Because of the difficult to meet requirements to rent an apartment or house in Colombia, many foreigners choose to buy a home instead. Then they find out that it means buying 100% cash as there’s no leveraging possible here. Here’s your guide on buying property in Colombia…
Acknowledgments: We thank our informed source, Juan Carlos (Juanka) Racines at Stellar View Realty in El Poblado, Medellín, whom specializes in the sale of real estate to foreigners and comes highly recommended by many expats. He was instrumental in nailing down the facts about buying property in Colombia if you're a foreigner.
Preamble: We try our best to get our facts straight. We may be missing facts, in which case you can help us add them. Similarly, if one of our facts isn't exactly right, feel free to point it out in our Facebook group (see link in top navbar) and we'll correct it after verification. In short, this is an evolving guide and we strive to make it the most accurate and complete available.
We’ll take a step by step approach in delivering these facts to you…
Are there any restrictions for foreigners buying property in Colombia?
None. Once your name is on the deed, it’s yours and your heirs forever!
Are there tax implications to owning property in Colombia?
We can’t speak to tax implications involving your country of origin, and apart from the usual property taxes, you may have to file a Colombian tax return (declaración de renta) if the assessed value of all your Colombian assets (cash in the bank, investments, property) exceeds a certain threshold.
Taxes are complicated and not the principal focus of this guide, therefore we strongly recommend hiring a tax attorney in the area where you plan to live.
How do you find trustworthy people to help you in your real estate transactions?
Ask a local person you totally trust for a recommendation or, failing that, there are many expat groups focused on a given city or area of Colombia where you can ask other expats for recommendations. Your preference should be for advisers that have experience with real estate transactions involving foreign buyers.
What you’ll need to buy property in Colombia
A lot of similarities with buying property in your home country, but the differences are notable!
- A trustworthy real estate agent in your area of interest. It’s a bit much to try to do it all yourself!
- An experienced real estate attorney you trust in your area of interest. Colombia has national, departmental and municipal laws, hence a local specialist is best. Some banks have their own experienced real estate lawyer and this will cost you much less.
- A way to transfer large sums of money safely and legally from your old country to Colombia.
- A notary public. They abound wherever you go, but as with anything, due your due diligence, and choose your own “notaria” rather than use the seller’s.
- Having an interpreter or someone who speaks Spanish fluently along for the ride is of great help!
Finding a Real estate Agent / Agency
First, let’s make it crystal clear that the real estate business here probably isn’t like it is “back home”:
- Real estate agents and brokerages aren’t licensed – anybody can be a real estate agent in Colombia.
- There is no MLS system, therefore agents can only offer properties that are in their own portfolios though they can search through offerings on real estate websites as well.
- Sales contracts with agents/brokerages aren’t exclusive, hence many can represent the same property.
There have been a few cases of fraudulent real estate agents, that is persons who will just steal your money, therefore it’s important to vet them. Recommendations from people you trust is a good start, and visiting the brokerage’s office in person is also a pretty good idea.
Even if they’re not legal per se, having a real estate agent you can trust is vital before you should even consider buying property here. There are agents and agencies that cater to foreigners and speak English (such as Juanka) and are well know to expats. In an area where no or few expats live, you might have to rely on the recommendations of the local people. If you have a real estate lawyer already lined-up, he/she probably knows someone reliable.
Mortgages / Funding your Purchase
Mortgage rates in Colombia ranged from 10,53% a 12,30% on July 18, 2022 depending on the bank, and are on the way up as the central bank here is fighting inflation and raising borrowing rates. However, if you’re a foreigner it’s usually not a worry anyway because it will be impossible for you to satisfy any lender’s requirements to qualify for a loan! For a foreigner to buy any kind of property here, be it commercial or residential, you need the entire amount in cash. Juanka, for his part, who handles only foreign clients, told us that he never had anything but all cash transactions.
This guide presumes that you have, or can arrange, large sums of cash from your home country. If you don’t have that liquidity, then you should probably rent (our apartment rental guide is here). How do you get large sums of cash into Colombia safely? You can bring in up to $10,000 US in cash with you when you travel here, which you can convert to pesos here, and this could be all that you need for your down payment, but the balance will be a bit more work. Carrying large amounts of cash across borders on your person usually isn’t recommended, but this is how most expats handle their down payment. Using ATMs to withdraw cash in pesos just isn’t going to cut it, and using Western Union won’t do either. So how do you do it? This is a country where money laundering is a big concern, so doing it legally and correctly is a given.
Exchange rates have been very favorable for a few years now and have reached new records in 2022, so a 500 million peso transaction translates to about 100,000 US dollars. Getting that kind of money into Colombia from a foreign source via a local bank tends to be difficult and costly, but there are alternatives.
The expats who buy property here tend to use one of the following services: Medellín legal partners and Alianza Valores, according to Juanka. They are brokerages and you can receive funds in the account you open with them. There are others and you should get trustworthy recommendations before using any money wiring service.
You can also do this through a major bank in Colombia, like Bancolombia, but getting a bank account has its own caveats and they may have a waiting period when you open a new bank account before you can use their wiring services.
Note: Online services like Remitly usually are unsuitable for large transfers.
SIDENOTE: Some expats claim Acciones & Valores / Western Union is the way to transfer large sums of money into the country but when we asked at one of their branches how things worked they said that they can only transfer funds from the foreign bank to a local bank, thus we see no advantage in using this service for inbound wires.
WARNING: As you will be transferring large amounts of money and converting them to pesos, you can expect to have to provide proof of your foreign funds legitimacy before you can move a cent. This proof could include your most recent tax returns and bank statements from back home. The “4 por 1000” tax may apply when you withdraw the funds unless it’s your designated principal account here.
The 3 steps of buying a property in Colombia
- Make an offer through your real estate agent. Offers aren’t much different than elsewhere.
- If your offer is accepted, you will need to negotiate with the sellers side and provide them with a notarized promesa de compraventa (promise to buy) contract and a down payment (10-20%) to be held in escrow. A successful property inspection can be included as a condition. This is where your real estate attorney will play a key role. The promise to buy is binding and has penalties stipulated if either side violates the agreement. The closing date is typically 20-30 days from the contract date, but this is negotiable. Note that the entire year’s property tax (“predial”) is the responsibility of the buyer (you).
- On the agreed date in the promesa de compraventa you will pay the balance and the lawyers will get the deed signed over to you.
The sales commission is 3% according to Juanka, and this includes both the buying and selling agents. This is a typical rate, but can vary. As anywhere else, the sales commission is only paid when the sale is completed.
The closing costs average about 1% of the selling price. This includes registration fees, notarization (shared with seller),deed search and your lawyers fees, but does not include sales commissions.
While this guide is dedicated to the purchase of properties in Colombia, we will soon add details about selling property here.
This page will be updated from time to time as we get more intel, so you might want to bookmark it!
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