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 seven 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 that 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.
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.
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 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 two 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.
6. 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’s possible to find real estate agents that aren’t very professional and don’t really have much experience.
7. 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.
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 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 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 two years. Due to this currency risk, many foreign investors who bought investment properties three or more years ago in Colombia likely 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, the exchange rate now is about 2,900 pesos to the USD and three years ago it was 1,996. So, a property that was “cheap” three years ago is now even cheaper in terms of USD with the current exchange rate.
The exchange rate may be favorable now as it has been in a higher range over the past two years than in the prior eight years. But exchange rates are very difficult to predict. What happens to the exchange rate if the global economy implodes due to a war? Or there is another financial crisis? Or what happens if Colombia elects a business unfriendly president next year?
10. 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.
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.
11. 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.
The Bottom Line: Working with Real Estate Agents in Colombia
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.
So, it is very important to make sure you 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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