Thinking about investing in the real estate market in Ecuador? In this post, Jesse Bayer of Abundant Living Ecuador, shares tips for expats buying property in Ecuador. Bio at end of post.
Check our full guide to Ecuador real estate.
7 Tips for Expats Buying Property in Ecuador
1. Set Your Parameters First
Know your preferences and narrow down locations based on your parameters:
- coast vs. mountain vs. Amazon
- city vs. rural
- humid vs. dry
- dry season vs. year round rain
- expat community vs. no expats in the region
- warmer vs. cooler
These are some of the things you should think about and then narrow down and rule out regions based off of your answers to these questions.
Once you have identified areas that meet your parameters you can focus your search on those regions and cut out a lot of would be wasted time.
2. Due Diligence, Due Diligence, Due Diligence
There are no comps available in Ecuador and no title insurance. Attorneys and related professionals do not have the same level of fiduciary responsibility you may be used to elsewhere.
In addition, Ecuador may represent a new language, culture and business climate to what you are accustomed to.
This puts a huge onus on the due diligence process.
Hire a trusted real estate professional and attorney and make sure the I’s are dotted and T’s are crossed.
Due diligence means:
- checking the title by requesting the ‘Certificado Simple’ from the Property Register.
- checking the zoning and any potential restrictions on land use by requesting ‘La Linea de Fabrica’ from the Municipio.
- checking the boundaries and ensuring the legal boundaries match the actual boundaries.
- checking for any water or mining concessions.
3. Understand the Market
There are no ‘comps’ available in Ecuador. Accurate sales prices are not recorded – therefore there is no aggregate data available to help you get a sense of fair market value.
You essentially have two choices on how to go about understanding the value of property in Ecuador.
- Find a trusted professional who can help you understand valuation and walk you through the process.
- Create your own ‘database’ of comps by seeing enough properties with similar characteristics in similar areas to start to understand what constitutes value in Ecuador.
Urban Areas: If you are looking in urban areas (towns or cities) gaining a handle on valuation can be fairly straightforward. Construction and lots (small pieces of land) have a basic price per square meter depending on their characteristics and level of quality/luxury.
For example if you are looking for an apartment in a populated area, by looking at 5 apartments and calculating the price per square meter of each apartment, you will begin to understand the value of apartments in the area you are looking at. Same with lots as well as houses.
Rural Areas: For rural areas and larger pieces of land valuation can be more difficult and prices can have significantly wider margins.
Land is valued based on traits such as location, proximity to the paved road, infrastructure such as; water, electricity, access, etc., amount of flat, quality of soil, and overall utility.
Focusing on an area and checking out several properties with similar characteristics can start to give you a basic idea of price per hectare in the area you are looking at.
Once you have a handle on the market and you make an offer or come to agreement on a price, the due diligence truly begins.
4. Consider Renting Before You Buy
This tip is dependent on the personality of the individual buyer and level of commitment to Ecuador – the point is to wait to buy until you are sure that Ecuador is where you want to be. Real estate is not a liquid asset.
Editor’s note: Or at least wait to buy until you visit. It is becoming increasingly common for expats to get their residency visa and purchase property before even visiting. Here is our Expat Scouting Checklist
5. Take Your Time / Keep Digging
See as much as you can: Related to the due diligence process, it is important that you see enough property that you are confident you understand both the value and characteristics/parameters of what you are buying.
6. Work With a Professional But Oversee Your Affairs Personally
It is highly important that you work with trusted professionals in the real estate purchase process.
That being said, it is also important that you are vigilant in understanding and overseeing your affairs.
Make sure you understand everything, that it makes sense and that you are comfortable with the process.
If you have concerns, ask questions, double-check, get second opinions and only move forward when you are convinced everything is on the level.
7. Do Business Like You Would Anywhere in the World
If you are buying real estate in Ecuador, you are doing business in a foreign country. This means that it is more important to ensure that you make good decisions than if you were operating in a place you are more familiar with.
I have seen too many mistakes made by foreigners being overly trusting, not doing there due diligence and getting railroaded.
7 Ways to Mess up Your Ecuador Property Purchase
Purchasing property in a foreign country can be daunting. Doing so in a language, culture, business climate and legal system that may be foreign to you can add to the challenge.
I have gone through it myself and ultimately founded Abundant Living Ecuador, a real estate and relocation services company based out of Loja, in part, to remove the stress and unknowns from the purchase and sale process.
Based on my experience here are 7 ways you can mess up your property purchase in Ecuador.
1. Buying Sight Unseen
This may seem obvious and is certainly true everywhere, not just Ecuador, but buying sight unseen (depending on the specific circumstances) is a surefire way to open yourself up to the possibility of being disappointed with your purchase and potentially even defrauded.
2. Buying Prior to Being Sure Ecuador is Where You Want to Be
Ecuador is such an amazing country with so much going for it. The quality of life, cost of living, climate, air, water and soil quality are just amazing!
That being said living abroad is a big change and is certainly not for everyone. Real estate in general is not a liquid asset and in Ecuador liquidating your real estate holdings can take some time.
So make sure Ecuador is where you want to be, that you like the area you are buying in and that you are happy with the climate, culture, etc. prior to making an investment.
3. Not Understanding the Market
In Ecuador, there is no aggregate data on sales prices or ‘comps’.
This means that you either are familiar enough with the market to assess the market value or you are not.
If you are not, it is highly important you either spend enough time getting to know market dynamics and understanding what constitutes value, or that you work with someone professional and honest enough to properly advise you.
4. Trusting Unscrupulous Actors
It could be said that sales in general sometimes can attract less than highly scrupulous people.
In Ecuador that is exaggerated by cultural differences, a potential language barrier and differences in the: purchase process, level of professionalism, due diligence process, fiduciary responsibility, etc.
It is important that you use a highly ethical and professional real estate person/attorney – get a personal recommendation, check references, vet or use any other method that works for you to select whom you work with carefully.
5. Giving a Deposit Without a Notarized Contract
Do not give a deposit based on a verbal agreement. Any agreement you come to can be put into the form of a contract or ‘Promesa de Compraventa’ and notarized.
This makes the agreement binding, you may add penalties for non-compliance and should you be making a monetary deposit with a closing at a later date the Promesa is a mandatory step.
6. Improper Due Diligence
Your due diligence on a property purchase anywhere in the world is crucial.
In Ecuador, where there is no title insurance or comps and where you may not be familiar with the purchase process, there is even more onus placed on thorough and proper due diligence.
Basic Due Diligence: While this is too large a topic to properly handle in this post, the first step to proper due diligence is researching the title and the boundaries of the property in question.
The title is researched via the Property Register. You must get a ‘Certificado Simple’, which will show if there are any liens, encumbrances, pending legal action, etc.
Depending on the nature of the property you may also want to research the boundaries. Make sure the boundaries or meets and bounds are properly inscribed with coordinates and that they are accurate.
The boundaries are in the Escritura (Title) but older Escrituras may not have exact or even any measurements at all. In this case, you must first inscribe a survey (boundary study) via an ‘Acta de Nueva Linderacion’.
It is recommended you make sure the property is not on a fault line, that its use is not restricted, that there are no immediate plans for public works projects that could affect the property, that there are no water or mining concessions, that you have legal access, etc.
Of course, a good professional can assist you in this process, but very few will be as thorough as necessary. It is important you make sure the i’s are dotted and the t’s are crossed.
7. Buying Shoddy Construction
Construction standards in Ecuador are not always up to international standards. Decisions have often been made in favor of cost savings vs. quality.
While buying a property that needs some rehab can be a good economic decision, it is important to know that the bones, including the foundation, electrical wiring, etc. were properly done.
Home inspections, which are available but not widely used, can help in this assessment, reviewing the plans when available is important as well.
Overall, the biggest advice I can give someone coming to purchase property in Ecuador is to get help – you are operating in a foreign country that you are not familiar with and things are different. Do your research on who are the trustworthy actors in the area and hire a professional with a good reputation to assist you in the process.
About Jesse Bayer: Jesse was a New York based real estate investor who relocated to Ecuador in 2013 and is now the Co-Founder and Managing partner at Abundant Living Ecuador, a Real Estate and Relocation Services Company based out of Loja. Jesse has prepared a free Ecuador Relocation Guide.
Read more about why Jesse decided to move to Loja, Ecuador.
Have a question for Jesse? Join him in the comments. Have a tip or lesson learned? Please share below.
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