Thinking of moving and buying in some other country has an amazing exciting appeal. So much so that people can be swept away by the idea while just on a short vacation.
But Being the author of this article, I should tell you I witnessed these mistakes happen while living abroad firsthand. Many buyers had the dream of buying in another country, but unfortunately ended up losing everything. I was very close with many developers, real estate agents and even family who purchased internationally. These are the stories and tips from the experts in those countries.
Hopefully this article will help at least one person who is buying real estate internationally to avoid these mistakes.
8 Mistakes When Buying International Real Estate
1. Pre-Developments
By far some of worst issues I saw internationally were those who fell into bad pre-development offers. If you don't know what I am talking about, these are nothing more then a future vision of a development and an opportunity to buy in at a discounted price. Visually, they computer generate an amazing landscape, a homes inside and outside, golf courses, restaurants, pools and more. However, if you go there it's often bare land with a drive in gate at the front and a sales office.
I have to say, most all of these pre-developments were in no way scams. They had good intentions to build the dream they sold. But unfortunately things happen, money runs low, sales are low and legal issues between partners pop up for example. What ends up happening to the buyers, they get zero of the development amenities and just end up with a vacant lot or remote home.
Although the company may be legally bound to build what they sold. Good luck getting your money back in another country. They would be protected under an S.A. or Corp which only allows you to go for the companies assets. If they didn't build it, the chances are nothing is in the companies assets or it was liquidated. Even then, the legal system in some other countries can be awful to navigate and not worth it. Even the lawyers at times will milk you dry during a very long court process.
Pre-Developments can also be great if you follow a few steps. I've seen people buy pre-developments for cheap and flip them for double once everything was built.
These are the general rules those investors followed.
Only choose from reputable building companies. Look for a long history of successful development projects.
Make sure the area is prime, don't choose a project that is very remote. Sales may be very low even though the price seems wonderful. A reputable company would pick great views or in a good location, they would have repeat sales and no history of abandoning a development.
If you decide to take a risk and not follow the first two points, ask many questions, try to buy in a stable economy and consult a lawyer about the contract.
2. Avoiding Legal Pitfalls: Importance of Checking Ownership Rights
I will start this one with a true story which happened to a friend of the family. This woman was of retirement age, single and excited for her next chapter in life. She had the dream to live in in Central America and open a small coffeeshop. She sold everything back in the United States, her home, car and every other personal possession. She used everything to buy a home and a coffee shop in Central America. She went the normal method of using a real estate agent, but no lawyer or title company. She was just not familiar enough to ask for those and the documents were in Spanish. After all was said and done, she was scammed and owned neither the home or the coffeeshop. Everything was wiped out, she was left with hardly any money and no way to get back her life savings.
These are the general rules people used to avoid such a tragedy.
Use a title company first and foremost, there are reputable large title companies with offices worldwide. They will check title and insure that you own what you buy.
Use a reputable real estate office. It's best to use a brand name real estate office like 21st Century or Re-Max. It may protect you just incase.
Double check everything with Lawyers. Two that don't know each other.
3. Avoiding Smart Banking Mistakes
Although usually not a problem it does come up. A good example is what happened in San Miguel de Allende. Money that expats moved into a very reputable Mexican bank vanished. If interested, you can read the story here on Bloomberg. It's not that these people didn't make a long thought out decision about using this bank. But things like keeping your accounts in your country and only moving money when need to, could of saved them.
If you plan on using an international bank, a lot of counties have international banks like Scotiabank. This particular one is a Canadian bank so you shouldn't have any issue as it's insured. If you need to use the counties local bank, see if your money is insured and get it in writing. It's very rare for bank issues to happen so don't let this stop you. But don't put every last dime into one foreign bank account.
The other thing to note is getting money out of the country. If you end up moving back to the States or your home country. Consult with attorneys and both banks for a smooth the process. I have heard of money being locked due to different problems.
4. Avoiding Costly Mistakes: The Importance of Checking Utility Rights
This one happened way to often strangely enough. Usually land, but homes as well and most always concerning water rights. Either someone near your property owns the water well, deciding to withhold it from you. But also with the country water company, deciding they can't do it in your area all of sudden. Both these issues will completely devalue your property. Even to the point where the water well owner forces you to sell your property for pennies on the dollar. Then buys it, then gives rights to the water when selling your old property. Oh that seems very extreme you may say. Well that is a true story and I've seen it more than once.
Some steps to take to avoid this.
Know who owns the water, is it a person, company or country system
Get access to the water in a contract or on your deed.
Don't fall for anything where they say the water right application is pending.
5. Avoiding Costly Mistakes: Understanding Real Estate Values
This is always hard to judge of course but do your best. Each county is very different in retaining, sustaining or raising value in properties. Try to look at real estate trends, resell value and time to sell.
Here are some tips.
Know that second homes like vacation homes are the first to sell and last to buy during a down economy.
Real Estate in some countries takes a really long time to sell. Make sure you can hold steady though this so you don't have to fire sell. This is most common in some poorer countries where you have expensive homes. Most of your buyer market for this type of home will be international buyers.
Real Estate agents can be very lazy. This is strangely true in some countries I saw. They may throw your property up on their local website, but then they don't even return the calls or show up to meet the person. You may need to be proactive and help sell it, or find a really good agent. A good start is listing it on Viviun.com yourself.
6. Avoiding Common Legal Pitfalls: Not Using the Lawyer Trick
I always thought this was the smartest tip given and it saved peoples butts left and right. The trick was to never use one lawyer, but use two. Most importantly, make sure they don't know each other or know that you have two. Lawyers are not always on your side or in your best interest. Comparing everything the two say will help you determine your decision. This should be used for real estate and any other legal issues.
7. Avoiding Political Ignorance: A Critical Mistake
This can be another thing that is hard to determine in some countries. Some are very stable, some are rocky and some seem okay but change fast. Political stability is important, take Nicaragua for example. A very popular growing surf destination where people started investing in hotels, homes and businesses. Almost overnight, no one wanted to go there due to political unrest. Property values dumped, business closed and hotels went vacant. Maybe even you won't want to be there, but now you can't sell your property.
8. Avoiding Common Mistakes: Why You Should Consider Renting First
The strange ones I heard about was the people who maybe took a week vacation and bought property on the last few days of the trip. They either go home and skip on the idea of moving there later. Or they move right away and have really bad culture shock. There was a story about a guy who did the latter. He sold everything, bought a place without ever staying in the country longer than a week or two. Well, he was in over his head and left after a few months. Of course he lost money and had to restart someplace else after.
You may wonder what went wrong for him to do this. You can almost always expect culture shock and at some point this realization of an extreme life change. Some miss friends and family after a while or the comforts of their old home. But for this particular guy, everything went wrong right away. You should always expect problems when moving abroad. But this guy got the short end of the stick too soon. After about a month there, a lightning strike caused a surge and destroyed every item in his home with power. Power also went out for many days and no one would come out to fix it. On top of that his place flooded, locals thought he was a bit weird and overall, it just wasn't what he thought it was going to be.
If the plan is to move internationally, it is a good idea to rent for while first. You can still be dedicated, sell everything and be ready for the move. But living in the country and area you think is best for a good six months or more will either give you comfort or make you realize this isn't for you before investing everything.
Buying and living internationally is one of the most thrilling experiences. You will run into issues here and there but as Anthony Bourdain put it "Travel is about the gorgeous feeling of teetering in the unknown."
