FOUND YOUR DREAM DEVELOPMENT? READY TO INVEST YOUR MONEY? READ THIS FIRST!
Ecuador is an amazingly beautiful place and we are so glad that we chose it for our retirement home. If you have found your dream development location in Ecuador and you want to have your home, or condominium built, we know how exciting that is and we wish you the best. In this article we want to share what we have learned. We hope that this information may prevent you from having the heartbreaking experiences we have had due to the mistakes that we made when we purchased a pre-construction lot in a development near Bahia on the coast of Ecuador. This information is just based on our experiences and what we learned along the way. It is not intended to be legal advice.
We have also included a link to an article written by attorney, Dr. Marcos Chiluisa Andrade at EcuaAssist. He offers some good advice on how to check out a developer before you invest your money and he also explains the legal steps involved in making your purchase. Read the article, Buying Real Estate in Ecuador
Here is what we learned along the way. Many developments have beautiful websites that describe an idyllic lifestyle with lots of amenities. Developers may also seem to be very competent based on the backgrounds they provide you. The developer may also have the best of intentions. However, what we learned is that what is promised does not always materialize. We got swept away by believing we had found our dream retirement home. It is easy to let your emotions do the thinking. It is also hard to believe that a developer would promise you something that he/she didn’t really know for a fact could be delivered. This is true of buying real estate anywhere in the world.
Please consider some of these easy preliminary steps you can take before you invest any money.
• You can check with the American and Canadian Embassies in Ecuador to see if the development that you are considering has had any complaints filed against it by other consumers.
• You can read forums such as www.expat.com, www.expatexchange.com and www.expatforum.com to so see if other expats have posted any information about the development you are interested in.
• Hire an attorney to help you with all of the documents and research prior to your purchase.
• You can also ask your attorney to check with the Superintentencia de Compañías” (Ecuadorian organization that is in charge of the Companies’ regulations, in English the Superintendent of Companies) to see if the development company is complying with all the regulations of Ecuador.
• Very important; ask the developer to show you written proof that they have the necessary agreements from the Ecuadorian utility companies in the area for the delivery of water, electricity, internet, phone and other utilities to the property. Yes, it is true that some development lots are, or have been sold without these agreements in place.
• We also recommend that you ask your attorney to find out if the developer has any pending or settled lawsuits for violations with consumers.
• You may want to consider not buying pre-construction property until you can actually see that all of the utilities and other basic infrastructure are in place.
• Have the developer provide you with a copy of the construction timelines that shows when various phases of the construction are going to take place and who the contractors will be.
• Beware of a developer who tells you what they will have rather than showing you what they actually have in place.
• Get all agreements in writing. *Very Important: Each time you sign a document at the Notary be sure that you get your own original copy of the document. Do Not trust the developer to give you the document later. The signed piece of paper in your hands is critical to protecting your rights.
The linked article by attorney Marcos Chiluisa outlines the stages of purchase when you are buying a lot in an unfinished development project. This is often referred to as the Pre-Construction Stage. According to the article there are three primary stages to the purchase process. The signing of a Reservation Agreement, the signing of a Promissory Deed Contract and finally the signing of the Closing Contract Deed when the property is delivered. The article outlines the amounts that you can pay during each part of the process so that you don’t commit more of your money than you legally are required to.
One mistake we made when purchasing our property was paying too much money up front to a developer. Trying to get a refund of a large amount is a lot more stressful than getting a refund for a smaller incremental deposit. For example, according to the attorney, the reservation agreement deposit should be about 10% of the final purchase price.
Again, we strongly recommend that you hire your own attorney to review any contract that you are signing. We also strongly recommend that you ask for inclusions of any protections that you feel you want with hard deadlines for the delivery of your property.
Buying pre-construction property can be fun, but it is very important to approach the purchase with caution.