Land Owner
Posted on March 11, 2007
Filed Under Real Estate, Expat Tips |
4 Comments
As of this week, I am a landowner in Uruguay! I bought a 900 sqm beach front terreno near the border with Brazil. About a year ago, my brother spotted a few good plots on a low-key balneario near the border. Jokingly, he asked me over the phone if I was interested in buying the undeveloped lot next to his. The time between my “immediate yes!” and the final closing of the deal took more than three months. The process was supposed to be simple, but ended up complicated due to a few peculiar issues. Here are the details, from finding the broker to closing:
Finding a real estate broker
In Uruguay, the broker represents both parties and charges 3% of the purchase price each. It is common for the seller and the buyer to each have their own broker, in which case the brokers split the fees. My brother found a local broker through a referral from friends. In my case, finding the right broker was very important, as you’ll see.
Locating the owner
It is quite typical that property owners in resort areas do not live close by. It is also rare for people to update their address with the registry of deeds. So the broker representing a buyer needs to be very resourceful in order to locate potential sellers. In the case of lands near the border, often the owners are from Brazil, so it is a good idea to find a broker that knows both languages well. Our broker was a doble chapa, the informal term for dual citizens (one parent from each side of the border). After much effort, he was able to locate the owner and convince him to sell the land.
Reaching agreement
The owner was willing to sell the land for a bargain, but there was a catch. He had not paid ANY real estate tax since the 1984. He was only willing to sell if I paid all costs. A quick visit to the Intendencia revealed that the back taxes amounted to about US$1800. Still a good deal. Next, we paid a visit to the escribana to find out about next steps. She indicated that if the owner were to bring the deed to her, it could all be done in a couple of hours.
Resolving the difficulties
We contacted the seller, who was from Brazil, and arranged a date for the closing. Unfortunately, on the closing day, the owner was unable to produce the deed. It turns out the title was being kept by a local escribano that died years ago. So we had to postpone the closing until the seller could get hold of the title.
Power of Attorney
As I was about to leave Uruguay, we thought it best to give power of attorney (poder) to my brother so he could buy the land on my behalf. We paid a visit to a different escribano and were told that a power of attorney is not technically needed for purchasing land in Uruguay. It is enough that I go to the escribano and state my intentions verbally. However a power of attorney would protect me against a few very unusual situations that could crop up. So we had one drafted just in case. Cost: US$ 150.
More trouble
The owner was unable to get the deed, so the escribana had to request a copy of the original deed in the central registry of the Intendencia. That took over 15 days. Also, we were told we could apply for a tax amnesty based on a law passed a few years earlier. We did that, but it also took over two weeks.
Closing
On the closing day, my brother needed to make a few visits between the escribana and the Intendencia in order to get the receipt of tax payment and to get other deed information. He also had to get the cash at the bank, in US dollars. Now everything was ready to sign. At the last minute, my brother noticed they had misspelled my name in the document. The documents were reprinted, rechecked and then the deal was closed. The good news is that the tax amnesty brought the tax liability down from US$1800 to US$140. Not bad. By the way, the taxes on my terreno will cost me US$50 per year.
It is important to note that when my brother bought his land, the whole process took only a few hours. In his case, the owner was local, the tax payments were up-to-date and the deed was available. Neither of these purchases could not have been done without a good knowledge of Spanish.
After the closing, the former owner mentioned that after three years of land ownership, I could apply for Uruguayan residency if I wanted. I would need to show I have US$20,000 in the bank. Could it really be that easy? I will need to investigate.
Here’s a lists of typical costs associated with buying property in Uruguay. This information is translated from this site.
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Broker fees – 3.63% (3% plus 21% IVA tax on the 3%) of the value of the property payable by the buyer and by the seller
Escribano – 4.2% (3% plus 21% IVA tax + 18.5% Montepio on the 3%) payable by the buyer
Real Estate Transfer Tax (ITP) – 2% of the taxable value of the property in the Cedula Catastral. Needs to be paid by both parties.
Fee of 800 pesos for Pedido de Información Registral to ascertain the title is clean, paid by the buyer.
Fee of 800 pesos to Register the property, paid by the buyer
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4 Responses to “Land Owner”
Congradulations on your new beachfront property!! Thanks for the details too on your experience. You could write a book, but a blog’s fine too. Can I ask a few questions? How were you able to make sure that the land you thought you were buying was actually what you bought? How much terrain in M2 did you buy? Did you see the land before you bought it? What do you plan to do with the land? Where is it near? My wife and I went up the coast from Punta del Este along the coast to almost Chuy and it was beautiful. We came home as the sun was setting and when the sun had gone over the horizon, the land scape looked kjust like a Juan Storm painting (look him up on Google). A sort of Uruguayan Monet. The coast is beautiful. Who was your estate agent?
Thanks. Whenever you buy land in a balneario, it has already been divided in Manzanas (kind of a block) and Padron (the lot or lots). The location of each lot was submitted to the registry by the developer. I my case, I hired a land surveyor to ascertain the location of the dividing lines. I think it cost me around 100 dollars. My terreno has 875 sqm. Yes I saw the land before I bought it. I would like to build a small house that I can use a refuge and a stopping point when we travel to Brazil. I would rather not reveal the exact location, I hope you understand.
Very informative blog. Great work.
Last year I spent a month studying Spanish in MVD and had a great time. I’m considering returning in the fall and buying a property.
Recently found below CNN/Money article suggesting real estate purchase in Uruguay.
http://finance.yahoo.com/retirement/article/102677/Live-Rich,-Retire-Richer?mod=oneclick
Thanks. Keep reading the blog because I’ll have some tips about real estate in the near future.