Buy Real Estate

This HowTo talks about how to buy a house or any other real property.

If you are looking to buy just about anything in Nicaragua that does not have a well-established price there is going to be a time vs. money tradeoff. That is, the best price will go to people with these characteristics:

• You are a member of the local community.
• You have brown skin. (This line has been criticized. It actually came from a guy I know here who in Nicaraguan and sells real estate, Omar Rugama. I guess the currect thing here is "they think you are Nicaraguan.)
• You speak excellent Spanish.
• You don't appear to have a lot of money.
• You are patient.

Depending on who you are dealing with, the value of each of these characteristics will be different. While you may not be able to do anything about skin color, the rest you do have control over. In fact, probably the most important is the amount of patience you have. I suggest, for example, that you will spend less total dollars on a house if you rent first, learn more Spanish, get involved in the community and wait. You don't have to do this but you just need to remember that you elected to spend more money rather than be patient.

Once you find your dream home/land/whatever and have the price agreed upon, you need to do your homework before you hand someone a pile of money. Start by getting a copy of the seller's Escritura which shows they own the property. This will contain a legal description which you should check out. It will also have a section added on the end by the Registrador Público which states that the sale has been registered. It will give the location (Asiento, Página, Tomo and Folio) where this is recorded.

If all this checks out, you are close. Two more documents you will need are a Escritura de Libertad de Gravamen which you can probably guess is a document that says there are no leans on the property and a Solvencia. The seller should get the Libertad from the public registry. The Solvencia comes from the Alcaldia and shows that the taxes have been paid (or, more likely have not been paid but what is owed.)

At this point you should be able to go to any notary (you have to be a lawyer before you can become a notary) who will write up a new Escritura for your purchase. You give the seller the money, sign the documents and you get the Escritura to take to the Administracion de la Renta to pay the transfer tax and to the public registry to register your title.

It is typical that the escritura will not have to real sales price of the property in it. I have been told that what is commonly done is that the price is adjusted by taking the dollar amount and indicating that it is the amount in Cordobas instead. (Thus, right now that is 1/19th of the real price.) Because of this you should get a receipt with the concepto stating that this is for the full price of the property (en concepto de cancelación completa de la venta a ________ de la propiedad _____ inscrito en el Registro Público de _____ tomo ___ folio xxx ...). This is so the seller cannot come back later and claim the agreed upon total price was higher and this was just part of that price.

For most people, this will sound much more hands-on then they have been used to. I have done this type of deal many times in the U.S. where the only other person involved was an escrow agent that took the money and made sure all the paperwork ended up in the right place. But, many people are used to real estate sales person, escrow company, title company and maybe a couple of lawyers. You could certainly do the same thing here. But, if you add these sorts of additional people, make sure you can trust them.

Even if you elect not to do these steps yourself, it is in your best interest to understand them and make sure who you are working with knows you expect a report when each step is complete.

Title Issues

There has been a lot of discussion of real estate recently on this site. With the usual disclaimer that I am not a lawyer, I have added this information. Note that I have bought and sold a lot of real estate in the US (without real estate agents or lawyers) and have bought three places in Central America.

While most land purchases are exactly that--you are buying the land--there are "concession properties" on the ocean and lake shores. This means you are leasing the land from the government rather than having the title yourself. This is not necessarily bad (as the least can generally be transfered to a new owner) but it changes the investment value of the property.

Property records are kept at the public registry where the property is located. These are public records and you or someone who hire to help you can review these records. (This is no different than from in the U.S.) What these records show is who the government believes owns the property. In addition, the Alcaldia has an office called Catastro. They should have a plano, that is a map, of your property. They need this information for property tax. The plano should match the records as the registry.

Now, here is the catch. Ownership can be disputed. Again, no different from in the US but there are more cases here due to land confiscation during the 1980s. Thus, multiple people might have what appears to be legitimate title to the land. Resolution would require court involvement. If the records in the Alcaldia show ownership before 1980, you are probably fine. If not, you have more homework to do.

Title insurance if now available in Nicaragua. It works just like in the US (mostly because it is offered by a US company). But, most people don't understand what it really is. If you have a title insurance policy, read the fine print. You will find out it doesn't do what you would expect.

When you buy title insurance what you are really doing is paying someone to read the public records for you. That is, the title insurance company does exactly the same homework as I suggest above. The word "insurance" comes into play only to the extent that the company will be responsible for any errors in their research.

Say what? Yeah, if they search the public record and miss a document that is there or read something wrong, they are responsible for that error. But, they are not responsible for incorrect public records. Thus, if the public record shows that the seller you are talking to has legitimate title and a year later it is discovered that he does not, that is your problem, not that of the title insurance company.

Thus, you have three choices here: do your own research, pay someone (such as a lawyer) to do the research of pay a title insurance company to do the research. Once again you have a cost tradeoff. And, in my (probably unpopular) personal opinion, having the title insurance company do the work is likely to be the least reliable.

Why? Their public record search will likely be as good as yours or that of a lawyer. But, it seems they are least likely to pick up on "street savvy" related to the property. For example, if you get a plan of the property and go talk to all the neighbors you are a lot more likely to hear about when some questionable deal happened in the past.

Commissions

What should you pay? Should you worry about getting ripped off? ... Call this the "common sense" section. In most US states, people selling real estate are regulated. In Nicaragua, they are not. Thus, common sense is more valuable here than in the US. But, that really is all it means. There are crooks everywhere--whether it is a legal rip-off of the buyer or an illegal deal.

When people talk "typical commissions" you will hear numbers from 1% to 10%. They would generally be paid by the seller. Now, what's the difference? One thing is what kind of services you get and the other could best be described as "the standard of living of the agent".

My personal experience has been with a 1% commission. It was strictly a finder's fee. Omar Rugama, the guy I worked with, is well-known and has what you can call "listings". This mostly means notes on the inside of his hat brim but no matter. For his 1% he takes you out (well, your car, bicycle or taxi) and shows you the property. If you are interested, he introduces you to the owner. Beyond that, it is all yours to deal with.

On the 10% end you will likely have someone with a car that will hand-hold you thru the whole process. That means showing you the properties, introducing you to a lawyer that can do the title search, helping you get your money here and such.

Now, sometimes, there is the issue of "other fees". That is, your agent may have a special deal for you. For example, the seller may want $20,000 for a piece of property and your agent gets you a special price of $30,000. Ok, he made $10,000. Should you be pissed at him? I say no. But, it is your choice.

If you did your homework you will know what is a legitimate price for something. If, in that example, $30,000 is a fair price for the property, you had a smart agent. That is, the seller got what he wanted, you got what you wanted and $10k ended up in the agent's pocket.

How do you avoid this type of situation? Go back and read the first part of this article again.

Note that there are real estate listings on our sister site, NicaPlaza.com. Listings are paid for by owners or "agents"--people who plan to make money on the sale. It's free for you to browse.