Yes You Can Get Scammed Buying Real Estate In Nicaragua
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.