By Eagle and Condor staff
The Ecuador real estate buying process allows for the straightforward transfer of real property. From start to finish the entire process can be done in about 15 days or less. We have actually closed sales in as little as 48 hours.
We find that the Ecuador Real Estate process is as safe as in any country in Latin America, with many built-in protections for both buyer and seller. However, you should be aware that there are no disclosure rules for the seller regarding property condition. In this case, it is very much, "let the buyer beware."
The Buyer’s attorney will verify a clear title by reviewing the following documents:
Certificado De Registro De Propiedad Actualizado – Confirms that the property is correctly registered with the local government.
Certificado Del Historial De La Propiedad – (Certificate of the ownership history of the property) Complete transaction history of the property. This document is rarely used except in a case where the buyer's attorney, or the buyer has reason to believe there may be a problem.
Both the notary and the register of deeds are highly paid attorneys who have the responsibility to determine that the person selling the property has the legal right to sell the property.
Escritura De Propieded Del Inmueble – Property deed
Pago de Impuesto Predial -- Receipt of the seller's recent property tax payment.
Certificado De Gravamenes – A document from the Registro de Propiadades. Lists any liens, debts, claims, or restrictions on the property. This document is required by the notary before finalizing the contract. A lien or debt must be notarized and registered to have any legal validity.
Permiso De Propiedad Horizontal – (Horizontal property permission) This document only applies to the purchase of new condos or multi-family projects, and represents municipal approval of the project. It used to be common for pre-construction projects to enter sales contracts after approval of the anti-projecto, but before final government approval of the horizontal plan. This is now changing. Make sure you ask your builder the status of the Horizontal Property permission. Your attorney can perform due diligence regarding the status of this approval. Pre-construction condo sales offer great value.
Proyecto De Lotizacion Aprobado – (Approval of the lot plan) This document applies to the purchase of lots in new housing developments and represents municipal approval to subdivide land. If the project has more than 11 lots, then it must have a horizontal plan.
The horizontal plan outlines the formation of the home owners association and deed restrictions, among other things. Your attorney can perform due diligence regarding the status of this approval.
The Ecuador real estate buying process is flexible and may allow a buyer significant time to complete payment. Your negotiated deal should be incorporated into one of the following documents:
Convenio de Reservación – This is a private contract between the Buyer & Seller and must be signed by an Ecuadorian Notary. This contract is often used to reduce costs associated with the Promesa de Compra-Venta. (Promise to buy/sell)
Promesa de Compra-Venta – This contract differs from the Convenio de Reservación in that it can be registered at the Regristo de Propiedades (local property registry). This document can add as much $500 to $750 to the closing costs when registered.
To reduce costs this document is often used as a private contract and not registered. However, if there is a problem between the buyer and seller, then the document must immediately be registered at the property registers office. A promesa is typically used when entering into a contract for construction of a house.
To conclude the transaction the Buyer’s attorney will prepare a document called the Minuta. This document will be used by the Notary to prepare the Escritura De Propiedad Del Inmueble (deed).
The selling price listed on the Minuta will be the property’s assessed tax value and not the purchase price. For this reason make sure to have a Convenio de Reservacion, Promesa de Compra-Venta, or private contract to clearly set forth details of the transaction even if you are going to buy the property with only one payment.
With information from the Minuta the Notary will prepare an Aviso de Alcabala. This document instructs the local government (EL Municipo) how much tax to charge. It is generally 1% of the assessed tax value of the property.
Alcabalas / Plusvalia:
Alcabalas is a transaction tax paid by the buyer and Plusvalia is the capital gains tax paid by the seller. Plusvalia taxes are paid to the Municipio based upon 10% of the increase of the property’s assessed value between the time of purchase and the time of sale. Plusvalia is typically paid by the seller.
Escritura De Propiedad Del Inmueble (deed):
Your attorney will arrange tax payments and the notary will use information from the Minuta to generate the Escritura De Propiedad Del Inmueble. This is your property deed. Before signing this document the Buyer will transfer any final payments to the Seller.
Your attorney will register the Escritura De Propiedad Del Inmueble at the local Registro de Propiedades (property registry). This step is required to officially transfer title of the Ecuador real estate from the seller to the buyer, and is entirely the Buyer’s responsibility.
Estimated closing costs for property that has a tax valuation of $50,000: Typically the assessed tax valuation of an urban property with a house or building is approximately 1/2 of the purchase price, or lower. If it is a rural piece of land, the tax valuation can be as little as 10% of the sales price.
These costs may vary depending on the location of your property and the complexity of the transaction. To avoid surprises ask your lawyer which costs are included in their fee.
Purchase Agreement (Lawyer Fee) $250 +
Purchase Agreement (Notary Fee) $50 - $100
Minuta (Lawyer Fee) $150
Alcabala (Tax 1%) $500
Property Deed (Notary Fee) $150 - $250
Property Registration (Government Fee) $350 - $ 560
Total Estimated Closing Costs = $1,450
Costs for notaries, register of deeds, and attorneys vary widely from canton to canton or city to city. Typically big city attorneys charge more than small town attorneys. The above costs are approximations.
Ecuador real estate is often sold directly by property owners. If you use a buyer’s agent the industry standard fee is 5 - 6% of the purchase price.
The Seller’s only cost is a capital gains tax (Plusvalia) payable to the local government (El Municipio).
Capital gains are calculated based on the change in assessed value during the period of ownership. Local governments never know the actual transaction value because only the assessed value is included on the property deed.
Annual property taxes on Ecuador real estate are called Predio Urbano for property within city limits or Predio Rustico for property located outside of city limits. City property taxes vary but average about 0.1% of the property’s assessed value, per year. Rural taxes can be much lower.
If you cannot be in Ecuador to close the transaction you can provide a power of attorney to your lawyer or agent or you can simply assign one of them as a proxy to sign for you without a power of attorney. The signer has no possibility of gain from signing the document for you, and the seller will not sign unless he has received his money.
If you hold assets in Ecuador it is a good idea to have an Ecuadorian attorney create a will in Spanish & English. Ecuadorian law states that if a spouse dies, his or her share of the property is automatically divided up among the children, and cannot be sold by the surviving spouse without the childrens' signatures. You can make arrangements for your attorney in Ecuador to process your will on behalf of your heirs. Both spouses must sign a sales contract, or both provide powers of attorney to sell a property. One spouse may sign for a property purchase.
If you are planning to purchase property valued over $500,000 USD, you may consider holding this property as a company. The government of Ecuador may implement hefty estate tax penalties for "high value property" so it would be a good idea to avoid this issue altogether.
Send a message to Pro-Ecuador for more information about purchasing Ecuador real estate. We have years of experience and many, many successful closings to our credit. We have never sold a property in which there has been title problems after the sale.