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10 Things to Know Before Buying Nicaragua Real Estate

Nicaragua Real Estate | 10 Things to Know About Buying Nicaragua Real Estate

Gran Pacifica Beach & Golf Resort | Nicaragua Expatriate Health Insurance

 

This is a great article by Gail Geerling – our expert Nicaragua Real Estate Broker & Buyer’s Agent. You can contact Gail here to learn more about buying Nicaragua real estate

1) THERE IS NO MULTIPLE LISTING SERVICE FOR BUYING NICARAGUA REAL ESTATE.

What does this mean for you, the Buyer?

It means that there is no central database of accurate information, and determining actual property values is challenging. Different agents know different areas well, but no single agency or agent has a thorough knowledge of properties in all parts of Nicaragua.

It means there is no simple way to find ‘comps’, or comparison values of property, in any given area. Though this is changing, properties are not always registered at actual sales value, and many persons choose not to register their property at all. So using the Public Property Registry won’t necessarily yield accurate information either.

And finally, it means that most Agents, Developer’s Reps, or Marketers will try to sell you their listings, on which they make higher commissions, rather than showing you what you want to see.

We work with a variety of agencies and developers, and we don’t care whose listing it is. Sometimes we can even save you thousands on your purchase by finding privately owned resales within the gated community you have chosen. Once you find the perfect property or investment, we follow up on your behalf during every step of the transaction.

2) NICARAGUA’S LEGAL SYSTEM IS VASTLY DIFFERENT TO NORTH AMERICA’S LEGAL SYSTEM. SO IS GETTING A MORTGAGE.

North America works under Common Law. Central America works under Civil Law. The differences are numerous, and the separation between the two systems is vast.

Assuming that the legal systems are similar is one of the biggest mistakes a foreigner can make when navigating Nicaragua. Contracts, legal proceedings, and property purchases vary greatly from home if you’re from a Common Law country.

Often, both buyer and seller use one single attorney in a Nicaraguan real estate transaction— but this puts your investment at risk.

Getting a mortgage in Nicaragua can be a complex and complicated task- even for Nicaraguan citizens. Mortgages are almost never given to foreigners, and usually come with such onerous terms that foreigners walk away.

That’s not to say they are completely unavailable, and sometimes we can even connect you with a private lender. However, mortgages in Nicaragua are guaranteed to be much more time-consuming and paperwork intensive than back home.

3) YOU ARE LIABLE FOR TRANSFER TAXES WHEN YOU SELL PROPERTY IN NICARAGUA – AND SOMETIMES EVEN WHEN YOU ARE BUYING NICARAGUA REAL ESTATE!

Most folks expect they will be liable for taxes when they sell their property. But did you know that, in Nicaragua, taxes are often negotiated between buyer and seller?

It’s a whole different world here, and Dorothy said it well: “I don’t think we’re in Kansas anymore, Toto!”

Just to confuse you, the government will never send you a tax bill- but you are liable for payment. There is no organized tax billing system here in Nicaragua; however, there are definitely fines if taxes are not kept up to date. It is expected that somehow you will find out that you owe the property tax, and that you will figure out the complicated manner in which you are meant to pay it.

Helping you pay only what is necessary, keep what is yours, and avoid surprises later… it’s what we’re all about.

4) NET SALES ARE COMMON.

Due to the lack of exclusive listing contracts or an MLS in Nicaragua, sometimes you will find the same property for sale at several different prices.

It is not unusual for the seller to say to an agent, “I would like to receive $XX for my property. You can put any amount you’d like on top of that for your commission and taxes.” This is called a ‘net sale’, and is illegal in most first world countries- yet, perfectly legal in Nicaragua.

Just to complicate matters, it’s common for a seller to say the same to several different agents, who all list the property for as much as they think they can get!

If we represent you in a property transaction, we will outline each cost, including commission payment(s) and who is paid. Total transparency, all the time.

5) THE WAY YOUR PURCHASE OR CONSTRUCTION CONTRACT IS WRITTEN COULD MEAN THE DIFFERENCE BETWEEN RECEIVING YOUR PROPERTY OR ENDING UP WITH NOTHING.

Laws exist which govern contract fairness, but they are not uniformly enforced. Once you have taken possession of your construction or home, it is difficult for you, as a foreigner, to force the seller or a developer to complete unfinished work, or even to repair obvious construction faults.

Developers spend untold thousands on creating their sales contracts. Wouldn’t it be ridiculous for them to write their contracts in your favor? Spending a little time with our team and letting us handle the negotiations on your behalf can save you from getting into a prolonged battle, or, even worse, having to pay a second time for someone else to finish your construction.

6) SAY GOODBYE TO SAFETY NETS.

In Nicaragua, most of the Property Safety Nets we North Americans are accustomed to, simply disappear. There is no ‘Big Brother’ here in Nicaragua… the only person watching out for you—is YOU.

Many North American property buyers find out the hard way that common safety nets we take for granted ‘back home’ such as title insurance, escrow, and even fair contracts, are often lacking. The results of assuming that these safety nets exist can be disastrous.

Despite the fact that a Public Registry exists for property, title issues can crop up.

Escrow is not in common use, and many licensed agents do not even understand how escrow works. Even when a buyer requests escrow, most folks don’t realize that they may end up paying for something they’ll never receive- simply because their agent did not know how to structure their escrow agreement correctly!

7) YOU ARE ALMOST ALWAYS LIABLE FOR PROPERTY TAXES.

Despite what agents or developers may say, you are almost always liable for property taxes in Nicaragua.

Given the government’s exoneration grants for condo-hotel projects under Law 306, you may be given a lengthy ‘tax holiday’ on a large portion of your property tax. Often, however, even in a tax-exempt location, you will likely be responsible for a small portion of the normal property tax rate.

Property assessments are random and arbitrary- but they are usually negotiable. Sometimes the initial assessment bears no relation to the actual purchase price.

Property tax laws change periodically in Nicaragua, and it is important to make sure you get the most updated information before your purchase.

Nicaragua’s government is ramping up its tax enforcement regulations, and allowing more power to its local assessors than ever before. It’s important to know your transfer tax rate in advance, if possible, and to understand that sometimes assessments are successfully negotiated or appealed. It’s our goal to give you all the information you need, before you decide to purchase property.

8) PROPERTIES IN NICARAGUA SOMETIMES DON’T COME WITH THE THINGS YOU THINK THEY SHOULD.

Light sockets, electrical plugs, light fixtures, hot water, appliances and air conditioning are just a few of the items sometimes not included when you purchase a residence in Nicaragua. Some sellers will negotiate these items, but some will not. It can be a nasty shock to walk into your new home and find that the most basic of items need to be sourced, purchased, and installed, at your cost.

Our team works with the seller on your behalf so that you are clear what is included- with no nasty surprises later. 

9) THE GOVERNMENT DOES NOT GOVERN YOUR COMMUNITY. FIND OUT WHO DOES!

Freedom comes with a price. In many ways the Nicaraguan government is “hands off” when it comes to telling communities how they should be governed. So the responsibility of finding out how the community you choose is governed – is up to YOU, and only YOU.

HOAs are the best way to govern a gated or resort community, but HOAs are rarely implemented the way North Americans might expect.

Important questions to ask when buying Nicaragua real estate are:

  • Is an HOA established and functioning?
  • If the HOA is established, who controls it- the Owners or the Developer?
  • Are the HOA fees high enough? (Yes, high enough- for a variety of reasons.)
  • If an HOA is not established, under what regulations is the community governed?
  • What sort of construction restrictions, requirements, or regulations affect your property purchase, and what sort of internal zoning regulations are in place?

The answers to these questions are not the whole picture, but as long as you know what you are dealing with you can make an informed decision. We can help you discover ALL pertinent details that may affect your buying decision, and to explain what those details could mean for you in the future.

10) YOU HAVE LEGAL RECOURSE IF IT ALL GOES WRONG- BUT IT DOESN’T WORK THE WAY YOU MIGHT THINK!

As a buyer, you DO have options if a seller doesn’t deliver what they’ve promised. Provided your agent has constructed your contract properly, there is legal recourse.

It pays to be very careful on the front end of a property purchase, to avoid costly mistakes and legal entanglements later.

Our team regularly works with purchase and construction contracts and legal agreements on behalf of our clients. We can help you structure your purchase agreement or construction contract in a way that offers as much protection as possible in an unfamiliar legal system.

 

 

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