Buying Real Estate In Ecuador And Comparing It To The US Market

How real estate transactions differ between Ecuador and the US

Ecuador real estate

Buying real estate in Ecuador is not like what you will expect from the US. There are a couple of differences and it goes beyond the price of the properties.

 

A lot of people are attracted to the idea of the cheaper homes in Ecuador. While it is relatively lower in price compared to the prices in the US, you have to fully understand the local market before you decide to invest in a property in this country. Some expats go into this country thinking that they can flip houses for profit.

 

Flipping in the real estate industry means you will buy a home, make a few renovations and then you will sell it at a higher price than what you got it for. This is a great way to earn money while in retirement but this may not be something that you can do when dealing with real estate in Ecuador.

 

How real estate transactions differ between Ecuador and the US

 

There are a couple of things that you should know when you are planning on buying properties in Ecuador for profit. If you are comparing it to the US market, you need to be aware of a couple of things.

 

First of all, “Short Sales” are not in practice in Ecuador - at least in the real estate industry. In fact, it refers to the selling of market shares or stocks. In the US, a short sale happens when the home buyer is unable to pay the mortgage on the house they bought. They will sell the home and the proceeds will go to the bank. The seller will have nothing to gain from the transaction. The bank or mortgage lender will get back their money and the buyer most likely will purchase the home at a lower price.

 

This could be a great way to flip homes because you get the house at a lower value. It makes the margin for profit bigger. However, this is not possible in Ecuador because the practice of borrowing money is not common here. While there are mortgage loans available, the process is difficult especially for foreigners. That is why they usually buy the property in cash. If you want to get a loan, it will be more difficult because the down payment is usually between 30% to 50% of the selling price. Not only that, you need to deal with the high interest rate of 12% or higher. Loan borrowers also have to present local employment history or a co-signer. When you are a foreigner this is hard to produce.

 

In terms of the documents and the process, you will find that the real estate in Ecuador is easier to complete - and faster too. In the US, you have to go through a lot of approvals for your mortgage loans, credit checks, title, etc. You need to produce a lot of documents to complete the transaction. In Ecuador, foreigners who have a resident visa can buy a property. Since most of the transactions are done in cash, the home buying process close pretty easily.

 

That being said, it is safe to say that buying real estate in Ecuador is very different from that of the US. Make sure that you understand the Ecuador market first before you decide to invest in a property here. Do not base it in your knowledge of the US market. Even if they transact in US dollars, the rules are quite different.