development May Take Years to Complete
Many of the property development projects in Colombia are delivered way past the original planned completion date. And some are never completed. 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 highly 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. This building still isn’t complete eight years later and buyers reportedly have been trying to get their money back.
This incomplete building is totally abandoned. Also, it’s been subject to the weather for over eight years now. And I haven’t seen any activity at the building in the past several years.
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 four cities (Medellín, Bogotá, Cali and Barranquilla). So, RE/MAX can offer real estate services to readers in several 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.
- RE/MAX ensures properties are not overpriced by performing a study of market property prices known as an ACM (Análisis Comparativo del Mercado).
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 Buying and Renting Apartments and Choosing a Neighborhood
On the Medellin Guru website, we have a comprehensive and up-to-date guide to renting, buying and selling 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
- 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
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
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?
- 2019 Unfurnished Apartment Rental Costs in Medellín in 5 Neighborhoods Popular with Expats
- 6 Inexpensive Neighborhoods for Unfurnished Rentals in Medellín
The Bottom Line: Things Real Estate Agents in Colombia May Not Tell You
The bottom line is do your own due diligence before buying or renting property in Colombia. Keep in mind that real estate agents are essentially incentivized to sell or rent properties for higher prices, so they earn higher commissions. Also, some agents may try to take advantage of foreigners that are not knowledgeable about the market.
So, it is very important to make sure you understand the market and understand market prices in different neighborhoods. Otherwise you may be taken advantage of as an expat.
What experiences have expats encountered with real estate agents in Colombia?
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Editors note: updated on September 4, 2019 to add information about how long it takes to sell new homes in Colombia.
Editors note: updated on November 7, 2020 to add two additional things that real estate agents in Colombia may not tell you.