The first thing you need to understand when you’re buying a property overseas is that you’re in a foreign country. And, as the saying goes, they do things differently there.
Whether it’s getting to grips with another language or a new legal system, buying a property overseas can quickly become a nightmare. But you can make it smooth and easy – once you know what you need to understand.
Tip#1. Understand the legal system.
In most of North America, you’re dealing with common law. In most of the rest of the world, civil law applies. With civil law, once you sign the sale contract, there’s no going back. It’s almost impossible to fix problems or make alterations after you sign. So it’s hugely important that you get an in-country attorney to walk you through the sale contract and make any changes before you sign. That brings us to point #2.
Tip#2. Understand your attorney.
It’s easy to find an in-country attorney. But how good is his English? You should feel comfortable that he is following your instructions, and that you’re clear on what he is asking you to do.
Tip #3. Understand what you’re buying.
It’s obvious that you’re buying a house or a condo or a piece of land. But it’s surprising how many buyers don’t know exactly what type of ownership they’re getting. We only recommend that you buy freehold titled property (known as fee simple back home). But I’ve met readers who shelled out $500,000 on a condo on concession land where owning titled residential property isn’t possible. I’ve met readers who bought rights of possession land and lost it a few weeks later – along with the $150,000 they paid for it – when someone with a better right to the land showed up. Ask what type of ownership you’re getting. And walk if it isn’t fee simple.
Tip #4. Understand contract clauses and penalties.
Get your attorney to explain the sale contract carefully to you. First, make sure all the required clauses are in there. Check that you get title free and clear when you close the sale. Ask that any penalty clauses are applied equally to both parties. And ask about adjustments if you’re buying a pre-construction property – additional costs you may have to pay at closing or with your monthly payment to the developer. One reader who didn’t check his contract faced an additional $20,000 payment when he closed on his condo. The clause was in his contract all along – but he didn’t know that.
Tip #5. Understand the total cost of your property.
Ask your attorney about transfer costs, taxes, his own fees and any other closing costs. And ask about post-sale costs. How much property tax will you pay? Is there a wealth tax where you’re buying, an additional payment because your home’s on the beach, or a condo fee you’ll pay every month? And chat with your attorney and tax advisor to see if you can cut your holding costs by setting up a corporation or foundation.