Have you ever wondered what happens during a real estate closing in Cuenca? Leave all of those expectations at the door, because I’m going to bet that it’s wildly different from what you’re used to. Today, I’m exploring this topic with YapaTree Properties Realtor, Xavier. Vamos.
Real estate is the core revenue-generating activity at YapaTree. As such, we have multiple years of experience navigating the closing process for our clients and it can be full of surprises. Joining us today is a local real estate agent with over 20 years of experience in Cuenca, Xavier. Welcome, Xavier. Let’s get stuck into some of those questions.
The Four-Step Closing Process in Cuenca
When we first started working together, one of the things that struck me was how involved Xavier is in the closing process. In Australia, where I’ve bought and sold properties, agents aren’t as hands-on. So, I asked Xavier to walk me through the key parts of the closing process in Cuenca.
“A closing process in Cuenca, well, in Ecuador, is actually a very simple, simple process,” Xavier begins. Here’s the breakdown:
- Promissory Note: This initial step involves creating a contract that outlines the terms of the sale, protecting both the buyer and the seller. It includes the price, time frame, penalties, and other conditions like repairs or modifications.
- Title Search: This crucial step checks for any liens, mortgages, or legal issues with the seller. Ensuring a clear title is essential to avoid future problems.
- Notary Involvement: After the title search, you make the payment, sign the deed, and the notary records the transaction. Notaries in Ecuador play a much more significant role than just rubber-stamping documents; they ensure everything is legally sound.
- Recording the Deed: Finally, the deed is recorded at the only recording office in town, making the transaction official.
“In some cases,” Xavier explains, “transactions can skip the promissory note and go straight to the deed if we already have a title search done and if your payment is going to be fully in cash, which is the case for most expats.” This approach is suitable if the property is ready to be delivered without issues. Unlike in the US, Ecuador doesn’t use escrow accounts, so the promissory note serves as a safeguard for both parties.
Escrow and Inspections: Safeguarding Your Investment
One major difference in Ecuador is the lack of escrow accounts. “How do we safeguard those deals in Ecuador to basically do not the exact same function as escrow, but ultimately give peace of mind to the buyer?” I asked Xavier.
“The laws are different here. One of the tools we use is the promissory note,” Xavier explains. It can be very specific to include conditions like repairs or modifications that need to be done before the sale is finalized.
Inspections are also handled differently. Instead of a standard inspection, buyers can hire licensed engineers or contractors to check the property. “You can hire a licensed engineer or a proper licensed plumber or a contractor,” says Xavier, although he warns against some practices where unqualified individuals are used to funnel more money into the transaction.
Challenges and Time Investment in the Closing Process
Xavier’s involvement in the closing process is substantial. “On a normal process, it takes me let’s say four hours per step,” he says. This time can increase if there are complications.
As an agent, Xavier spends about 30-35% of his time ensuring deeds are done correctly. “I have to supervise what they’re doing,” he notes, referring to the lawyers involved in the process. The manual nature of the process in Ecuador means Xavier often spends time physically moving documents from one office to another.
Costs Involved in the Closing Process
Understanding the costs involved is crucial for buyers. Here’s a breakdown:
- Title Search: $13 fee at the registration office plus $25 for the person to handle it.
- Recording Fee: Up to $500.
- Buyer’s Tax: 1% of the property value.
- Notary Fees: For a $100,000 house, expect around $2,500 in total closing costs, including the promissory note, deed, title search, and registration.
There’s minor paperwork costs between $150 and $200,” adds Xavier. The exact amounts can vary depending on how the previous deed was written and whether there are multiple deeds for things like parking spots and storage units.
The Adventure of Real Estate in Cuenca
Buying property in a new country is an adventure. It’s filled with excitement, but also with challenges that can test your patience and resolve. Today, I’m sharing a detailed case study that highlights some of the potential pitfalls and the meticulous efforts required to navigate them successfully. Our story involves a particularly tricky closing process that Xavier and I had to handle recently.
The Case Study: A Rollercoaster Ride
Let’s start with a real-life example to illustrate the complexity of some real estate transactions. We recently dealt with a house in downtown Cuenca. It was a beautiful, move-in-ready property with a surprising twist—hidden complications in the deed registration.
Uncovering Hidden Issues
The house originally belonged to a couple who had passed away, leaving it to their seven children. We thought everything was in order until the registration office rejected the deed. Why? Because an eighth sibling, who had passed away years ago, wasn’t accounted for properly in the paperwork. This meant we had to pause everything to complete an “effective possession” for the deceased family members, a process that was manual and painstakingly detailed.
The Deed Debacle
To add to the confusion, the house had three different repertory numbers due to multiple mortgages and other transactions recorded over the years. Imagine trying to decipher 60-year-old handwritten documents in Spanish! We had to collaborate closely with the registration office to clean up these records, ensuring that only the correct details were recorded.
Xavier’s Expertise: The Key to Success
Xavier’s role in this process was crucial. He tirelessly researched, negotiated, and coordinated with legal experts to resolve these issues. It took a full month, but he managed to fix everything without going to court—a route that could have taken a year and a half with no guarantee of a favorable outcome.
Avoiding Legal Quagmires
One important lesson here is that avoiding court whenever possible is usually the best path. The Ecuadorian legal system, like many others, can be slow and costly. By addressing issues directly with the registration office and using thorough research, Xavier saved us time, money, and stress.
Common Issues in Real Estate Closings
While our case study was exceptional, it’s important to recognize the more common issues you might face during real estate closings in Cuenca.
- Missing Stamps and Signatures: In Ecuador, every document needs the right stamps and signatures. A missed stamp can delay the process by a week or more. It’s a small but critical detail that Xavier always double-checks.
- Family Disputes: Properties inherited by multiple family members can be tricky. If even one member doesn’t agree to the sale, it can halt the entire process. It’s essential to ensure all family members are on the same page before proceeding.
- Liens and Mortgages: Mortgages are common and generally straightforward to handle. However, legal liens are a different story. These require court intervention to clear, which can be a lengthy and complex process.
Practical Tips for Buyers
To wrap up, here are some practical tips to ensure your real estate closing in Cuenca goes smoothly:
- Patience is Key: The process can take anywhere from a few weeks to several months. Be prepared for this and stay patient.
- Do Your Due Diligence: Work with qualified professionals to conduct thorough title searches and appraisals. This will help you avoid unpleasant surprises.
- Avoid Legal Battles: Whenever possible, resolve issues outside of court. It saves time, money, and stress.
- Beware of “Gringo Pricing”: Ensure you’re getting a fair deal by consulting with trusted local experts.
- Verify Every Detail: From signatures to stamps, double-check every document to prevent delays.
Wrapping Up – Embrace the Process
Navigating the real estate closing process in Cuenca can seem daunting, but understanding the steps and costs involved can help ease the journey. Xavier’s expertise and hands-on approach ensure that every detail is meticulously handled, providing peace of mind for buyers. If you’re considering buying property in Cuenca, partnering with an experienced agency like YapaTree Properties can make all the difference. Happy house hunting!
Further reading:
View full video transcript
Cuenca Real Estate Closings with Xavier (Local Agent)
Participants Jason, Xavier
Jason 00:00
Have you ever wondered what happens during a real estate closing in Cuenca? Leave all of those expectations at the door, because I’m going to bet that it’s wildly different to what you’re used to. And honestly, it’s the part of the process we least enjoy.
Today, I’m exploring this topic with YapaTree Properties Realtor, Xavier. Vamos.
Real estate is the core revenue-generating activity at YapaTree. As such, we have multiple years of experience navigating the closing process for our clients and it can be full of surprises.
Joining us today is a local real estate agent with over 20 years of experience in Cuenca, Xavier. Welcome, Javier. Let’s get stuck into some of those questions.
Xavier 00:42
Thank you for your invitation.
Jason 00:44
One of the very first things I noticed when we started working together like three years ago now is just how involved you are in the closing process, mainly because it was just so different from what I’m used to. For example, in Australia, I have purchased and sold properties, and the agents there aren’t anywhere near as involved in at least parts of the closing process in the same way that we are here. So, my first question is, please walk me through the key parts of the closing process in Cuenca and your general involvement in each.
Xavier 01:17
A closing process in Cuenca well, in Ecuador is actually a very simple, simple process. Of course, it can get complicated because, well, let’s go to the process first. You’re going to have a promissory note that involves what’s going to be selling, protecting the deal, protecting the buyer and protecting the seller. When you have a promissory note, it is authorized as a public deed as well that protects the deal as I say. It includes a price time frame, a penalty and all the general conditions of the negotiation how you’re going to be paying, when are you going to be receiving the property and whether are you going to get painting in the walls when you get it whatever, whatever you agree on the on the negotiation, that’s the first step.
The second step is doing a short or quick title search. After that, that’s going to include our checking if there is a lien or a mortgage or there is a law issue with the seller because that might create a problem later. Then you go back to the notary, you make your payment to the seller and you sign your deed and finally, you record the deed in the only recording office in town.
Jason 02:53
So, you’ve effectively discussed a four-step process there. I know in some transactions we would actually skip the promissory note component and go straight to the deed. Can you walk me through what those circumstances are and when it’s appropriate to, you know, potentially just skip that promissory note process?
Xavier 03:12
We could have it and we could avoid that if we already have a title search done. And if your payment is going to be fully in cash, which is the case for most expats well, yeah, for most expats. And if the house is ready to be delivered, if there are no issues, there are no leaks, no pipes broken, nothing to take care of. Something different here, in the US, most of our customers are from the US, we do not have inspectors, number one and we do not have trust accounts.
Jason 03:51
The escrow the escrow.
Xavier 03:53
The escrow process we do not have.
Jason 03:54
That is a big difference and let’s dig into that now, because a lot of clients do find that quite perplexing. And it’s like, how do we have a, a safeguard to make sure that we’re actually going to get what we pay for if there’s no escrow involved in the middle so how do we safeguard those deals in Ecuador to basically do not the exact same function as escrow, but ultimately give peace of mind to the buyer?
Xavier 04:19
Well, the laws are different here than it is in your home country. So, we got to use the tools we do have here and one of the tools is the promissory note. Ok, that promissory note can be as general as you want or as specific as it needs to be. So that’s going to include a warranty – actually for two parties, not just the buyer, is also going to warranty sellers as well. So, let’s say you’re going to put you can you can hire an engineer or a contractor or an architect to do an inspection on your own. That’s not something we do commonly here because let’s say roofs here are made to last a lifetime. We don’t have 4 seasons so they don’t get frozen, they don’t get extremely hot. It’s always plain so we don’t care. The pipes are always in good shape. However, you can get them inspected. But if you find something you don’t like and you want it, you want the house and you want to have it fixed, you put it in the Promissory Note in a special condition. I will buy it if you fix that or this.
Jason 05:38
Sure, and you said before that I want to touch on just the inspection report side of things because that’s also a little bit different to what we may be used to. Every time we might buy something in Australia, the US, or Canada, we would generally want to have like a qualified surveyor or someone might go in.
Xavier 05:55
Well, we do have something. Part of the title search is going to be, let’s say if it is the land, we’ll do a survey, OK. If it is a house, we’ll check the approvals and the plan for the blueprints if they are recorded at the municipality. That’s going to give you an idea of if you’re buying the right property. That’s pretty much it. If you’re going to hire a surveyor to survey your house, probably there’s going to be a difference between the deed and the survey.
Jason 06:28
Sure, so not so much the surveying part of it, but you know, just the, the general stuff so you know, you mentioned before the pipes, the roofs, all these things that hopefully we don’t have issues, but we want to make sure that we don’t have issues how do we do that?
Xavier 06:39
Well, you know you can hire is a licensed engineer or a proper licensed plumber or a contractor. I find it a little bit abusive sometimes there’s some gringos, can I say gringo?
Jason
Yeah.
Xavier
so, some gringo real estate agents who actually are not agents, but gringo real estate agents who have a handyman and they qualified as a contractor and they have them for 800 bucks to inspect the house. And then they have a list of paint the walls, check the stairs you know, it’s just getting them jobs.
Jason 07:30
It’s effectively another way to funnel more money into the transaction.
Xavier 07:35
Yeah, and that’s not right. And actually, they don’t have the equipment to check the piping or the electric, you know.
Jason 07:43
You end up with a report that isn’t really meaningful yeah so how can we get a meaningful report like from the peritos or?
Xavier 07:50
Ok, we have peritos. They are qualified by Superintendencia de Bancos or by the court. Also, we have a construction chamber. You know, one of my partners is in the headboard of the construction chamber so if you want to have them, I can get a bunch of phone numbers of engineers and architects who actually can do the job you want. That’s not something we do and but I.
Jason 08:17
I was going to say that’s a big difference in our perception when we come here, but a lot of it is because we don’t know, we don’t know the system so we want these extra little assurances.
Xavier 08:28
A lot of the time also I want to be safe as well as an agent. So before I lease a property, number one, I don’t list old properties because old properties are going to have issues. I tend to list the newer properties in the market in good condition and of course, sometimes there’s a leak or whatever, and I already have an agreement saying you got to fix it before I list it. And even then there might be a shake, you know, a little earthquake and a little crack come again. And whenever you buy it, my sellers are going to be taking care of that because I already made that agreement.
Jason 09:05
Got it. And so you said the process is really, really simple. I disagree with you on that. Nothing about the process seems simple to me like you said, yeah, it’s a four-step process, but a bunch of stuff can pop up during each of these steps and none of those steps seem to talk to each other. And it’s very manual so like I know that you spend in, in my opinion, too much of your time in the closing process because it’s important to get it right and I respect the fact that you go through that effort to make sure that you get it right. But how much time as an agent do you spend on the closing process?
Xavier 09:44
On the normal process, it takes me let’s say 4 hours per step. Yeah, OK. Because if everything is in order, but sometimes it can take me a while, it can take me a lifetime, and he knows that.
Jason 10:06
Claro, claro. No, but like, so for me it’s a like let’s say 50% of your time, would you say, or maybe not that much, but you know what sort of percentage of your time.
Xavier 10:17
I would say 30- 35 % of my time I’m taking care of the deeds are being done properly and don’t take me badly, my friend’s lawyers are really good at these but I have to supervise what they’re doing. I’m sorry.
Jason 10:32
Yeah, I get it. It’s OK I mean, you do this day in, day out, you know what you’re looking for and there is a tendency for lawyers here, if you ask them a question, they’re going to tell you, yes, we can do that and maybe they can but ultimately, they’re probably just saying yes to anything as well. So, do look out for that. That doesn’t mean that some lawyers out there have the requisite experience and they can certainly help you out with this process as well.
Xavier 10:54
They’re qualified to do it. Sometimes it’s just that you need to have inside of the public offices the connections number one.
Jason 11:05
Everything is manual, right that’s the important part to know. So, you’re basically taking the documents from here to there to over there, getting stamps and, you know, whatever they want along the way.
Xavier 11:16
And sometimes there are mistakes on previous deeds and you got to go to the records and check and, you know, make, make an agreement on how to fix it, you know, and that might take time.
Jason 11:27
That’s a little bit frustrating for me. I’m always trying to find you and you’re always like, no, no, no at the municipality paying taxes or something like that. Always going from A to B to C, and it seems to be that’s where you’re spending a chunk of your life so as an outsider, I would love to see these sorts of processes automated, but of course, that’s not the reality here and it’s unlikely to happen anytime soon. So, knowing the process is really the best that we can do right now.
Xavier 11:52
Yes, well, I go up, I got to be the backup for my customers, so.
Jason 11:56
Exactly yeah, No, I understand.
Xavier 11:58
I wish I could have more sales in that time and.
Jason 12:00
Make 35 % of your time that’s huge.
Xavier 12:03
Yeah, it’s a lot.
Jason 12:04
So, what other parties are generally involved in the closing process? Obviously, you’re here and you basically oversee the process and you do part of it yourself, but who else is generally in the mix?
Xavier 12:15
We do need a notary. A notary acts after a lawyer’s paperwork and they do have lawyers as well inside our offices. And we need the municipality on the tax, the tax area of the municipality. Also, we need the registration office and that’s pretty much it. And of course, buyer & seller.
Jason 12:47
Awesome and coming back to the notaries and this is another big difference they tend to be pretty expansive in terms of the services that they offer here in Ecuador compared to where we’re from you know, normally where we’re from, they’re known as rubber stampers. Whereas here they have a much more active role in the process can you walk us through that?
Xavier 13:07
Number one, they have to be a graduated lawyer. Number two, they have to be qualified by the government.
Jason 13:14
Not just graduated lawyers, but my understanding is that they’re generally like the best lawyers in the class a lot of the time.
Xavier 13:19
Well, they’re qualified. They’re well, not just the best lawyers in class, but they’re qualified by the government, OK, they have to also qualify their standard behavior. You know, they’re, they have to know notary law, they have to do tests.
Jason 13:40
It’s a prestigious position.
Xavier 13:42
Yeah, it’s a prestigious position number one number and also if something goes wrong, they can be sued.
Jason 13:49
A big responsibility.
Xavier 13:50
They can be sued as well. So, they’re basically managing a part of the law. Sometimes you can get married in front of the notary, you can get divorced in front of the notary and you can do a lot of stuff, even dealing with the government in front of the notary. They’re very, very important.
Jason 14:12
And so, for the property process itself, we generally find them for drafting the promissory notes and the compraventas and signing all those documents.
Xavier 14:19
Yeah, they do have lawyers inside their offices or allied lawyers who are a lot cheaper than an outside lawyer and faster as well because they are just there and they have to do whatever the lawyer, the notary, and me tell them to do. So, they act quickly. That saves a lot of my time because when there’s a lawyer involved, a simple 2-week, 3-week closing might turn into two months, three months closing.
Jason 14:51
Because they tend to be a little bit more involved in the process than the notaries of the lawyer or where does the extension in time come from?
Xavier 14:58
That’s a really good question. There’s no reason actually will, but.
Jason 15:03
Just lawyers are busy.
Xavier 15:04
They’re busy, they delay things and you know, and these kinds of businesses, you know, real estate businesses are not something we use a lawyer. So, sure they’re not.
Jason 15:18
That’s a big difference locals in a property transaction would almost exclusively, unless there’s like a genuine issue with the law, they would go straight to the notary under normal circumstances.
Xavier 15:26
Straight to the notary and there’s got to be faster there. Lawyers are not used to it, they like to go to court, they like to fight, they like to argue, but they don’t like to type. So, they delay, they delay the process.
Jason 15:40
OK. That’s good to know as well. And so moving on to the property registry itself, again, this is a little bit different to what we’re used to. How does that work in the process? Where does it fit in and how often during a transaction do you need to go then visit there?
Xavier 15:56
Ok, number one, we go the first time to get a record of the of the deed. That’s gonna give us how many times the deed has been or the property has been trespassed or modified. Also, how many times it has had liens or mortgages or there was a low issue with the seller or a previous seller or whatever you know?
Jason 16:23
So the title search component, that’s where you would originally go?
Xavier 16:26
That’s one of them, yeah, that’s one of the title search components. That’s the main one actually. You can also do the other side of the title search at the municipality. But the main one, the most important one is at the registration office and it is a $13 fee at the registration office plus $25 for one of my guys to go and ask for that’s it’s, it’s super inexpensive. It’s safe.
Jason 16:54
That basically comes back saying there’s a lien or there’s not a lien or what can someone expect from that?
Xavier 16:59
Well, it’s going to tell you there’s a lien / there’s no lien. There are special numbers like Repertoire. Repertoire is a book with a number where your deed is stored, you know.
Jason 17:17
Like physically stored?
Xavier 17:19
Physically. The only original actually is there. Everything else, what you get as an original actually it’s just a, just a copy, you know, so it is there whatever and whatever it happens, they will go to that repertoire and they will add another paper saying well, there’s a lien or there’s a mortgage or it got sold or it got sold, just part of it or owner died and now the property belongs to eight brothers or seven, you know.
Jason 17:57
I know. We’ll get to that in a little bit because that was one of the use cases that we went through recently it was very difficult, but I just want to touch on the cost a little bit. You mentioned before there is a fee for the title search, but what are the standard closing costs that someone can expect as a buyer?
Xavier 18:13
Well, the recording. The recording is going to be up to $500. Most of them are $500. OK, just a little suit or something very inexpensive is going to be less, but most of most of them are going to be 500 bucks. Ok, If you want to put a mortgage or a lien or if you have kids and you want to put them in their names, there’s going to be extra cost. I will have to find out.
Jason 18:46
But budget $500 for that process, maybe a little bit more. In terms of the buyer’s tax?
Xavier 18:51
The buyer’s tax is 1% of the business.
Jason 18:54
So that’s the main one, right that’s the main cost that they’re well and.
Xavier 18:57
Also, the notary is expensive. Notary can be.
Jason 19:01
So, come back to the, the buyer’s tax, you know, 1% if the property is a hundred thousand, dollars then there’s your, one thousand dollars in taxes. And for the notary fees itself, how much would, let’s use the same example in a hundred thousand dollars let’s say we’re doing a promissory note. What can we generally expect?
Xavier 19:18
If we’re in a hundred thousand dollars house we’re talking about twenty-five hundred dollars total close in cost. OK, between the promissory note, the deed, the title search, and the registration.
Jason 19:36
And does that scale up so for example if it’s a two hundred thousand dollar can they, expect five thousand dollars or?
Xavier 19:43
It has, we have a chart based on the minimum wage. So, from 60 to 90, from 100 to 150 you know, I can provide that chart to you. So, you can have it and even put it in the in the video, you know. Yeah so it is totally transparent and it changes every day. Every year, though.
Jason 20:06
It does, with the minimum wage changing every year. Yeah, of course. So that’s good you know, a bit of an overview so there’s going to be the notary fees depending if you’re going through it twice doing the promissory note and the compraventa.
Xavier 20:19
Deed. Yeah.
Jason 20:20
There’s going to be, the taxes as well. How do we calculate the so we have the 1% tax? What other taxes can they expect throughout the process?
Xavier 20:30
There’s minor paperwork.
Jason 20:34
Sure, there’s not much.
Xavier 20:35
Not much between $150 and $200 yeah you know.
Jason 20:39
The difficult part though is it’s really hard to give exact quotes for this.
Xavier 20:45
I always give an estimate that might change.
Jason 20:48
And it does change a lot depending on which way someone at the tax office processes something or at the registry processes, you’re going to have a slightly different fee.
Xavier 20:57
Also, it depends on the way the previous deed was written. Ok, that’s going to give you a huge difference. Let’s say you buy an apartment, a condo with two parking spots and storage. It’s going to be one cost if the two parking spots and the storage are in the same deed. But also, you can have four different deeds, you know, four different deeds that can be sold.
Jason 21:26
Separate and you’ve basically got to do the due diligence and everyone then on every single one.
Xavier 21:30
Is more expensive.
Jason 21:31
Of course, of course so I know that’s frustrating. It’s frustrating for me not being able to give clients the exact, you know, figure when it comes to the closing costs but you know, that’s just the reality here.
Xavier
We are very accurate.
Jason
If anything, we tend to overestimate a little bit, you know, for that reason. But still, I would love to be able to say it’s going to be exactly this and have it done but.
Xavier 21:51
Just so you know, it will take two days and three hours, but it is labor.
Jason 21:56
That’s a really good point so in terms of the overall time frame for let’s say you know a standard deal that goes through that four-step process?
Xavier 22:05
Well, the four steps, we cannot talk because the promissory note is also going to include a time frame. And let’s say you guys are not ready to move in because you have things in the US and you need three months to come. So, you just put the money down the down payment and you take the unit out of the market. Ok, that’s going to add three months to the closing time. So, let’s take that promissory note out of it. But the average will have to be between two and three weeks between title, search, deed, and registration, two to three.
Jason 22:43
Weeks that’s assuming everything just flows the way that it should without any hiccups. If there is a hiccup, every hiccup kind of adds another week.
Xavier 22:53
Every time you make a mistake or if you find a mistake inside of any public office, you will add at least a week, at least a week because you got to go back to the to the notary fix what you did and go back to the registration office. Ok. And if the mistake is not evident, it’s not easy to find and then it’s going to be more time.
Jason 23:27
Let’s dig into that because we have a case study that’s really going to illustrate, you know, some of these points a little bit because we did have a really difficult close recently, one of our sales it was very frustrating because there was no real way for us to know how complex the close would actually get.
And so, let’s dig into this example to illustrate some of these potential issues. This one was thankfully very rare, this issue that that we came across. But at the same time, I think the way that we dealt with that issue is probably the most important. So, can you just walk us through quickly what the issue was with this particular close?
Xavier 24:06
Actually, this is very important to know. The registration office is going to give you the records of the deed. If something was recorded, as you said before, everything is manual so you have to take everything into your own hands and do your diligence. But if you don’t do your diligence, there’s going to be a mistake. But it’s very, very, very weird to find something like this. This case was a house downtown, a beautiful house in really good condition and well ready to move in just do some touches and move in. The tiles are done. No liens on it. There was one but we couldn’t find it. I’ll tell you later why no liens.
No liens on the records. The house below used to belong to Dad and Mom and they passed away. And the seven brothers I talked to, decided to sell and they listed the seven of them and we sold the property. We got a promissory note and we did a deed and the deed was rejected by the registration office because when you’re recording a deed, I think they do a cross information. And we found out there was another brother who passed away a couple of years ago and they did not do their homework. What they had to do was an effective possession.
Ok number one Dad passed away, do an effective possession and record it. Number two, mom passed away, did an effective possession and they did not record it, but we did it in the process. I knew it and I knew it was easy, so go ahead. Recorded not a problem. Number three, there was a brother who passed away and they did not put a, they did not need the effective possession, so it was rejected. So, we had to take it out and do the effective possession by the time, but the time well, their mom died and dad passed away many years ago. And you saw the deed. I show you they were handwritten.
Jason 26:46
It was yeah, I could not read that. It was so incredibly difficult. I mean, obviously in Spanish, but just the type of handwriting itself. Can you understand that?
Xavier 26:54
Yes, I do. Most of it, yes. But you know, it’s still, it’s handwriting. It’s tough and it’s 60 years old paper, but it was handwriting. They did an effective position at that time, but we couldn’t do it now because when we did it, there was one repertoire in the deed. Then when mom or dad died, I can’t remember, I can’t recall right now which paper was. They did a defective position with a different repertoire number. It was.
Jason 27:33
Basically, a different case number or, you know, different location number, Yeah.
Xavier 27:38
It was just a different file. Yeah, when they took a loan or mortgage that it had years ago, they did in a third repertory number in a third folder number. So, we had three.
Jason 27:56
So they had three different effective case numbers and they were all attached to the same deed.
Xavier 28:03
All of them were attached to the same deed.
Jason 28:05
And that creates just confusion across the board, right? Like the process just basically could not continue.
Xavier 28:12
So, we didn’t fight which one was a good one, and we did with that one. But then again, they got confused. Ok, so we got to get together with the guy, one of the important guys inside, and ask them to write him, actually write him a letter and ask them to delete the other ones. They are a mistake.
Jason 28:36
So, we basically had to roll up our sleeves and investigate, figure out what the mistake was, go out of our way, you know, get lawyers’ opinions, write a legal letter, basically identifying these are the potential issues that we want to have resolved, go back to the office and for them to hopefully accept that and move forward. But that was a lot of additional effort that was on you basically and that’s the only real way forward. What was the other path if we wanted to go we can like in Australia, this would be an administrative law type.
Xavier 29:13
Well, you could do that. You could go to court and sue them and find a solution at the end of the day, it’s good. It’s also valid. But that’s going to take a year and a half. It took me a month.
Jason 29:26
Yeah.
Xavier 29:27
It took me a full month.
Jason 29:28
And no guarantees that there’s going to be a good outcome at the end of that process.
Xavier 29:34
When I do, when I finish.
Jason 29:36
No. Like if you go down the law path and it’s going to take a year and a half, obviously the time is one component, but there’s no guarantee that you’re going to get the result that you want as well.
Xavier 29:43
You can lose it and the judge can say, “Well, go back and do what you’ve done.” Yeah, that’s going to take a bunch of money out of your pocket and a bunch of time and my reputation.
Jason 29:59
So, so, and like for me, look, when you go down the path of the legal route, no one wins ultimately. I can say that as a lawyer. And so, I’m very firmly of the opinion that if we can avoid the courts, it’s always going to be the best solution. And you’re able to do that and it took another month out of the process yeah.
Xavier 30:18
Took a month of investigation, of research, a little bit more than a month, but at the end of the day, it’s fixed.
Jason 30:26
It’s fixed, yeah but like that, that month of research, for example, you know, we’re, we’re not getting paid extra for, for any of that. That’s basically part of the process that you effectively just take on to make sure that the close happens. And, I think that’s an important part of it just to realize exactly how involved some of these closings can be as an outsider.
It still seems a little bit bizarre that that’s what the process is. As an expat, just recognizing that and knowing that the process itself is going to be open to these types of issues and so time expectations when it comes to time for a look, this was a rare issue and so I don’t want to use this as the standard or anything like that.
Xavier 31:09
There was something extra. There was a mortgage, and that house had three mortgages, OK. And when they passed away, automatically the insurance of that mortgage took control of it and it was done. Ok, it had to be clear that again there were three different repertories. So, one of the last mortgages, the one that was not clear was in a different number. So, it was. It had the mortgage still that nobody knew it, not even them. But when we fix it, we also clear that part.
Jason 31:51
Yeah, so these issues are obviously very uncommon, thankfully. What are some of the, I guess more common issues that you see in the closing process?
Xavier 32:01
Well, sometimes the notary can forget to put in the stamp. Ecuador is the country of the signs and the stamps. So probably a signature or probably a stamp on one page and then you get a call back.
Jason 32:15
But that’s generally going to be a week or it’s going to be a week. Yeah like not a, not a huge.
Xavier 32:20
Remember a few months ago we had this case of these guys who bought in Kira? Yeah, and it took me 3 weeks.
Jason 32:29
And that was a case of basically a stamp missed somewhere along the way.
Xavier 32:33
Was three weeks easy? Piece of cake. Just go back, and ask for the stamp.
Jason 32:38
Sure, so that’s generally what the scenario is. But Even so, it’s really good to know that if someone does have a more advanced problem that this assistance there and it’s not necessarily the legal route.
I think that’s the important path for, for people to know because as an outsider, we tend to be a little bit sue happy and like basically very aggressive, you know, you’ve done something wrong to me – I’m going to sue you that’s the immediate reaction and so if we come here with that attitude, I do feel like in this circumstance, I don’t think it would have been, it would have provided the best result. And I think under most circumstances it’s not going to provide the best results.
Xavier 33:19
It’s going to be the worst result actually, because if you sue the government, they have lawyers.
Jason 33:24
They have deeper pockets than what we generally do.
Xavier 33:26
Of course, well they have lawyers and their job is just delay, delay, delay, delay. You’re fighting the government so they will delay, so you get tired.
Jason 33:39
Yeah, yeah. No, I understand. And so, what are some potential red flags that buyers can look out for, you know, during the closing process? I would say red flags like some warning signs that the like for example, obviously if we get a lien on the property something like that, that’s going to be very clear. OK, look but what else are we sort of looking for?
Xavier 34:01
You know, actually a red flag would be the real red flag is if your salary has problems with the law. OK, because everything else is just a matter of time or money. Ok, let’s say the house has a lien because of a mortgage and the seller is clear and he or she says we have a mortgage. OK, How much do you need to clear the mortgage? I need thirty thousand dollars, hundred thousand dollars OK, do a down payment. Make sure the promissory note says that it has a mortgage and you’re going to be clearing with that money even you can pay in the bank. You can, as a buyer, you can come, you do the promissory note, go to the bank and pay them directly and the bank is going to give you the deed. You know, I love buying properties with mortgages, mortgages with the bank, OK. Because those are the most secure deeds. Once it’s in the bank’s hands, no one else is going to be fighting that so it’s super good.
Jason 35:14
So let’s say if the buyer is, I don’t know, let’s say you know, heaven forbid them, they do have some sort of criminal record and they want to sell the property. What exactly? What steps would you take to safeguard yourself?
Xavier 35:27
I will walk away, yeah. If the buyer has a criminal record and has a lot of problems that is current.
Jason 35:37
Ok. But so, if someone has a 10 years ago, they had some sort of issues.
Xavier 35:40
Whatever 10 years ago, it’s prescribed already so prescribed is the word prescrito is gone.
Jason 35:47
It’s. I don’t know the exact word in English right now, but I understand what you’re saying.
Xavier 35:51
So, it’s gone it’s expired. Ok. Another red flag is when they have when there’s been a divorce and they have kids’ monthly payments, how do you call that?
Jason 36:09
Yeah, like child support.
Xavier 36:10
Child support and one of them is not paying. That’s another red flag and it would be shown because those things go to court and court is going to record against the house.
Jason 36:21
Wait, so you’re saying that if for example there has been a divorce, let’s say that the mum keeps the house in this scenario, but the money from the father has not been paid, somehow that can affect the house.
Xavier 36:35
Let’s say they were divorced and this guy has a house in Ecuador. He has to pay no matter what. So, he hasn’t been paid and mom sues the guy and compromises the house, cars, or whatever.
Jason 36:54
I understand so he has the property under that circumstance and the liens can and all that sort of stuff.
Xavier 36:58
Just walk away because if they’re in trouble, they’re fighting. She’s going to delay the purchase.
Jason 37:06
She has to agree to the purchase, right? So, if she doesn’t want to and she wants to, you know, just cause an issue or whatever.
Xavier 37:12
They are fighting and if he’s not paying for that?
Jason 37:17
So, you bring up a good scenario what about so the one we just went through? Right, so there were seven family members as soon as I knew there were seven, well, I always knew there were seven family members involved.
Xavier
Yeah, the 8
The angel, yeah. So obviously it was a lot more effort with all of those different family members and so that’s a potential red flag. But how big of a red flag is that in a purchase just getting agreement from the entire family?
Xavier 37:47
Well, if you have a heritage patrimonial, patrimonial member, if they all agree there’s no red flag there.
Jason 37:58
Ok, but if you’re talking to them and you feel like there’s some sort of, you know, disharmony within the family, and one person is like on the side, only one person.
Xavier 38:07
If only one person is not willing to sell, then you’re going to be able to buy, in this case, 7/8, and then 1/8 is going to belong to somebody else and that’s legal. And the notary and the registration office are going to record that because you’re buying one-seventh. Can even buy 1/8 you know.
Jason 38:31
That’s really good to know so if you do come across any sort of indecision amongst the family, you know what it’s best to walk away.
Xavier 38:37
Talking about this, whenever you see, and this happens a lot of the rural properties, whenever you see a deed with the Derechos y Acciones that’s something that is not going to be a red flag, but some light bulb is going to be turned on and you got to check if you’re buying 100% of the deed Derechos y Acciones, you know, 100 the rights or just 50% of that or a third. Even when there’s a divorce, you can buy 50% of it, you know, but you got to see what you’re buying.
Jason 39:12
So, what would that so obviously on the deed it’s going to say somewhere, but where exactly would they, would they find out that particular type?
Xavier 39:18
Of yeah, add the registration when we do the title search, yeah.
Jason 39:22
Awesome. Ok. So again, or something to look into further if we come across any, anything else that you typically come across that you’re like, hey, hold on, let’s slow down.
Xavier 39:31
No, that’s pretty much it. You know if it has a lien or a lien is a mortgage. It has a mortgage. It’s easy. If it is a legal lien, uh oh, don’t do it. Just think twice.
Jason 39:44
Because you’d have to go through the courts to get that lien removed.
Xavier 39:48
Yes, yes, you’re going to go to court, but sometimes… don’t forget about that sometimes we don’t want.
Jason 39:55
Yeah let’s not go down that path and so I think that the last step in the process and I do kind of want to leave here is just the switching of utilities and that seems to be like the very last thing that we do can you just walk?
Xavier 40:07
Well, I don’t do that.
Jason 40:08
Ok, but like how that works in practice?
Xavier 40:10
Yeah, what you got to do is pay your well, get your deed recorded. I don’t do that because that’s just simple.
Jason 40:20
Nothing can really. Nothing bad can really happen at this point.
Xavier 40:22
Nothing’s going to happen and you can do it on your own, but if you want to do it, if you want help, I have somebody else from my office who’s going to be able to help you out with that for a small fee. However, you take your deed, take your ID, whatever passport or cellular, whatever you have, and last year’s payment which is included in your deed, payment of the property, and property tax which is included in your deed. However, I will sit with you and check which one it is and that’s pretty much it.
Jason 40:55
Just go to the office, right and.
Xavier 40:56
And the number of the meter or the contract that the previous seller gives you.
Jason 41:04
And that’s a pretty quick process.
Xavier 41:05
You got to do the tax thing first, the tax name update and then go to Centrosur for power and Etapa for water.
Jason 41:18
Yeah
Xavier 41:19
That’s it. It’s super easy.
Jason 41:19
Awesome so that’s pretty much it. Anything else? Have you any last tips? I guess that you have just to make sure that the process goes as smoothly as it can.
Xavier 41:34
Be patient.
Jason 41:35
Patience is a good one, yeah.
Xavier 41:36
Yeah be patient because it can take, as I say, two or three weeks or it can take two or three months yeah and sometimes, we’re humans. Everything we do it by hand. I can make a mistake, of course. I tend not to because I read it 10 times before.
Jason 41:55
It’s a manual process so the safeguards in place simply aren’t there to catch some of these mistakes. And so, I think patience is very much a virtue here so if you are coming, just again, realize that things are very, very different in Ecuador and we’re not trying to make excuses for the process and the system. That’s not it. It’s just accepting that this is the system that we have and everyone is trying their best to get you the result. Obviously, some people, there are some bad actors out there and I’ve done some videos on that and if you want to check out some stories, I will link to one of those videos as well as what can go wrong in a real estate deal.
But I also just don’t want you thinking that the process is just completely haphazard and yet you’re going to expect mistakes. I don’t want you to expect mistakes, but I do feel like you should be expecting to come here with some patience and that’s going to go a long way.
Xavier 42:49
I saw one of one of those last videos. My recommendation will be to not be Gringo-priced. That is pretty much a big red flag to me is do an appraisal with a qualified appraisal guy and.
Jason 43:10
How do you find a qualified appraisal?
Xavier 43:13
In court or with banks?.
Jason 43:15
So, the peritos or something?
Xavier 43:16
Yeah, the peritos. I have a list of qualified peritos in a court or banks and they can do it. They can do it so if you’re five, ten percent of their price up or down, it’s going to be fine but.
Jason 43:31
I think that’s a really good way because we don’t know what the prices are going to be in the market here. You come here, you’re completely fresh and so yes, you can spend a bunch of time like finding that knowledge out yourself and I do think that’s valuable but if you want to shortcut that and you want to pay these reports of generally what like $200?
Xavier 43:48
Yeah, it could be up to $200. They have a fixed chart according to the price.
Jason 43:54
So, if you have any sort of feeling that you are getting gringo priced or something like that, then throwing $200 at it seems very reasonable to me yeah, $200 could save you a lot of money.
Xavier 44:04
If you’re buying land, of course, do a survey.
Jason 44:08
Of course.
Xavier 44:09
Yeah, you get to do a survey.
Jason 44:09
Land’s a whole different story and there’s a lot of additional steps I think that need to be taken when you’re buying land. I don’t want to focus on that one too much. We don’t tend to do that many land deals at YapaTree, no. Just because they’re very unique and they’re different and then they take a lot of time. But if you do want to use us as your Cuenca real estate agent, then we do provide you with the option of using us to do the close. But of course, you’re always welcome to have your own attorney handle it for you. And we work with them. We have no problems doing that. Ultimately, end of the day, you are the buyer you’re the one that needs to be comfortable with this process and so we work around that.
We also do have clients that let’s say have found a property, but they do want us to help with the negotiation and the closing. We do offer this under our buyer’s agent service. And so, do feel free to get in contact with us should you want to pursue this or just have any questions that you want some help with, feel free to email me at [email protected]. And here is a video on our buyer’s agent service if that is of interest. So, thanks a bunch for watching and thank you for joining us today, Xavier.
Xavier 45:20
Thank you guys. See you.
Jason 45:21
Let’s go close some of those properties.
Chao chao chao.
