Real Estate in Metro Medellin: Clarifying the Picture
Buying and selling real estate in metro Medellin can be a confusing and uncertain experience for foreigners, given the many legal, business, cultural and processing differences in Colombia versus the practices found in other countries.
For that reason, Medellin Herald consulted with Luis H. Londoño — one of metro Medellin’s most-experienced real estate brokers, especially in the super-hot “oriente” market east of Medellin.
Another key factor behind Medellin Herald’s request for this consultation is that Luis H. Londoño also has professional real-estate sales experience in the United States. Hence there’s knowledge and experience behind an ability to compare the differences between these two markets.
(Full disclosure: Luis H. Londoño handled a most-satisfactory, problem-free purchase of the “parcelacion” property that my wife and I bought here 10 years ago, at a price that most U.S. citizens today would consider an astonishing bargain. While the house was old and needed lots of work, we have gradually upgraded the property over the years, to our particular tastes, and enjoy living here immensely).
What follows are our questions, and Luis H. Londoño (LHL) answers:
Medellin Herald: Please explain to our readers your experience as a real estate agent in the United States — and tell us about your decision to return to Colombia to launch what is now known as one of the metro area’s most experienced and recognized real-estate agencies, especially in the “oriente” (east of Medellin) area?
LHL: My experience in the U.S. real-estate market was very gratifying, given that I became familiar with a new and developed method of real-estate commercialization, based upon the “multiple listing service” (MLS) system. This system considerably facilitates the ability to find available properties consigned to real-estate colleagues, and also provides them access to one’s-own property listings.
In the U.S., regulations require brokers to undergo state-supervised examinations prior to becoming a real estate agent. This establishes a series of norms that are the hallmark of an ordered system — not only when it comes time to pay a broker’s commission, but also norms that govern the closing on a property purchase. In many cases, a real estate agent in the U.S. has an exclusive contract with the seller — contrary to the custom in Colombia.
My stay in the U.S. real estate market was from 2002 to 2004, after which I decided to return to Colombia to restart my career here. During the 10 years since then, I have developed a real estate business with a loyal and committed team.
Medellin Herald: How can a person unfamiliar with the Colombian real-estate market be sure that a given real-estate agent is properly certified, doesn’t have legal problems and has a good business reputation?
LHL: There isn’t any regulation in Colombia that demands studies and accreditation in real estate brokering, nor any credential that guarantees a transparent and honorable legal history. Because of that, it’s very important to study the trajectory, experience and seriousness of an agency or an agent prior to using their services.
Medellin Herald: Many people outside of Colombia have the impression that Colombian banks won’t extend mortgage loans to non-Colombian citizens, unless perhaps the applicant is married to a Colombian citizen, or meets certain other Colombian legal requirements. Can you explain what is available to non-Colombians for mortgage loans here?
LHL: There are various bank entities that offer mortgage loans to foreigners. Some lending institutions offer loans covering up-to-50% of the purchase price, but the average is 40%. One institution offering such loans is Colpatria.
At most Colombian banks, however, foreigners can’t have access to such mortgage credit. In the case of Bancolombia, foreigners can get mortgage loans if they are blood relatives to a Colombian citizen. [Editor’s note: Bancolombia also states on its web-site that non-resident foreigners married to Colombians also can qualify for mortgage loans here.]
Corpbanca and Banco de Occidente also will offer loans to foreigners that have assets in Colombia, while Colpatria will loan to foreigners without those restrictions.
Medellin Herald: Do you have bilingual (English-Spanish) agents that can help foreigners not only find a suitable property, but also to advise them on the entire process of buying and selling – including the legal requirements here, the required taxes, how to detect and avoid embargoes that may have been placed on a property, or other problems?
LHL: Yes, we have bilingual agents, and we have a legal department that oversees all legal issues that attend to this process in a most careful manner – from start to finish – with the aim of avoiding impediments to the property sale at the time of negotiations.
Medellin Herald: In general terms, how can one compare the business of real estate in Colombia versus the business in the United States?
LHL: In the U.S., as I mentioned, strict regulations cover this activity, and the most usual case is for sellers to give exclusivity to an agent for a certain time – unlike the situation in Colombia, where many agents are given the business, which leads to considerable disloyalties in the process.
Medellin Herald: How does a seller or purchaser go-about obtaining a legal certificate indicating that a property is free of legal impediments to a sale? For example: If the proposed property is located in El Retiro, then how is one to know where to obtain this certificate, if El Retiro doesn’t have a Registry office?
LHL: It’s simple. Today, you can do this via the Internet. In order to know which property belongs to which municipality, you only need to know the first three digits assigned to locations. For example, Rionegro is “020,” while La Ceja is “017.” An internet search will show the codes of each municipality, but you must keep in mind that there are situations where there’s only one Registry office covering several municipalities.
Medellin Herald: Does a foreigner need a lawyer for advice on a property purchase, and if so, then do you have a list of recommended attorneys?
LHL: When you work with a serious, experienced real-estate agency with knowledge in this field, then I don’t see the need to hire a lawyer, except when it comes to handling foreign-exchange transactions. Our policy isn’t to recommend lawyers.
Medellin Herald: How can one avoid frauds? For example, there have been a couple of cases of renters who have illegally put a property up for sale, and then disappeared with the sales proceeds, without the knowledge of the owner.
LHL: Frauds happen everywhere in the world. Here, the most important thing is to get the support of a serious agency or agent who will assume the role of investigator into the owner as well as the buyer.
Medellin Herald: What role does a notary-public play in the buying and selling of properties here in Colombia?
LHL: Notaries are persons with great experience and knowledge of contracts — and they check to see that a legal registry of a property doesn’t have any embargoes or other impediments that would take a property off-the-market. At the same time, they check to see if the property is up-to-date on tax payments and any administrative fees [such as association or condo fees]. However, an attorney, an agency or agent that is involved in the real-estate transaction should be involved in a title search. Because of that, it’s important to know the trajectory and experience of the person who is representing you in the negotiation.
Medellin Herald: Is it wise to buy a real-estate development project that is just in the planning stages? There are cases of fiduciaries in Colombia that refuse to recognize their financial responsibility in the face of non-compliance by a project developer or construction company. How can one avoid such problems?
LHL: Investment in real-estate projects is an important and profitable business as long as the construction company is serious and the end-product is commercial.
As for the fiduciary, there are those that are involved only up-to-the-point of [financial] equilibrium, and others that are involved all-the-way to project completion. Because of that, it’s important to know what type of fiduciary contract a construction-company has, given that once the equilibrium point is reached, a fiduciary may hand-over the collected funds to the builder and no longer takes responsibility to see the project through to the end. In this situation, an investor in such a project must have confidence that the builder has a solid history.
Medellin Herald: To date, a nationwide “multiple listing service” (MLS) system apparently doesn’t exist in Colombia, although there is a limited version of an MLS organized by the local real-estate trade association, “La Lonja de Propiedad Raiz para Medellin y Antioquia” (see: http://www.redinmobiliariamls.com/). On the other hand, there are internet real-estate sites that are emerging in Colombia, such as www.fincaraiz.com.co. How can one obtain adequate and reliable information about real-estate markets in metro Medellin, given the lack of a nationwide MLS system here?
LHL: While there’s no “MLS” system here like that of the U.S., there are many web-pages now produced by various companies and real-estate agents, such as “vendoyarriendo.com,” “metrocuadrado.com” and others. Similarly, one can find important real-estate listings in magazines such as “Luis H. Finca Raiz,” “Revista Inmobiliaria,” “Revista Propiedades” and others. These will give you an idea of what’s on the market and the prices.
Medellin Herald: Many foreigners would be confused by the “cambalache” (bartering) custom that is frequently used in real estate deals here, which may include swapping properties, cars or other valuables as part of the purchase or sale. Can you pre-qualify buyers and sellers to avoid such “cambalaches?”
LHL: “Cambalaches” are very frequent in our business — and I would say that this isn’t completely unknown to foreigners. Nevertheless, it isn’t common to make a sale [to a foreigner] using such deals. Therefore, a simple way to avoid this is to establish with agent at the time of listing the property that there’s no interest in accepting any “cambalache.”
Medellin Herald: Many people are afraid to show their property to “outsiders” and likewise want to avoid the possibility of dishonest people involved in a property transaction. How can this be avoided? Is there a system of pre-qualifying buyers and sellers, to avoid such problems?
LHL: This is a fundamental task of the intermediary in this area. It’s not advisable to do real-estate business directly, because as we all know there are people who act in bad faith – and such people try to avoid at all costs an intermediator such as a real-estate agency or assessor.
Medellin Herald: In the U.S., it’s customary to hire a professional to conduct a property inspection before closing a sale. But as we’ve all seen on popular real-estate TV programs such as “Property Brothers,” it’s possible to discover big problems — during post-sale home-improvement projects – that weren’t detected during pre-sale inspections. Is there any way for buyers in Colombia to protect themselves against such problems, perhaps via terms in a purchase-sale contract?
LHL: If the purchased property is new, then it will have a guarantee period. But if the property is used, then no such guarantees are customary in Colombia. So, it’s wise for a buyer to contract with a person who is expert in detecting damage and flaws in a property, so that the buyer can agree with the seller on covering costs of such repairs.
Medellin Herald: For foreigners that are planning to pay cash for a property in Colombia, is it difficult to transfer a large sum from a bank in the U.S. to a bank in Colombia? Are there legal limits on the amount of such transactions – limits that presumably were created in order to prevent crimes such as money-laundering?
LHL: It isn’t a matter of limits on the amount, but rather that such money transfers must be done in an official manner — and because of that, it’s fundamental to obtain the advice of an expert person in this matter.