When you move from one country to another you have to accept that there are some things that are better and some things that are worse, and there is nothing you can do about it.
Expat Retirees Buying a House Abroad
From a consumer standpoint, buying a home is more secure and straightforward in your home country (I know it doesn’t seem that way after you signed the hundredth disclosure form, though) than anywhere else in the world. Here are some everyday things that make it more challenging to buy a home abroad than in your home country.
Most of the World’s Real Estate Markets are Caveat Emptor (Buyer Beware): Realize that most of the world’s real estate markets are based on the concept of caveat emptor (buyer beware). Seldom do other countries have the disclosure laws, required appraisals, and formal title search and insurance programs in the US.
You should thus be prepared to have someone knowledgeable about local construction take a look at the home to ensure that it is sound and, if possible, hire an appraiser to check to see if the house is reasonably priced. It is common for locals, once they hear that an American is looking at a property, to inflate the value. (Remember, we are considered rich and naive by their standards.)
It would be best if you also did careful research to ensure that the title will be yours. Sometimes, you may get title insurance, and sometimes this will be established by an attorney. (Residents in Lake Chapala suggest that one good way to ensure that the title is yours is to buy a property from a foreigner. The chances are that the previous owner has been there for a while and would have encountered and dealt with any problems with the title before reselling the property.)
Few real estate agents in the world are required to have a license or take any classes before hanging up a shingle. Therefore, even if they seem honest, they may not know all the skinny about buying homes in the area.
Ask everyone, particularly fellow Fifty-Plus Nomads, before selecting a realtor. Don’t assume that just because the realtor is from the US or Canada, they are necessarily more honest than a local realtor.
Things Expat Retirees Buying a Home Abroad Should Research Beforehand
Most expats seem, justifiably, concerned that they have the right to own a property abroad, but most problems occur for other reasons that sometimes get lost in the excitement of buying a property. Therefore, I’ve developed a list of some common questions that you should ask (and double-check the verity of the answers) before purchasing a property abroad:
- What are the future plans for the neighborhood? I have heard stories of people finding a great deal on properties in France, only to find out that the government planned to build a nuclear reactor down the street, for example.
- How well is the property constructed? Sometimes the most attractive houses hide construction defects under beautiful fittings. Just because the property is in a fancy area and expensive, doesn’t mean that it is well constructed. If you can get a couple of local construction people to check out the house or, if they are available, hire a property inspector.
- How well is the house connected to the electric grid, water and sewage system, and garbage collection? Many communities, particularly in the third world, have poor connections to these services. Pick up a local paper and chances are you’ll read about communities where trash has not been collected for months, sinkholes have developed because of poor runoff collection systems, etc.
- Does the seller have the right to sell you the property? Do they actually own the property? Most of the time these questions will be answered by a reputable, property attorney. (Most countries require an attorney to be involved in the sale of the home).
However, to be sure that you are aware of your property ownership, most experts recommend that you have the documents translated into English. Once you do so, you ask the attorney questions to determine your rights to own the property. (Most of the time, problems do not occur because you don’t have the right as a foreigner to own property; instead, they occur because the sellers think that they can “pull the rug under you” because you are a foreigner).
Probably the single best piece of advice I can give you is to heed the old refrain: If it seems too good to be true, it probably is. If, for example, you see a property that appears unusually cheap or has sat on the market for a while, there is a good chance that there is something wrong with it that is not readily apparent. This does not mean that you should nix the property entirely, but instead that you should be cynical.
In addition, ask other expats if they know of any problems with the area/properties and neighbors.
It is not as easy to find available houses for sale as in the USA: Very few places, even in Western Europe, maintain something like our Multiple Listing Services (MLS). MLS list all the properties for sale by realtors in a given geographical area.
Since MLS is rare, if you want to have a good idea of the inventory available, you’ll need to visit many realtors to see the properties by their firms individually.
Even then, many of the best properties in many parts of the world are not listed by realtors. It would help if you asked around to find them through friends of a friend. While this may be the best way to find a well-priced property, take care before buying a house from the owner since no one represents your interests in the deal. Be careful to hire high-quality personnel to help you inspect and appraise the house and ensure that the property transfer is entirely legal.
Financing is usually more difficult to acquire abroad than in the US. In many countries, the biggest obstacle may be the lack of funding for your home. Many countries still require that you pay for the property in cash (or check). Often banks are reluctant to extend mortgages to foreigners because: 1) they are unable to determine your creditworthiness quickly; 2) most Fifty-Plus Nomads are highly mobile and do not have an established work history in that country; 3) you don’t know their market and may be subject to “walk away” from a home after you find that it does not meet your standards.
However, there are more options to finance a home abroad than ever before. Several countries (including Mexico) have 20- or 30-year mortgages available at a reasonably low-interest rate. Many countries have a mortgage that requires you to put up 1/3 or ½ in advance; finance a 1/3 or so over the next 5-15 years, and pay the remainder as a balloon payment at the end of the loan. (The US had the exact financing mechanism until the Federal Housing Administration worked with banks to allow easy financing in the 1930s.)
Don’t assume that these mortgages will be available to you as a foreigner if you see them advertised. Many times, they are tied to specific government-subsidized developments designed to stimulate low-income homeownership.
Establishing your legal rights to buy a property can be tricky. You will probably need an attorney to help you with every transaction: Your legal rights to own a property abroad vary from country to country and change over time. However, as a whole, with the gradual liberalization of the world’s economy, it is getting easier to own property as time goes on. (For example, for years in Mexico, it was hard for Americans to own property by the beach. Now through the fideicomiso process, you can own property (through a trust with a bank) there without an excessive amount of legal entanglements.)
Be prepared to research your legal rights. Don’t trust your realtor. Talk to Fifty-Plus Nomads who own property in your location. Buy books and magazines (see my resource listing) about living, working, and investing in the country where you want to live.
Chances are you’ll need to find a local lawyer and a title search company (if they exist at all). Generally, the lawyer’s costs will be high because, in effect, the attorney is the only person who functions in your interest throughout the entire transaction. The lawyer may search the title, record the deed, and do many functions performed by title and escrow companies in the States.
To every rule, there is an exception: A good reason you may want to get home fast: While experts recommend that you wait some time before you buy a home (usually at least six months) in most of the world, there are times when you may want to act faster than others. Currently, with the US dollar in a tailspin against many currencies, you may want to invest in some countries before the dollar gets even weaker. In addition, there are times in certain places globally (for example, New Zealand and Portugal in 2003, at least) that have highly heated housing markets.
The combination of a weak dollar and a hot market can make a lot of difference, particularly in Western countries. Five years ago, real estate in New Zealand was about 50-60% of the US market, and now it is as expensive as in the US. In that same period, the US dollar lost 30% of its value against the Euro, making rural France and Italy no longer a bargain (though you can still live in a small town there for only slightly more than you’d pay in the USA).
To me, this is one of the pluses of investing in a developing country’s real estate. While realtors there may try to talk you into acting quickly, most of the time, the currencies are relatively stable against the US dollar, and the real estate market is not increasing as fast as it has in Europe, Australia, and New Zealand.
The Pluses and Minuses of Building a Home Overseas: I have heard several stories of people buying land and building homes overseas. Many times, this is a great way to save money, design significant, unique, architecturally pleasing dwellings, and ensure that your home meets your standards. This is particularly true in countries where labor is inexpensive, and people tend to inflate the value of existing properties for the expatriate market (in Mexico, for example).
Unfortunately for everyone who gets the house of their dreams inexpensively using this method, there is probably someone else who rues the day they ever decided to build their own home. Many are the stories of people who get a beautiful house constructed only to discover that it is defective in some significant way (I have even heard stories of people who had beautiful houses built that lacked indoor plumbing!) or that it cost twice what they expected.
I would only recommend considering building your own home if you know something about construction and can oversee the construction. In many parts of the world, you are expected to carefully watch the workmen ensure that it meets your standards and avoid significant headaches.
That said, you also have to walk a fine line in watching over the construction. On the one hand, you want to show that you expect the workmen to be professional; on the other hand, you don’t want to be too demanding. If you ask workers to do something that they don’t understand or think won’t work, most likely they won’t do what you want. In addition, since construction techniques vary from country to country, there are often very legitimate reasons why something you think is necessary may be completely inappropriate in another country.
Buying a home in a new development: Most of the horror stories that one hears about purchasing a home abroad involve new products. Generally, most of these stories apply something like this scenario: Someone buys a home from a developer after listening to this beautiful presentation (usually accompanied by a steak dinner with free-flowing booze) while they are in port from a cruise ship. The buyer has acted impulsively and soon finds that the development is either a scam or that many promised features are mere pipe dreams.
Even when these developments are built as promised, the owners sometimes have problems later on because they were built on land that the developer did not own legally in the first place. Sometimes it takes years (and somehow, it is always just when the market is at its peak) before the proper owner attempts to take away the property back from the new “owner.”
This is not to say that only impulsive buyers have had problems with new developments. However, these problems will be less frequent if you’ve done your homework. You’ll probably, with some diligence, be able to find out if the developer has a good reputation in the community and whether the land may be owned by someone else.
Even when everything is on the up-and-up, new developments are a bit of a gamble. It is not uncommon to discover construction defects after you’ve purchased a property. Homes have a way to develop unexpected problems during the first couple of years of occupancy, even in a market like the US. (These problems are so familiar with condominiums in the US that most developers nowadays first rent out condominium projects as apartments for five years to avoid lawsuits from new owners over construction defects. (Note: Construction warranties are usually only good for five years in the US.)
Looking for Real Estate Listings
You can find links to realtor listings of thousands of homes and apartments worldwide through escapeartist.com. Craigslist.com also has a growing list of homes and apartments in different parts of the world. Private parties offer many craigslist.com listings (particularly apartments) rather than realty agencies. You can also find real estate listings for homes around the globe by simply using google.com (or a similar search engine like yahoo.com or msn.com) and putting in the term “real estate in (the name of the city)” and by looking in local papers. You’ll find real estate sites in English in most of the world’s most famous big cities and expat havens. Keep in mind that most sites and newspapers in English (outside of English-speaking countries, of course) will have a lot of pricey homes geared toward expats with great pocketbooks.
A Final Note on Buying a Home Abroad:
While these potential caveats all sound rather daunting, to some degree, you have to have faith before you invest in real estate anywhere, even in the USA.
Real estate markets vary widely from place to place and time to time. California, for example, has more diligent requirements for realtors, appraisers, disclosures, and title and escrow companies than most other states. Hundreds of buyers have been taken in real estate schemes over the years in the US; in fact, that is the reason why many states have strict requirements in the first place.
In addition, as the recent reduction in prices in the US has shown, you can lose your shirt in the States just as quickly in a busted market as in another country. Between 1996 and 1998, I worked as a housing coordinator for the city government of a mid-sized Los Angeles suburb. For the first year, I got calls daily from people almost in tears who had to sell their homes at a substantial loss (which they often could not figure out how to cover) to get a job (often after a year or more of unemployment) in some far-flung corner of the US.
Renting a Home or Apartment Abroad
Finding a Good Place
Finding a place to rent can take time in another country. As a whole, most of the world’s landlords find tenants through “word of mouth.” It takes time for you, as a foreigner, to be tied into this information grapevine.
That said, you’ll often find that it is easier to rent an apartment in many countries than it would be if you were a resident. Fifty-plus nomads have a reputation for paying their rents on time, and, perhaps most importantly, many countries have laws that make it very difficult for landlords to expel delinquent or problematic native tenants that don’t apply to foreigners.
Even though word of mouth plays the primary role in finding tenants, you will find listing services and apartment rental firms in the most popular expat communities.
That said, be prepared to do more legwork to find the right place for you than you’d do in the US. Perhaps the best directions for how to do this legwork that I’ve seen come from Don Adams in his book Head for Mexico: The Renegade Guide:
First, find a place you can rent for one month or on a month-to-month basis. If you come down in the off-season, you should be able to get a reasonable rate at a B&B or small hotel. If you take a few days to look around, you might be able to find an ad posted by a snowbird owner of a rental property. Lots of them want to rent out their places for short periods, around three months when they’re out of the country. Now, use this short-term rental as your headquarters to conduct a serious search for the long-term rental that works for you. (Paul’s note: I’ve heard several stories of people who have been able to arrange to take care of someone’s home in exchange for free rent.)
Start checking any place that allows flyers to be posted on bulletin boards. The first place to look is the local grocery store where most gringos (fFifty-Plus Nomads) shop. There will probably be more than one. Just ask someone—the lady at the following table, the guy eating ice cream in the plaza, the desk clerk at your hotel. (Paul’s note: Some desk clerks, particularly in areas with many foreigners, receive referral fees from realtors, so be careful). There are gringos or English-speaking Nationals almost everywhere, even in the smallest town. Talk to EVERYBODY.
Now check bulletin boards at the post office…restaurants… internet cafes… and then do like the encyclopedia salespeople, and Mormon missionaries do. Go door to door. Seriously. Many outstanding rentals will never be advertised except for a small sign on a building or portico.
…I know that your Spanish is not that good, and chances are the person who answers the phone won’t be proficient in English either. Ask for help. Ask the desk clerk at your hotel, or the waiter at that little place you like so well, or that lovely gentleman or lady you met near the plaza (…remember to tip him or her).
After talking to EVERYBODY and trudging the streets looking for rental signs, take a little advice: Slow down…Exhilarated or worried, you will probably be under a lot of stress (and more likely to make a wrong decision).
Issues to Consider when Renting a Property
- Make sure that you understand which appliances and appurtenances are included in the rent. In many countries, particularly in Europe (though I’ve heard the same exists in Argentina), anything that can be moved out of the apartment, will be. This includes things that most Americans would never have thought of including carpet, curtains, countertops, and even lighting fixtures
- Learn about the local laws for rentals. Some countries have laws that you would not expect. For example, in Costa Rica, landlords may not, with some exceptions, increase rents when you pay in dollars rather than colones (the local currency).
- Don’t expect landlords to make repairs. In many countries, the tenants are expected to make repairs to the place.
- Realize that you may be asked to leave (sometimes with little or no notice), if the landlord needs to use the apartment for a family-related reason. This is the most common and legally acceptable reason, for landlords to ask tenants to leave, particularly in Latin America.