Blame it on the Rum and the Sun

by Ronan McMahon

sun emergingI don’t know whether it’s the sun, the rum, or a heady combination of both, but many people take risks when buying a property overseas that they would never take when buying back home.

There’s something about buying a property overseas that can cause us to leave our reason at the airport. It all seems so exciting and full of possibilities. It’s easy to get caught up in the excitement, and it’s very easy to get carried away. You need to remember that some things stay the same”don’t leave your common sense at home. This is a truly exciting adventure once you rigidly follow a set of steps.

If this sounds like a lot of work, don’t worry. The lawyer does the work. You just need to make sure that you have satisfactory answers to these questions. I’m talking about some e-mail back and forth and maybe a wrap-up call. Then it’s back to the fun, rum and sun.

We’ve included the main steps to follow, below. The full report with more in-depth information is available to download free, here:Due Diligence Free Report

Step #1: Hire a good, local, in-country attorney. Your bilingual local attorney should work for you”and only for you. He should not represent anyone else in the transaction. That may sound like a givenbut in many countries, an attorney can legally represent both sides in a transaction. You should be aware too that while the US and Canada use common law, in most of the rest of the world civil law applies. Civil law is very black and white. There’s no pleading for fairnessyou are either right or wrong.

Have your contract translated and read it carefully yourself. Ask your attorney to explain anything you don’t understand. Your attorney may not explain a clause that is normal procedure in his country”but it may be very different to how you’d do things back home.

Step #2: Buy title insurance. Title insurance is available in most countries through companies like First American Title Insurance, and it’s affordable. It gives you peace of mind.

Step #3: Check the sale contract. Have your attorney translate the sale contract for you, and read it yourself. Ask your attorney to explain any clauses or terms that you are not sure of. Remember, it doesn’t matter what the vendor has told you. What matters is what’s in the contract. Check that the property details, description and price are correct. Check that the seller’s name matches the name on the current title deed.

Step #4: Check the title deed. Your attorney will check the title chain in the registry. Check if your title is registered or possessory. In some countries, they can seem similar. You can live in a Rights of Possession property, record your claim to it, and you can sell it. There is a difference, however. Registered title means you own the land. Possession means you have the right to occupy the property, until someone with a better claim to it turns up. You cannot get mortgage financing on a possessory property, either.

Step #5: Check the permits and approvals. They’re becoming more difficult to get, and more expensive. There’s quite a range of them, and they vary from country to country. The standard ones are environmental, water, construction, and municipal permits.

Step # 6: Check access. How do you get to your property? If it is via a right-of-way through someone else’s property, that needs to be stated in the deed. Similarly, has anyone else got rights of way through your property?

Step #7: Check infrastructure essentials. In particular, make sure you understand how water and electricity will get to your property and how waste will leave.

Step #8: Check the developer’s background. If dealing with a pre-construction development, ask if your developer has developed before. If so, where, and what was the finished development like? Can he provide you with written testimonials from previous buyers?

How is your developer financing the project? If he has loans or mortgages, how is he proposing to pay them off? If he is committed to repaying those before he starts construction, that is not the ideal situation for you.

Does he need money from sales to finance the project? How likely is he to achieve that sales level in the current market?

Step #9: Check the master plan. With pre-construction developments, make sure that amenities promised in the master plan are in writing in your contract. If the developer has reserved areas or green space, see if they will be preserved, or used for future development. Similarly, if there’s empty land next to the property, find out what plans are in place for it.

Step #10: Check the CCRs/HOAs. With the CCRs (Covenants, Conditions and Restrictions), make sure there is nothing you can’t live with. Keeping certain pets may go against CCR rules. Working from home usually carries restrictions, related to the type of work you do. See what standard of maintenance you are obliged to carry out on the exterior of your property”and what remodeling is allowed.

Step #11: Investigate tax issues and wills. Discuss with your attorney the best way to hold your property overseas. Whether you hold the property in the name of an individual or a corporation, for example, this is dictated by your personal circumstances and what your plans are for the propertydo you want to hold it long-term, sell it before completion, or use it for rental income? Ask what happens if you die. You may need to have two wills, one in the country you are buying in, and one back home.

Step #12: Use approved escrow services, such as those offered by First American Title Insurance if you make any payments that are contingent on the vendor fulfilling certain criteria.

A finance graduate, Ronan McMahon worked in the e-business consultancy and dot-com industries before joining International Living as Real Estate Marketing Director in January 2004. Ronan has been an active real estate investor since his early twenties and joining International Living gave him the opportunity to marry his personal and professional interests. Last year Ronan took up the position of Executive Director with Pathfinder.

Pathfinder is International Livings preferred Real Estate advertising partner. Pathfinder scouts the globe to find the most unique and value-oriented real estate opportunities.

Ronan writes International Livings Real Estate Trend Alert and regularly contributes to International Livings print and online publications. Ronan has travelled to 15 countries in the past 12 months alone following real estate trends with the potential for profit. Instinct, experience and an unrivalled black book of contacts give Ronan McMahon access to the inside track to unique profit opportunities. 

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