Tag: Nicaragua real estate

 

One Man’s Loss Is Another Man’s Gain

Nica Investments LogoNica investments does not maintain “listings” of the same Nicaragua real estate offered for sale by every realty company or individual in the country. Nor does Nica Investments tack a sign on the wall of a house that already has one, two, three or even four other signs stating the obvious… this property is for sale and I want to be the person who sells it.

What Nica Investments does is locate well priced properties in ideal locations that our clients would do well purchasing. One such purchase opportunity is about to become available.

There are five adjoining lots in the initial phase of a subdivision that were previously considered sold. The term of the existing agreement to purchase is about to expire, and the seller has already moved on to phase two. They will be offered for sale at the end of this week.

The lots are on a paved road, are fully serviced, flat and ready to build on. The lots are about 58 meters deep and the approximate frontage of each is 30 meters.

The seller is asking US$34,900 per lot. However, he would be open to negotiating with a purchaser interested in buying all five lots. It is possible the seller would even consider a joint venture partnership with a developer willing and able to construct five homes. Assistance with marketing would be provided, and construction would have to begin within 60 days of an agreement being reached.

My personal recommendation to clients is to purchase all five lots at as good a price as can be negotiated, then resell them… with houses constructed on each. Why do I suggest this? Because this subdivision is not one of the pie in the sky developments that dot the Nicaragua landscape. All of the seller’s available lots in phase one are sold except for these five. Within the first phase there are already homes built and occupied, and others are under construction. These lots front a quality paved road, with water, electricity, and streetlights already in place… not promised and unfulfilled, as is so often the case in Nicaragua.

Soon the infrastructure for phase two will begin, and soon after the marketing of phase two lots will commence. It’s a sure bet that when prospective phase two purchasers start to drive past these few remaining phase one lots they’ll not last long.

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Shopping Online For Nicaragua Real Estate? Don’t!

With the season upon us when the most Nicaraguan real estate changes hands, I thought this would be a timely newsletter.

If you’ve been scouring the Internet for deals on Nicaraguan real estate, stop wasting your time. I say this to almost every client, and have to say it over and over again to potential new clients… You must not only come to Nicaragua, but be prepared to spend a couple of weeks here to learn about the market, view properties that fit your budget, familiarize yourself with the different market areas, and learn about the processes involved in purchasing a property and transferring ownership.

That said, there are people I know who have purchased property sight unseen. Amazingly, a lucky few have only minimal complaints, but none are completely satisfied. Plan and simple… Invest your time before you invest your money!!!

A real life case study

I was recently contacted by clients, a couple from the USA who have been subscribers to my newsletter for some time. They’ve been shopping for a potential retirement home for almost four years. I was surprised to learn that the last time they were in Nicaragua was four years earlier, and that all of their subsequent home searching was conducted online.

They emailed to ask me, “Why have house prices doubled?”

Lake NicaraguaI explained that real property values were going up nationally by about 10% per year, more in some specific geographical areas, but less in others. This is a healthy equity gain, but not the doubling in prices the client’s suggested they were seeing. When they sent me some links to homes that were twice what they were before, I realized what the problem was. I’m not going to include the links because I don’t know for sure the prices had actually doubled. I also don’t know without doing research if there were improvements made to the properties to justify the price increase. Likewise, there may be market factors at play that would make price increases entirely justified.

However, there were a few properties listed that I’ve had occasion to investigate for clients and they are now grossly inflated. I pointed these out to my client and explained that I knew for a fact the owners would take significantly less. In one case 40% less. Of course these prices were net to the seller. I did my best to explain that the amounts advertised includes a profit for the realtor, and no doubt some added negotiation room.

These clients are Americans, used to a set asking price and the seller would pay the sales commission from the proceeds of the sale. I explained that may be what they’re used to, but it is not how it works in Nicaragua. I suggested this difference in real estate rules and regulations is why they should retain my services.

The Unique Nicaragua Real Estate Industry

The rumors everyone seems to have heard are true, there are a lot of unsavory characters presenting themselves as “real estate agents” in Nicaragua. However, there are also a lot of reputable people acting as middleman for people selling properties. And just to be clear, that is what all “real estate agents” in Nicaragua are, middlemen.

There is no government agency, nor self governing body that enforces ethics within the industry, sets standards, or hears and then rules on complaints. In fact, there is nothing foreigners assume is in place to protect buyers other than if fraud is committed. Then there is a good chance someone will go to jail or be heavily fined.

To be clear… there is no special training or licensing needed to be a “real estate agent”. Only a business license is required. Likewise, there is no government or real estate industry body such as a real estate board dedicated to monitoring the conduct of agents/brokers, registering listings, tracking sales, arbitrating disputes, etc. There’s also nothing like a Multiple Listing Service (MLS) to facilitate doing comparable on asking prices.

Investors Need An Independent Consultant

Novice and even experienced real estate investors tend to get themselves into trouble by assuming they know what they’re doing. Back home they probably do. In Nicaragua the game is played using local rules. Sadly, half of the folks who come to me do so to rectify transactions that have gone bad. I do not like this type of business but take it on because I want to help, if I can.

What I prefer to do is walk clients through the entire process from the very beginning to assure it is done correctly…

What I do is meet with the purchaser to determine the budget and needs. I then source prospective properties I have research thoroughly. If the property’s title, survey, taxes, and ownership are in order, I make an offer and handle negotiations. If an agreement is reached, I oversee the closing, proper transfer of the title and registering it in the new owner’s name.

Some prospective clients balk at letting me serve them because I work on a per diem. I provide a service, and do not work on commission. My services will not only save them money, but most probably avoid wasting a lot of time too. But it is that hurdle of the buyer having to retain a representative that is hard to swallow. Unfortunately I can not afford to work for free, and in Nicaragua there is no legal grounds to collect a commission is the seller does not want to pay.

However, it is actually less expensive paying a per Diem than it is to pay a built in commission anyway. I invoice for days spent on a transaction, which is often no more than 10 days to two weeks. The actual closing may take two to three months, but most of that time is spent waiting on one government office or another to process documents, or lawyers to prepared, exchange and review documents. My billing is for days spent on a client’s file. So if a transaction that takes 3 months to close requires 14 day of my time, the amount billed is US$1400.00. I can guarantee that amount will pale in comparison to the savings I realize for clients. On a home with an asking price of US$60,000 I will likely negotiate a purchase of US$50,000. If the selling commission were just 5%, that would be US$2500.00.

If you want to learn more about my services, or are in need of advice regarding an ongoing purchase, feel free to contact me. Better still, let’s get together here in Nicaragua and find you a building lot, home, condominium or farm. I would be my pleasure to arrange your flight and accommodations, airport pick up and drop off, some interesting activities to fill free time, even a rental car if you desire one.

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Yes You Can Get Scammed Buying Real Estate In Nicaragua

New logo.

One of the new Nica Investments logos under consideration.

A rule of thumb in marketing goods or services is that you focus on the positive while avoiding any negative aspects. If there are negatives they’re included in a disclaimer written in tiny text at the bottom of the page or, in the case of TV or radio spots, spoken so quickly no one grasps what’s being said. This rule of thumb is especially relevant in the real estate industry. However, I have no choice but to shine a light on the negative aspects of purchasing Nicaraguan real estate to educate those yet to be fleeced.

The plain and simple truth is… there’s a good chance someone, probably more than one person, will try to cheat, overcharge, or under serve you during the real estate purchasing process here in Nicaragua.

Real estate investors considering Nicaragua need to remember what Judy Garland said in the Wizard of Oz, “I’ve a feeling we’re not in Kansas anymore.” Definitely not, so forget everything you think you know and venture forth as if you’re following the yellow brick road with all it’s wonders and dangers at every turn.

The most glaring difference between Nicaraguan real estate transactions and what most foreigners expect is that the price being asked by a “Realtor” is over and above what the seller seeks to receive. This means that selling commissions are added to the amount the seller wants. This means the total of what the seller is willing to accept and the amount a selling agent wants for his or her services totals the “asking price”. This is the way business is conducted in Nicaragua, so it isn’t anything sinister on the part of the country’s many reputable real estate agents. However, I personally know of properties being advertised for double what the seller will accept, so caution is necessary.

There is no such thing as a “real estate listing” as it’s known in North America or Europe. Owners seeking to sell their property will allow real estate agents (the plural is not a typo) to sell their land or home provided they get what they want. The seller is just as likely to employ the services of friends, family members, co-workers and outright hucksters to sell their property as well. It’s perfectly legal to do so. The owner is only bound by a “listing agreement” if he or she has entered into a contract that expressly states that the selling agent has sole rights to sell their property and the agreement is registered with the court. Such agreements do exist, but they’re usually agreements entered into by expats selling property through other expats. I do not know of any Nicaraguan national agreeing to enter into an exclusive listing agreement. Since 90+% of real estate on the market in Nicaragua is owned by Nicaraguans, or Nicaraguan corporations, it’s best to assume no exclusivity has been granted. Personally, I insist that I be granted a Power or Attorney or an ironclad Option to Purchase before I consider myself to hold an enforceable “listing agreement” that is worth my time to market.

In the case of Nica Investments being retained to market developments or commercial property, holding an Option is non-negotiable, and my interest will be registered on title. It costs money to do so, but I only commit to sell properties I know are worth the amount being asked, that the titles are free and clear, the survey registered at the Alcadia (City hall) is accurate, and taxes are current. To the best of my knowledge, I’m the only person in Nicaragua with such a requirement.

It’s accepted by North Americans and Europeans that a property survey and title registered at a federal land registry or municipal taxation agency will be accurate. In Nicaragua such an assumption is ill advised. I’ve been involved in real estate transactions that had significant discrepancies between the stated boundaries in the title and the official survey. In only one case was the discrepancy to the advantage of the purchaser, and it was huge. There was ten feet gained on both long sides of the rectangular lot and 81 feet on the ocean frontage. All others were to the purchasers disadvantage, and some involved significant square footage. Such discrepancies are correctable, but to rectify them is a time consuming, and sometimes costly undertaking. So it is best to identify issues before being bound to a purchase agreement. I advise making the resolution of encroachments, meets and bounds discrepancies, or inaccuracies in the title documentation, including misspellings and typo errors, the responsibility of the seller to rectify.

There is no Multiple Listing Service (MLS) in Nicaragua, nor any other similar service. Thus there’s no reliably way to calculate what comparable properties have sold for, nor how long they were on the market. Ironically, there are appraisal firms that assess the value of a property. I’ve retained a number of them to secure bank financing and none have ever satisfied me that the values applied have any relevance to anything other than the sale price. So even if someone provides an appraisal, the true value is what someone is willing to pay for the property, and what the seller is willing to accept.

Investing In Nicaragua Real Estate Can Be Horrendously Profitable – Or Not

I talk to dozens of people each month who have tales of horror to tell. They’re generally people seeking my help to recover their money or get title to a property they’d already paid for and assumed they owned. Often I have to be the bearer of bad news. I shouldn’t have to be if only folks would apply Caveat Emptor, Latin for Buyer Beware. The principle is as applicable anywhere in the world and means to be cautious and perform thorough due diligence.

For sure Nicaragua has real estate title issues. However, most of those stemming from the time when the US backed Somoza dynasty and their cronies were sent packing have been settled. What remains problematic are older holdings that have been handed down through generations. It is necessary to have everyone with any claim on title sign off on a transfer, otherwise the purchaser may find their ownership contested. Claims can included multiple family members, some of which may no longer be living. In such cases heirs, who may not even know they share ownership in a property, would have a claim. Also claims on title may include tax authorities, utility companies, creditors and unpaid workers who built, repaired or maintained a property. The document required to identify claims on title is the “certificato de Gaveman”. For my clients I always have the title searched and recommend anyone interested in a property do the same.

In conclusion, it has to be stressed that the tales of horror told by people investing in Nicaragua real estate generally share one underlying fact the tellers of such tales fails to share. That is that the purchaser did not perform their due diligence or have someone do so on their behalf. There are still bargains to be found in Nicaragua real estate, but not every property is a bargain no matter how cheap the priced. Nica Investments specializes in sourcing well prices properties that are free and clear of encumbrances and are able to be transferred without problems. To learn more, Contact Us.