Buying a pre-construction property is not for the faint of heart.
First, you must have a vivid imagination. Most pre-construction properties are only an architect’s dream.
Then, you need to trust … do your due diligence and check out the developer and architect before you buy, so you’re not driven simply by blind faith.
And, patience is a definitely a virtue. You probably will have to wait at least a year before your new home will be available.
But, the rewards of buying a pre-construction property including purchasing exactly what you want, at a good price, and having a hand in the design and structure of your new home … is well worth it.
Ecuador is one of the easiest places in the world to buy real estate. I did, in less than 24 hours, with only my passport and a blank check. Now mind you, I had been looking for a place on and off for two years. And, I deliberated over buying my loft in Cuenca for a week. But, when it finally came down to saying “yes” and starting the procedure, the entire thing took only five hours.
Ecuador allows for foreigners from any country to purchase and hold property. It’s actually written in its country’s Constitution.
So when I spied my beautiful 2,000 square foot loft … or rather a giant mud-pit inside an old colonial building in the World Heritage Site City of Cuenca, Ecuador ... I quickly signed up for the adventure.
I first saw the building in September 2010. When I met the accomplished architect, he had blueprints and extensive plans. I quickly changed them … knocking down a proposed wall, moving the stairs, adding a skylight.
Like birthing a baby, the renovation took nine months to complete. And, there were definite aches and pains along the way. But, it was all worth it when my new “baby” finally came to life.
I was on site in Cuenca three times during the construction (for about two weeks each visit) to work with the architect, designing, re-designing, and picking out appliances, counters, cabinetry, and flooring. Being on site was critical to the success of the final outcome and each time I traveled to Cuenca I averted some sort of potential problem.
When I was not there, we worked together via the Internet. My business partner, Michel, a designer and Parsons School of Design award-winning grad who moved to Cuenca, also lent his creative talent.
If you are buying a pre-construction property and you cannot oversee the construction, it is advisable to hire an in-country project manager or contract with a Spanish-speaking friend in Ecuador to work with the developer and architect. This will help ensure the building process proceeds as promised.
I was one of the lucky ones. The development team was honest, reliable and (almost) on time. And, when there was a month’s delay before finishing the loft, the developer was sincerely apologetic and compassionate ... and offered to hang all my pictures and fixtures “free of cost” as compensation for the hold-up. He also got me a great rate on a local hotel while I waited.
Now this is not always the norm. I have friends who bought a condo in Cuenca the same time I did. They were told that their apartment would be completed by December 2010. Nearly a year later, they still have not moved in. Others have been swayed by false promises, poor construction, or in some cases … outright lies.
So how do you ensure your experience is a good one? That what you buy is truly what you thought you were buying? I’m sorry to say there are no guarantees ... in Cuenca, or anywhere else in the world.
There are, however, a few tips worth noting before purchasing a pre-construction property.
Here is my top ten.
(1) Investigate your developer and make certain he is reputable, financially stable, and has a strong track record. Get references, talk to previous purchasers or people who have worked with him, and see some of his completed projects, if possible.
(2) Find a trustworthy, in-country attorney who is fully independent (and not attached to the developer) to research any property you are thinking of buying.
(3) Make sure you get a purchase or sales contract that covers all possible contingencies, and that has all the standard clauses necessary for purchase in the country you are buying in. In Spanish, this is called a “Promessa de Compra” – A promise to buy document. This is a formal, legally binding sales contract that spells out the terms and conditions of the sale … much like a sales contract in the United States.
This contract should include the sales price, the upfront payment (ranges from10% to 30% of purchase price), subsequent payments and schedules, construction starting and closing dates, and information on defaulting or penalties. Try to include a clause that allows you to receive penalty payments if the construction is not completed by the stated deadline. This is not always enforceable, but it puts the developer on notice.
To be legally binding, the contract must be in the language of the country where you are purchasing, Ask for a translated copy in your native language and make sure you all the points are clear before you sign.
(4) Be certain that the seller of the property is the legal owner. If the seller is the legal representative for the owner or for a corporation that is controlled by the owner, you will have to get an addendum stating that relationship to make sure you are legally covered. Also make certain that there are no outstanding mortgages, unpaid taxes, or any leans against the property that you might incur at a later date.
(5) Study, re-study, and make sure you understand the architectural floor plans and renderings. Check closet spaces, traffic flow, measure rooms or ask for room dimensions to ensure your furniture fits. Check which way doors open, where appliances will go and if there is enough light. What looks good on paper does not necessarily translate into comfortable everyday living.
(6) Understand what is included in the purchase price and outline the details in your sales contract. What is indicated in an architectural drawing or seen in a model apartment is often not “standard” like hardwood floors, marble countertops, chandeliers, and bathroom fixtures. Make sure that all the specifics are spelled out, so there will not be the possibility of a bait-and-switch later. If the developer has promised you something … get it in writing!
(7) If you have received developer financing, financing rates might change during construction, so make certain that you have an adjustment clause that reflects real changes in labor costs or construction, not just the whims of the developer. The adjustments should tie into an official government inflation index. If you are paying cash, ask the developer to remove any adjustment clauses from the contract.
(8) If you need to back out, or can’t make payments, or if you want to sell your unit prior to completion, understand clearly what the ramifications are. Some developers allow clients to assign their sales contract to another buyer, others don’t. Most pre-construction contracts state that if the purchaser backs out, they lose their property, and any money they’ve put into it. In some cases additional fines can occur. Make sure you know what you’re getting into if something happens and you cannot move forward with your purchase.
(9) When signing the “Compra Vente” or final closing document, make sure that it is notarized. To legally participate in this Notary process you must be fluent in Spanish and understand the procedures. If you do not speak Spanish, Ecuadorian law requires you to bring a translator for your protection. Your bi-lingual lawyer can also serve as your translator.
Once notarized the final sales agreement must be registered with the Office of Land Registry. One copy will be filed with the Registry Office and you will receive the other, which is considered your deed. Once you have made your final payment and the sale is closed, get the title and deed transferred into your own name as soon as possible.
(10) If you buy real estate in Ecuador, it is also recommended to have your attorney draw up an Ecuadorian will. Without such a document, ensuring your property goes to your family and friends could be a long and tedious process. You will pay less than $100 to have this document made, and it is worth every penny.
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