Paradise Uruguay Blog: The real estate buying process in Uruguay

The process of selecting a property, making an offer, and closing a sale works differently in different places.?Uruguay offers a lot of exciting real estate opportunities, but it?is almost a sure bet that the real estate buying process in Uruguay has some significant differences than where you are from. The purpose of this article is to provide you with an overview of how the real estate buying process works in Uruguay, as well as provide you with specific tips to help you along the way.

Selecting a property to buy in Uruguay? Identifying available properties and making showing appointments in Uruguay takes longer and involves more people than in places that have a multiple listing service and lockbox system. When another office?s listings are shown, the listing agent usually comes along to open the property and be present for the showing. In some cases, the seller or the building?s concierge may need to be present for the showing as well.

In most cases you will receive property information verbally. Having a notebook and camera with you on your property search will help you to keep track of what you see and learn.

Since there is usually no written listing agreement, property sellers can change their asking price or change their mind about selling their property if their circumstances change. In addition, it is not customary to have any type of preliminary title investigation to determine if a property has title concerns before it is put on the market. For these reasons it is recommended to think in terms of identifying properties that will serve your buying objectives as opposed to looking for a property to fall in love with.

However, rest assured that even though there is less surety if a specific property will work out in the early stages of a transaction, once the title has been cleared and the deed is registered the rights of real estate ownership in Uruguay are very solid and secure.

Determining a property's value

A property?s list price may or may not have a correlation with its fair market value. While some properties in Uruguay are priced fairly, many properties are priced speculatively. Some properties will even have a different list price with different real estate companies.

Since there is no complete or authoritative sales data to produce a formal market analysis, a buyer needs to develop a sense of property values by studying real estate magazines, looking at posted advertisements in real estate offices, and viewing several properties so comparisons can be made.

Your first line of protection from overpaying is to choose a Uruguay real estate agent who knows the market and is looking out for your best interest.

Cost per square meter can be a useful general comparison tool. The ranges of cost per square meter will be different for single-family homes than for apartments. There will also be differences in cost per square meter based on the age and condition of a home or building, as well as the location, view, amenities, and services.

Be aware that the floor area quoted by the listing agent may be an estimate and should be verified. Also, it is common practice for listing agents to include garages, balconies, and patios in the floor space.

If a property becomes a finalist in your investment search, and the cost per square meter is a determining factor of its value for your decision, measure the floor area to make your own comparisons.

As your search narrows to similar properties in the same area, you will soon get a sense of value by making comparisons between the properties you view. You?ll be able to tell the properties that stand out as being over- priced and properties that seem like a good value for your objectives.

If you are shopping for an investment, a property?s capitalization rate will give you a basis for comparison. ?(Be sure to verify income and expense records.)

Due Diligence

Your first visit to a property for sale will give you the opportunity to see the neighborhood, the floor plan, the property's features and finishes so you can form a general impression. Taking notes and pictures will help you remember what you saw.

Getting detailed property information is important but can be very time consuming in Uruguay. Start with general questions that will help you make comparisons with other properties. Then, after narrowing the field to properties that are of serious interest, take the time to ask more detailed and specific questions.

Determining ownership costs
Before you make your offer, it is prudent to verify the building?s floor area; find the amount of homeowner?s dues; and learn if the homeowner?s association has reserves, upcoming special assessments, and current or pending lawsuits. If you are buying an apartment, much of this information is available from the administration company that manages the building.

It is also a good idea to check the cost of utilities and property taxes. If you cannot get the property tax information from the owner or administration company, the property?s municipal values which are used to determine tax rates are available at the local Direcci?n Nacional de Catastro.

Determining quality
Besides depending on your own observations, you may want to hire an architect to assess a structure?s quality and condition. In the case of an apartment, you may hire an architect to assess both the building and the apartment of interest.

On newly constructed apartments, the reputation of the architect and the builder are used as quality indicators. Most experienced real estate agents will know about a particular team?s reputation.

Determining the cost of refurbishing, remodeling, or construction
If the property you want will need refurbishing, remodeling, or construction, it is a good idea to consult an architect regarding the feasibility and cost of your plans. An architect cannot provide a precise cost estimate without a deep inspection and details of the work to be done, but an architect can often provide their opinion of a cost range to help provide a buyer with some perspective to help in the buying decision.

Retaining previous tenants
When you are selecting a property to purchase that you intend to use as a vacation rental, it is a good idea to find out who has been managing the property in the past. It is not uncommon for a couple, family, or group to rent the same house or apartment year after year. By keeping the same property management company, you may retain the property?s repeat tenants.

Making an Offer

Negotiations and offers to purchase are usually conducted verbally. Offers and counteroffers are passed between the buyer and seller through their respective agents or through the listing agent if he or she is handling both sides of the transaction. In resort areas, furniture and household items are frequently negotiated to be included in the sale.

When a verbal agreement is reached between the parties, it is put in writing on the Boleto de Reserva (Reservation Ticket), which is usually prepared by the buyer's escribano. The Boleto de Reserva documents the parties to the transaction, the subject property, price, terms of sale, closing date, and real estate commissions.

The Boleto de Reserva becomes binding when all parties to the transaction have signed and the buyer has put up a 10% deposit that will be held by the escribano. If the buyer does not speak Spanish, the Boleta de Reserva needs to be read to the buyer in his or her own language by a translator.

Power of Attorney

In many cases, a foreign buyer?s schedule will prevent him or her from being in Uruguay for all the steps of the transaction and will give a?Poder de Representaci?n?( a?specific power of attorney) to a friend, real estate agent, or attorney in Uruguay to act on their behalf. The power of attorney in Uruguay is a registered and taxed document that is required to be read by a translator to a non-Spanish speaker. It is prepared by the escribano and has a published fee schedule of around 250 US dollars, although prices between different escribanos often vary.

Be aware that in Uruguay, there can also be a fee as high (and sometimes higher) as getting the power of attorney to terminate it, after it has served its purpose. To avoid this cost, ask about getting a power of attorney with a built-in expiration date.

The Closing Process

In most transactions, the buyer hires and pays for the escribano?s services, which are commonly 3% of the purchase price. Many real estate agents will recommend a favorite escribano who may or may not speak English, in which case you will either need to ask your bilingual real estate agent to act as an interpreter or hire an interpreter.

A real estate agent may steer you toward a particular escribano because they are exceptionally good, or it could be that a particular escribano gives the real estate agent a hefty finder?s fee for referring business. You are the one who will pay the excribano?s fee and it is your property title that is at stake. Take time to select a good escribano who comes recommended by other English speaking expats who have used their services.

It is the seller?s responsibility to deliver a set of ownership documents showing the property?s chain of title to the escribano hired by the buyer. The documents include a set of building plans and the seller?s deed. (It is likely that the seller?s title documents will not be checked for completeness until after an offer has been accepted.)

The escribano will investigate the title going back 30 years. In addition to examining the seller?s documents, the escribano will visit several government offices to check for any liens or encumbrances against the property or the seller. Once the title is shown to be free of any encumbrances, the escribano prepares the Escritura de Compra Venta (Purchase Deed).

The closing process is normally completed in 30 days from the date of the signing of the Boleto de Reserva but may take longer if there are liens or issues to be resolved. The next step in the process is the closing itself where the money is transferred and the Escritura de Compra Venta is signed by both parties.

It is important that the buyer has made arrangements for the money for the purchase to be delivered in the right place, in the right currency, at the right time.

There may not be a single settlement statement with an account of all disbursements relating to the transaction. The Purchase Deed, however, contains a receipt for the value of the property itself or for the amount actually paid on closure, assuming some payments are to be paid later in quotas. However, it is prudent for a buyer to make sure they have a receipt of all monies paid before leaving the closing table.

Just before closing, the escribano has the Real Estate Property Registry (Registro de la Propiedad Inmueble) block the property from the registration of any liens or encumbrances for 30 days. During this time, the escribano pays all the taxes and registers the deed.

The original purchase deed is held by the escribano in his Protocol and he files a certified copy with the Property Register. The buyer can ask the escribano for a photocopy of the signed deed on closure. If for some reason he needs an official copy, he will need to ask the escribano for a certified copy (testimonio). Registration of the purchase deed is normally completed within 20 days.

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