Top 6 things you need to know before buying Real Estate in Colombia

Over the past ten years, the real estate market in Medellin has exploded. The combination of great weather, amazing food, cultural diversity, and increased airline connectivity has made Medellin one of the most visited and fastest growing cities in the world.

In Medellin, there are many opportunities to invest in Real Estate with returns on investment that are significantly higher than most foreigners are accustomed to. While we expect this market to eventually cool within the next 15 to 20 years, now is the prime time to buy in Medellin.

One of the biggest barriers for many foreigners who purchase in Medellin is understanding the dynamics of the various laws and nuances that exist in Colombia. If things are done incorrectly, there can be significant tax consequences or even worse, the investor may find out that they don’t even own the property after years of having it due to issues with the title.

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Buying Real Estate In Colombia? Here’s what you need to know

1. FIND A LICENSED LAWYER

Make sure the professional whom you contact is a licensed Lawyer able to practice in Colombia.

Due to a lack of regulatory enforcement, there are many people who practice law in Colombia who are not properly licensed. Without exception, every licensed attorney should have a valid "Tarjeta Profesional" (Spanish for "Professional Card").

In order to tell if your lawyer is licensed (or not), ask for their Tarjeta Professional and enter their identification number at https://sirna.ramajudicial.gov.co/Paginas/Certificado.aspx.

On this page, you’ll be able to not only confirm whether or not your lawyer is properly licensed, but you can also find out if there are any existing sanctions.

Because of the lack of regulatory enforcement, there’s a chance that the person that’s doing your paperwork is not even licensed to practice law.

2. ASK YOUR LAWYERS TO DO A COMPLETE TITLE STUDY OF THE PROPERTY AND A BACKGROUND CHECK ON THE SELLERS

It’s always essential to ask acquaintances, colleagues friends, and fellow foreigners for references.

It is important to identify the existence of any mortgage, lien, or lawsuit against the seller that may affect the ability of the client to acquire the property. Unfortunately, there is no single unified place to check for these issues - there are multiple places / systems that need to be verified.

In addition, it’s important to do a background check on the sellers to identify any issues that might affect the transaction or have legal implications.

Not doing this critical step of verifying the title properly can have significant consequences in the future regarding ownership, thereby putting your investment at risk.

Buying a title that is not cleared can cause you to lose the entire value of your investment with limited options to recover your investment.

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3. ALWAYS PUT IT IN WRITING

Colombia is not known for formality when it comes to business negotiations.

If you’re planning to invest or do business in Colombia, make sure to always have everything in writing (with signatures) so that everything is clear and so that you are protected. Take care to utilize a law firm that is ‘on top’ of all of the contracts, terms, and conditions to ensure that you are completely protected – for example, a Purchase Agreement for real estate investments should outline every aspect of the negotiation. In this way, you can avoid fraud in the negotiation and ensure that your deal goes smoothly.

Not having things properly documented can lead to your investment being loss and unnecessary higher costs and hidden fees

4. YOU WILL NEED TO OPEN A BANK ACCOUNT IN COLOMBIA

Your lawyers should assist you with properly bringing money to Colombia – explaining the different methods of legalizing funds, preparing he necessary forms, and guiding you through the entire currency exchange process.

Opening a bank account is an onerous process that can take 2 – 3 weeks due to Colombian requirements of compliance, due diligence and paperwork. Deciding how the funds should be registered with the Colombian central bank and how the asset will be held needs to be fully analyzed in order to make the best decision regarding tax planning, the potential for an investment visa / residency, and liability.

Not doing this correctly can lead to bank accounts being frozen or closed unexpectedly in addition to funds being frozen.

5. MAKE SURE YOU SET A DATE TO CLOSE THE DEAL AT A NOTARY

The closing date will be specified in the purchase agreement between the parties, and your lawyers will draft the document for the deed/title – this needs to be notarized to be legally binding.

In Colombia, getting a document notarized usually requires physically visiting the notary office to sign the public deed guaranteeing your ownership after executing the purchase agreement. Your lawyer must ensure that all of the information is accurate, and can provide you with an official translation in the event that you do not understand Spanish. Additionally, you can provide your attorney with a limited power of attorney in order to sign the document on your behalf.

The notary is the one that closes and certifies all documentations.Having errors during the notary process can increase the time it takes to make your investment and also lead to extra costs.

6. CONFIRM THAT THE PUBLIC DEED HAS BEEN REGISTERED CORRECTLY

Before you sign, the Notary will send the public deed to be registered at the registration’s office on the same day.

You must be aware of this process and ask your lawyers if they already have had notice related to the registration of the public deed – once you have received the official document, the purchase process is complete. This final step can take between 2 -3 months, depending on the backlog within the notary and the national real estate registry office.

All paperwork must be properly submitted to a central public data base, if it’s not there, it’s not official.