Wednesday, June 08, 2011
Dear Reader,
Let’s set the scene: the historic district of a capital city in Central America. The players are a real estate broker, and her potential buyer. The dialog is short. “I won’t sell units in this project”, says the broker, “I know that they’ve had problems obtaining permits”. The buyer assumes she’s lying…trying to steer him to another project where she’ll earn a commission. So he buys a unit anyway (and yes, the agent loses her commission).
In the final, dramatic scene, the buyer gets the bad news: part of the building—the top floor his unit is located on--faces demolition. The building didn’t have the proper permits after all…
Sadly, I didn’t invent this play. The only deviation from reality is that the buyer bought two condos, not one.
Next, we move to a highlands setting…with gorgeous, lush, mountain scenery. The players are the owner of a piece of “development” land, and a potential buyer. As the owner walks back to his car to get some paperwork, the buyer greets an elderly neighbor on the other side of the fence.
They briefly chat about the weather, the beauty of the area, and how much land is for sale. The old man mentions there’s a reason for that. This is one of the wettest parts of the country…but this land is dry. No water sources underneath…and poor, craggy soil. It’s worthless, the old man says…no good for cattle or crops or even the developer’s planned project. And the curtain falls again…
The point of my playlets is to demonstrate the importance of local knowledge, and the need to investigate it rather than dismissing it out of hand. Sure, locals can have vested interests (like the broker losing a commission). But if the buyer in the first scenario had taken the broker’s comments into consideration and checked it out with the help of a local attorney, he would have discovered that the broker was telling the truth…and saved himself a lot of financial and emotional grief. If the buyer in the highlands hadn’t spent those few precious minutes talking to the neighbor, he may well have ended up with a tract of useless land.
When you’re buying an overseas property, I always advise you to act as if you were buying back home…following the same steps and procedures…and going that extra mile to make sure that everything is in order.
- Don’t rely on a seller’s promises or information. Carry out your own due diligence. Make sure you get freehold titled property, with all the necessary permits and approvals, and that the property complies with local zoning. Find out about utilities (water, electricity, etc.). And get all guarantees in writing.
- Hire your own local attorney.
- Check out the location for yourself. That way, you’ll see the garbage dump close to your home, or find out that the huge park next door is set to become a huge supermarket in the next two years. No amount of glossy photos, sleek sales brochures, or slick website presentations can ever take the place of a personal visit.
To make things a little easier, I’ve compiled a report with tips on what to look out for when buying a property overseas. You can download it for free on this link. The report is based on my own personal experience, dealing with hundreds of developers and real estate agents… handling the due diligence of countless properties…and extensive boots on the ground scouting.
And scouting should also be an essential part of your due diligence. You should travel in-country, see as much as possible on your trip, and talk to as many locals and in-country experts as you can. This will not only give you a feel for the property, it will also give you a feel for its location, in order for you to decide if it’s the right location for your second home. We make that a little easier, too, with a range of subsidized scouting trips here.
Next time you’re looking at a potential overseas property, take the time to stop and chat with neighbors and locals. A few minutes shooting the breeze could unearth invaluable information that will help with your buying decision. And if you do go on to buy, you’ll already have taken the first step to making friends in your new overseas neighborhood.
Margaret Summerfield
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