I got an e-mail from a fellow reader last week. He was in a bit of a bind. He’d decided to purchase a pre-construction property overseas. And, to save some money, he’d decided not to hire an attorney. He figured that as a smart professional, he could figure out a sale contract on his own. But now he had a problem.
His budget was tight, so he opted for developer financing. He’d calculated the monthly payments and figured he could afford them…just. But now the developer was asking for a sizeable balloon payment, which he didn’t realize was in the contract, and which he didn’t have. He wondered if he could just back out of the contract, and get his money back. The answer in his case, unfortunately, was no. But here’s what he should have done before he signed the contract…
He should have hired a good, local attorney. Yes, it can be expensive. But it’s also worthwhile, and can save you tens of thousands of dollars. And if you calculate attorney fees as part of your overall buying costs, it’s a low percentage, and well worth it. This is what your attorney can do for you…
- Help you understand the contract. In Latin America, contracts are in Spanish or Portuguese. If a seller gives you an English contract, ask for the original one in the language of the country you’re buying in, and have your attorney check that one. Have your attorney translate it accurately for you into English, or at least walk you through it, and make sure you understand all the terms. The contract you’ll sign is the Spanish or Portuguese one. This is the legally-binding version used in case of dispute, or if you have to go to court.
- Check the property title. Is it freehold, concession, lease, or rights of possession? Your attorney can tell you. We only recommend that you buy freehold registered title. We also recommend that you should purchase title insurance.
- Check who the seller is. Sometimes you’ll deal with an agent rather than the property owner; perhaps a corporation holds the property. Your attorney can verify that you are buying from the registered owner, and that he wants to sell.
- Check for liens, mortgages, and unpaid taxes. Many countries tie a mortgage to the property, not the owner. Make sure that the seller pays any and all taxes, mortgages, liens, etc., before you buy the property. Your attorney can add a clause stating this to the sale contract.
- Check the boundaries. Your attorney can tell you the official size of the property in the public registry, and if there are annotations such as rights of way. Ask him to make sure that if you have access via a right of way, it is recorded in the title deed.
- Check for permits and approvals. There are permits and approvals required in every country, and they vary. In some areas, you need a water permit; private communities often need master plan approval. Modifications and alterations to an existing property also need approval. You may only have to apply for retrospective planning…but you could face a hefty fine, never get registered title, or even have to demolish the property if it doesn’t have the necessary permits.Your attorney can check they’re there before you sign the contract.
- Check the payment terms. Your attorney will explain how much are you paying, total, and in what currency. He’ll go over deposits, and stage payments, and explain inflation adjustments and balloon payments.
- Check the penalty clauses. Have your attorney explain what will happen in worst-case scenarios, as per the terms in the contract. If you back out at any stage, what happens to the monies you paid? What penalties apply if you are late with a payment, or fail to sign the contract on the appointed date? Your attorney can add in penalty clauses that favor you, too, if the seller fails to keep up his end of the deal.
- Check for fault fixing. Your attorney can see if the sale contract has a mechanism for fault fixing. If you buy a property (especially if it’s new) is there a period when the seller is still responsible for a leaking roof, or faulty wiring? Make sure you know your rights under the terms of the contract.
So, hire a good local attorney. Have him help you through the buying process overseas. Not only can your attorney save you money, he’ll make the buying process smooth and easy…and far less stressful than trying to figure it out on your own.