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Dominican Republic - Buying Property
Expats should be particularly cautious when buying a property in the Dominican Republic. The properties that are advertised online and those that go through an English-speaking broker don't always represent the proper market value. Over the past few years there has been a drop in house prices of between 20 and 25 percent. Since the beginning of the economic crisis, new developments have dropped by up to 80 percent and many other projects have been put on hold.
Recently, the property market has recovered significantly and high-end housing is still bringing in high prices. At the same time, many mid-range properties went through a struggle trying to find buyers. The majority of foreign buyers in this country come from North America and Europe, and the number of buyers from South America and Russia is significantly increasing. Many property brokers say that buyers from United States tend to choose the area along the south coast, while the European buyers mostly choose the south-east. The northern coast has buyers from all over the world.
One good thing for expats is that there are no restrictions for foreign buyers. To handle the sale properly, it's best to hire a lawyer who can act as a notary at the same time. Lawyers usually charge around 1 percent of the property value as a commission. If buyers choose to use an agency, they should know that the Dominican Republic doesn't license these. With this being said, it is best to find out exactly what kind of commission has to be paid; these can range from 3 to 10 percent.
Finding a property
There are several different ways of looking for a property in the Dominican Republic. Apart from looking online, it is also good to go and explore the country a little in order to get a better idea of the island and its areas. You will find many listings online, but the two portals below are the common choices among expats.
It is wise to check out the market before beginning the house search, seeing what you can buy for your money. After doing that, it's best to contact the real-estate agents in the Dominican Republic. It's important to see the property before buying it as scams are always possible. If the real-estate agent recommends a lawyer, it is wise to check how much they are charging for their services. If you speak Spanish, the process will be much easier. It's not uncommon that non-Spanish speakers are charged more.
Once you have found a place to buy, it's time for the buying process to begin. After finding a property, the buyers need to make an offer to the owners. When the agreement is made, the buyer needs a solicitor who can provide a binding promise of sale. When going to sign the contract, buyers must make sure that the promise of sale has the following things as a minimum:
- The full names of both parties. If the person who sells the property is married, the spouse must also sign the contract.
- The legal description of the property that is being sold
- Purchase price and payment terms
- Default clause
- Date of delivery of the property
- Due diligence done
- Representations by the seller and remedies in case of misrepresentation
- Obligation of seller to sign the Deed of Sale upon receipt of the payment
After this document is signed by both parties, a Deed of Sale has to be signed when the deal goes through. This document is then sent to the internal revenue office where the taxes are determined. The Document Stamp Tax costs RD$232 and for the first RD$20,000 and 1.3% for anything that comes after. The buyer must pay a 3% transfer tax and a 2% a property registry tax.
All documents must be submitted to the title registry office by the buyer's lawyer, where the deeds are put into the buyer's name. After this is done, the buyers must be patient as the process can take some time.
Once you have found your home, it is wise to consider in which way you will finance the purchase. Many expats choose to buy the property outright, rather than relying on a mortgage. In the Dominican Republic, the interest rates are quite high and can fluctuate around the 20% mark. These rates are also adjustable and can be secured only in pesos.
Because of these terms, many foreign buyers choose to buy their property outright, avoiding this complicated situation with interest rates. This requires a certain amount of capital, but it's the best possible option for all who can afford it. Otherwise, it's maybe a smart choice to rent a property instead.
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