Never Ignore These Seven Rules…

Each day, over 10,000 baby boomers turn age 60.

That’s a rate of eight per minute.

With the dismal state of affairs in the U.S., many are now seriously considering purchasing international real estate, as a vacation or investment home. And some are looking for an international destination to be their primary residence.

Yet, many don’t make that leap because they don’t know where to go or they don’t know how to avoid common real estate pitfalls.

But from experience, I have gleaned seven offshore real estate rules that will help save potential buyers thousands of dollars and hours of regret, down the road…

1. Beware of net commissions. In many countries, real estate agents, not property owners, set the sale price. In foreign markets, these deals are particularly dangerous for buyers, because there’s no U.S. style Multiple Listing Service, so there’s no way to compare selling prices of similar properties. The easiest way to avoid this practice is to negotiate directly with the property owner.

2. Ask about title insurance. Never, ever rely on verbal promises. The seller and his attorney will always tell the buyer that the title is good and that there is no need to worry. After all, they do all the work in registering the property in your name. So, raise the question of title insurance early in your discussions. If the seller is confrontational and it looks like there is something to hide, look elsewhere.

3. Make sure to buy titled real estate, not “rights of possession.” Rights of possession are not the title and you should walk away from any property being sold as such. What it does mean is that you get only possession of a property, with the possibility that the full title may be obtained after a certain length of time (normally about 15 years). Such rights are subject to legal challenge by the titled owners of the land. The owner of the land, who is trying to sell his rights of possession, and his agent, may not tell you that the land is not titled.

4. Beware of laws that restrict foreign ownership. Figure out what property you can buy and how you can buy it in order to avoid the expense of dealing with restrictive foreign rules. You must know the local rules governing foreign ownership of the specific land in which you are interested. In some countries, foreign buyers must purchase through a corporation. In others, foreigners are not allowed to buy oceanfront or coastal property or other designated areas.

5. Offshore real estate markets can be difficult to navigate. Start with local realtors and familiarize yourself with the general market. Explore. Visit areas of interest and look for “For Sale” signs. Go to local bars or shops and talk to whoever you can. If possible, find a reliable local contact who can verify your quotes on local market prices.

6. Learn the options of offshore financing. In Western Europe, Panama and Mexico, loans should be available through a local bank, especially if you’re a resident of the country. Also, don’t expect a 30-year mortgage— 20 years is more typical. In less developed countries, your options may be limited to developers who offer direct financing with terms that are generally not appealing. You might arrange a loan in the U.S. using U.S. collateral (a second mortgage). Some offshore private banks will lend money against the value of your investment portfolio held with them in your choice of currencies, but you must watch the currency exchange risk.

7. Market price, not asking price, must be your guide. The asking price in a developing market is only a starting point, especially if there are no multiple listings, or comparative sales lists. Sellers will price property based on what they’d like to make, such as meeting momentary cash needs or following how neighboring properties have sold, regardless of how those properties compare with their own. Bottom line: Offer only what you believe the property is really worth, even if it’s only half the asking price.

Because the rules regarding the reporting of foreign real estate are subject to change, I track offshore developments very closely and report the latest developments to my Offshore Confidential and Freedom Alliance readers regularly. Plus, I provide more helpful information on establishing an offshore residence in my new book.

Start looking for your offshore haven. International living is easy if you know the ropes.

Faithfully yours,

Bob Bauman, J.D.
Chairman, Freedom Alliance