Expat Exchange members, some of whom have purchased multiple properties in Colombia, offer tremendous insight into the property buying process in Colombia and the involvement of Colombian lawyers, real estate agencies and Banco Republica. Expats in Colombia and others considering investing in real estate in Colombia should read these tips for buying property in Colombia.

1. The Property Buying Process in Colombia

One expat in Colombia offered a very helpful checklist for buying a property in Colombia. He advised the following:

• First, find the property you want to buy and make a sales contract.
• Second, wire the money to your BanColombia account, when it gets here, show the bank your sales contract and they will convert it into pesos and deposit into your account.
• The bank will assist you in filling out a formula 4, keep a copy and send it to Banco Republica.
• One business day before the closing, go get a new certificate of title, certificado de tradition, just to make sure nothing new has come up.
• On closing day, show up with a bank check for just a little less than the estimated closing amount and some cash to make up the difference.
• Go right away, the same day or the next day and pay the tax and register your property.
• Trust no one and especially not the sellers or any family members that have advice.

2. Bank Transfers for Buying Property with the Formulario No 4 or the Formulario No 5?

Formulario No 4 and Formulario No 5 are two different Banco Republica forms that are filed when you bring money into the country. Formulario 4 is for foreign investment and Formulario 5 is for everything else. If you use the forms incorrectly, you may face significant fines.

"I am NOT a specialist on such matters and expert advice may be necessary. When I tried (wrongly) to use a Formulario No 4 for an inwards transfer whilst I was already deemed a resident fiscally (more than 183 days in Colombia), I was threatened with a fine for infringement of Colombia's exchange control rules of up to 200% of the amount being transferred. Fortunately, I was able to argue my way out of it and then used the Formulario No 5 which is used by Colombian resident expats," recalled one expat.

Another member explained, "Which formulario should you use... I learnt the hard way. I initially used Form 4 and then had to change to Form 5. The idea is, you are either identified as a 'tax resident' in Colombia, or you are not. The Form 5 is used by 'tax residents' in Colombia when they want to bring money into the country from overseas. But if you are not a 'tax resident,' then the money you bring in is registered by the Banco de la Republica as a 'foreign Investment,' and Form 4 is used for this purpose."

3. The Title Report for a Property in Colombia (Certificado de Tradicion)

One person asked, "If buying property in Colombia remotely (while living in US), is there a way a buyer can verify that the property was properly registered? would this require flying down to Colombia to verify?"

An experienced property buyer in Colombia answered, "Not really sure how you purchase a property remotely, that is unless you gave your power of attorney to someone for you. In regards to confirming that the property you thought you purchased, is truly yours. You need a revised copy of the title report. This is called 'Certificado de Tradicion.' This title report is available in the recorders office in the Department where the the property is. The process is:

1. The seller signs the title, the buyer signs the title.
2. The notary office authenticates everything.
3. The new title is taken to the registrars office, taxes and fees are paid.
4. The law gives you, I think, 30 days or more to pay the taxes and registrar the property, however:
   • Until you have registered the property in your name, any debt, lien, encumbrence or claim agianst the previous owner can be recorded agianst your property and will stick.
   • It is prudent to record as soon as possible.
   • I have heard of people who purchase a property and do not registar right away. Then somthing like a tax lien or a claim from a relative comes along and BANG! You're just another victim.

4. The Importance of the Sales Contract in Colombia

"The sales contract is the most important legal document to protect you. When things go wrong, the court will go by what is in writing not what is verbally agreed to. The price of the property in the contract should be the real sales price... I've had buyers ask for it to be higher to satisfy the 30% down payment required for approval of a mortgage (down payment built into price) but I've refused. The notary will ask you if you want the real price or the value that the tax office provides to be used on all papers for registration. This is where 'most' people use tax office value which can be 30% or more below the real price to reduce fees. This price has nothing to do with Banco De La Republica declarations. Your sales contract will confirm the actual price if ever needed," recommended one expat.

5. Advice for Closing Day on a Colombian Property

In the property buying process outlined in Tip 1, the member said to show up with a bank check for little less than the estimated closing amount and some cash to make up the difference. Other members asked why you should do this. He answered, "Because the closing amont is just an estimate. There are always offsets or additional fees or somthing else that comes up. Also utility bills cannot be paid up to closing so that has to be negotiate or prorated. I will, depending on the seller or amount or situation, show up with a check for 5 million short and 10 million in my pocket. Additionally, if the seller does not come with some good references or is not known by me, I will ask to inspect the property early in the morning of the closing day before we meet at the notary. I have more than once closed on a property and the seller has not completely moved out or has removed items that were to stay. Also the paz y salvo (certifies that no property taxes or administrative fees are due) need to be up to date, as much as possable. After the closing, there are no go backs. We come from an environment where we want to do the right, fair thing. They do not. "

6. Direct Foreign Investment Credit for the Property Purchase

"I have learned that if you are interested in obtaining a residency visa, then the American citizen alone should purchase the property in his or her name only in order to receive credit for the direct foreign investment. Hope that much at least helps," advised one expat.

7. Finding a Reputable Real Estate Agency in Colombia

There is a lot of discussion on our Colombia forum about so-called 'gringo agencies' and their motivations. One expat commented, "Although the 'gringo agencies' are easy to criticize the reality is that buying for anyone new to the country isn't easy. Finding a good realtor isn't easy and they don't tend to do much other than show you places that they know of. My experience, even with the best of them, is that you don't get a balanced view. In Medellin, with all of the development going on it's important to have someone that tells you that one of the reasons this apartment is on sale is the the road below (for example Carrera 30) is being widened and that's going to significantly change your living experience."

Another expat in Colombia explained that some real estate agencies in Colombia do not work with in the best interest in of the buyers. "I agree that intermediaries in Colombia are pretty useless and their role is basically to make phone calls to arrange meetings. They know nothing about the property they will show you. They charge foreigners with 'gringo tax.' I was shown in Medellin the same apartament by three different estate agents and asked three different prices, with differences up to 40.000 US$. Some agents will only show you 2-3 apartments and if you do not buy what they show you they will either drop you or ask you to pay hourly fees for their services, which is totally unheard of and is only done with foreign clients."

Based upon these warnings, expats should be very careful when choosing a real estate agent. Get recommendations from friends or colleagues who have purchased properties in Colombia.

8. Buying an Pre-Construction Property in Colombia

If you are considering buying a pre-construction property in Colombia, learn from this member's experience, "I bought an apartment off-plan about a year before I moved here. They estimated 1 year until completion, and in the contract it allowed the developer until a certain date to complete. When I arrived in Colombia, they still hadn't started to build, so I gave them a little time to start construction. However, despite constant promises to start next week, tomorrow, next month, it never got under way. So I had the right to cancel in my contract, which I did. The money I also got them to agree should be put in a fiduciaria, to protect me (I paid in full), and so when I cancelled I got all my money back plus a nominal interest, and bought my present apartment. To this day, 3 years later, they still haven't started construction of the original one."

9. Property Pricing and Negotiations in Colombia

A lot of expats on the Colombia forum talk about properties in Colombia being overpriced and how to know what a property is worth.

"I'm not sure that the issue is Colombians not accepting what the property is worth. Selling here provides exactly the same problem. Realtors tend to ask you 'what you want' rather than providing any real advice. Some of the bigger agencies work some sort of scoring system but it's hardly scientific. Put it this way I have a property on the market and actually had it put on significantly less than the realtor suggested. Even time on the market isn't a great indicator of something being mispriced. Long time to sale isn't unusual here. One of the big measurements they use is price per square meter with thoughts about an upper band for the zone. That of course misses a whole lot of information about property quality etc. but they should at least be giving you that as some sort of guideline," explained one expat.

Another expat recommended having your Colombian spouse help in the process. Obviously, if you're not married to a Colombian, you'll have to enlist the help of a Colombian friend! He said, "When we were looking at properties, I'd have my Colombian wife go first. She would short list them, then I would go take a look. As soon as they saw me, the price would jump... my wife would remind them the original asking price. It's very difficult to find the correct price since they don't have a county assessor like in the states, where you can just go to the website and find out how much someone paid for their property... or even call the county assessor. Best option to find what a good price is to look at many different places, take into consideration location, etc... When I say many... I mean 30-40... seriously. You need to get a Peso/Sq Meter cost. Try to talk to the neighbors too. My wife did this just to find out who our new neighbors might be, and they would normally always say 'they're asking too much for that place'... even if a higher price on their neighbor's house would mean a higher price for their house."