Written by Sara Chaca, Attorney–Abogada
Revised on December 27th, 2018
Buying a property in Ecuador, if you are in love or smitten with one, can be a WONDERFUL idea, so long as you are aware of the possible pitfalls that might dare to rear their ugly head(s). This is because, firstly, unlike in places such as the US, Canada, Europe and Australia, title insurance is not a common protection mechanism in Ecuador (if ever available at that!). So naturally, any prudent person’s “numero uno” concern is to ensure the absolute safety of making such a large item purchase, which is almost certainly the biggest investment that an Expat can or will ever make in Ecuador. A second thing to be aware of, is whether the Notary and/or Municipality who last effected any documentary change in the property with respect to the current owner (or even with regards to prior owners of the property before that), might have made a problematic error in the property recording(s) of past, because that might invalidate the ability to ensure a smooth transfer of the property (or even any transfer of the property at all). A third issue that is a common occurrence, is that the current owner’s relatives or divorcing/ex-spouse might have something to say about the sale of the property, if or when they might learn of it at any time (including even after the property sale has gone through, if unbeknownst to them previously that the property was being sold..). As an example, it could possibly be the case that the current owner might still owe some contractual or familial duty of equity or care to or for their benefit(s), with respect to the property that you wish to buy. A fourth possibility (among other hypotheticals that will remain beyond the scope of this article), is that you might happen to see a sign advertising the sale of any Ecuadorian properties, boasting offers such as “Land or House for Sale”. Such an innocent enough looking sign, might really in the end just be a fraud to lure in unsuspecting Expats, so as to induce them to misguidedly lay down their funds, in the heat of their “excitement to buy something”. That is to say, one person or group may be pretending to own various parcels of property or homes in Ecuador, by presenting false documents that might otherwise appear at first blush to be legitimate, so as to try to evidence authenticity to an unsuspecting Expat, and then issuing the Expat “purchaser” a fake Deed (or even no Deed at all).
Getting past some of those sour grape possibilities, there truly are EXCELLENT reasons to buy real estate in Ecuador. Not the least of which is that one can use an Ecuadorian property as their Investor Visa qualification for becoming a legal Resident of Ecuador (assuming a minimum Municipality granted tax assessed value of at least $39,400 for any property as of 2019 – which such tax assessed value can also be increased at the request of the property owner, since naturally all Municipalities love to receive higher taxes on a voluntary basis). Plus, if one elects to invest in real estate in Ecuador, they can stop accumulating monthly rent receipts, and even become a landlord themselves, reasonably receiving a healthy monthly rental income prior to rolling out of bed in the morning. As well, one can also have an eye on real estate with the intent of earning potentially attractive annual rates of return on the increased value (yearly appreciation) of their purchased property in Ecuador, including perhaps as a “tax preferred” investment. Like all other things in life, just remember that the calculation for risk vs. reward simply needs to be taken into account, before making the decision to buy any property in Ecuador.
And so, as per the processing of any actionable and desired Ecuador Real Estate Closing within any city/town of Ecuador, some very necessary steps must occur in order to complete the property purchase process. A thorough investigation of the property, as well as confirming through the Municipality where the property is located, that it has clear title and no known debts, deficits, liens, outstanding taxes or other problems with it, are paramount to this endeavor. Plus, the property has to be registered in your name, once all other requirements and necessary verifications have been performed. Please also note that it is relatively difficult to obtain Expat Mortgages in Ecuador, at least in the first 2 years of a foreigner being a Resident of Ecuador. And of course, it virtually goes without saying, that it is effectively impossible to secure an Ecuadorian mortgage if you are only a part-time tourist or short-term visitor to Ecuador, as compared to a full-time legal Resident of Ecuador holding a Cedula ID Card. For this reason, Expats almost exclusively buy property in Ecuador as a full cash purchase, or sometimes as an installment purchase over a 6-12 month period of time, through the use of a written “Promise to Buy” (which is akin to short-term financing being provided directly by the seller to the buyer).
In order for there to be a legal sale of a property in Ecuador and it be recorded by the Municipality where the property is located in, you as the Buyer are ALWAYS far better off to have your own Attorney (rather than the Seller’s Attorney) write the very necessary “Minuta” document that will put the property in your name. The reason why this is so important, is because the formal property sales agreement should be principally written with your own interests in mind as the buyer (even exclusively so, if/when possible), being that you are the buyer and to be the new property owner for going forward purposes – the seller really only needs assurance that your money is green, and little other protection mechanisms besides that. Naturally, you also need to pay the Municipality costs as well as Notary fees associated with your property purchase in Ecuador, as and when they become necessary for clearances, permissions, registrations and verifications, during the property purchase process. Of course, these fees and costs depend fully on the Municipality where your property is situated in Ecuador, as well as on what the tax assessed value of the property is in comparison to the actual purchase price that you are paying for it, and whether there are/were any outstanding taxes or other debts owed with respect to your property.
What any Ecuadorian Real Estate Attorney needs in order to be able to represent you for the Real Estate Closing itself, is the former (past) Escritura and/or Minuta of the current owner’s past purchase of the property, plus color copies of each the Buyers’/Sellers’ Identifications (i.e. Foreign Passport or Ecuadorian Cedula). The Ecuadorian Real Estate Closing process generally takes around 2-4 weeks to complete, from start to finish, depending on how quickly the Seller/Buyer are in providing the necessary documents, required information and/or answering any questions that may arise, as you and they move through the process to effect the change in property ownership to your name.
Payment for buying/selling a property in Ecuador is usually made via bank wire transfer (international wire transfer is generally more typical in the case of Expats). And, so as to pay Real Estate Attorney fees and/or fees to reimburse your representing Ecuador Real Estate Attorney for Municipality costs or Notary Fees that are prepaid by your Attorney on your behalf, those are usually made payable via either personal check, cash in hand or a cash deposit made to the bank account of the representing Attorney with respect to your Ecuador Real Estate Closing.
As an aside, a last but not least important item to consider when buying a property in Ecuador is for purposes of determining/evaluating your ability to build, reconstruct and/or remodel on or with respect to the property you wish to buy (or per a property you might have already bought prior to reading this article..), from the perspectives of permitting and zoning in Ecuador with the respective Ecuadorian Municipality or Ministry that governs the applicable area or matter relative to your property (these can change like the wind in direct relation to the Ecuador Real Estate Market itself!). Note that for Cuenca specifically (i.e. the city that my family and I live in and where my own primary law office is domiciled at), purely as a courtesy to Expats (on a fully complimentary basis at no charge), I very regularly refer Expats who either email, call or visit me, to the very best Cuenca Architects and for Cuenca Handyman purposes too (ALWAYS English speaking ones at that!) for their Construction in Ecuador and also for general building in Ecuador needs (say to build a house in Ecuador..), per any Cuenca Construction & Cuenca Remodeling desires (i.e. Cuenca Plumbers, Cuenca Roofers and as well for other construction related trades for many other Ecuadorian cities), plus naturally for any other Ecuador building matters that are held near and dear to the heart of any Expat.
Thus, in summation of all of the above, if you have found, or may at any time in the future find, a property in Ecuador that seems to sing and/or appears to “have your name on it”, certainly don’t be afraid to make an offer to buy it. Just always be sure, for purposes of purchasing any property in Ecuador, to retain competent Ecuadorian legal counsel, so as to ensure that your attempt to purchase your property will not be made in vain, and perhaps even more importantly, that it not be made in pain.
Sara Chaca (Attorney – Abogada) is a seasoned Ecuadorian Lawyer, who principally serves Expats in making their moves to Ecuador, as well as for any legal issues that arise or become actionable for her Expat clients to undertake in their new lives here in her beautiful country. Sara resides in Cuenca with her family, which consists of her American husband and 2 daughters (as well as her parents and siblings), and when not working, she enjoys spending time with her family in Cuenca’s majestic Cajas Mountains and local parks & fairs of Cuenca, plus visiting the coast as well as the many gem towns of Ecuador. Sara’s personal email address is firstname.lastname@example.org, and her personal cell phone number is 099.296.2065. Sara has a less than 24 hour first response policy, in that if you email or call her, she WILL return your first email or first phone call in less than 24 hours (more typically closer to 24 minutes). Most importantly, all first time consultations with Expats for any type legal matter(s) are always FREE OF CHARGE.