How to buy real estate in Puerto Rico as a foreigner? How high are realtors´ and lawyers´ fees in Puerto Rico? What about other property purchase costs?
This article is an overview of what you can expect when purchasing real estate in Puerto Rico. We cover the costs, taxes, process and some of the legal aspects.
How to purchase property in Puerto Rico?
Foreigners can freely buy property in Puerto Rico. To enter into a real estate transaction, it is important to hire a real estate agent as knowledge in Spanish is very much needed.
When an agreement has been reached, a deposit of 5% of the purchase price is usually paid by the buyer. The deposit is non-refundable if the buyer decides to back out of the transaction. In case the seller backs out, the seller will pay the buyer twice the amount of the deposit or earnest money provided.
The seller usually pays for the notary´s fees, and real estate broker´s commission (unregulated). The buyer, aside from the down payment, also pays for title insurance and documentary stamps on the deed. Additional costs may include appraisal and inspection fees. Property taxes, on the other hand, are prorated. Since property taxes are usually paid at the end of the year, the buyer and the seller share the expense according to the number of months each owns the house during the year of the transaction.
All real estate titles are recorded in the Registry of Property. The titles are further categorized into subsections according to the territory where the property is located. It is important to file the title of the property under the correct section to prevent any objections from the Registry officials, who check the title´s legality and requirements.
A foreigner can also take the corporate route to acquiring property in Puerto Rico. Costs for registering a property obtained through a corporation include US$300 for Corporate Resolution. This is prepared by a notary to authorize the representatives of the buying corporation to appear in the deed of purchase and sale. There also are additional costs for Internal Revenue Stamps. The whole process of registering a property by a corporation can be completed in around 15 days.
Transaction Costs and Fees in Puerto Rico?
|Internal Revenue Stamp||0.55% - 1.00%||buyer|
|Registration and Filing Fees||0.10% - 0.50%||buyer|
|Attorney´s Fees||0.50% - 1.00%
0.50% - 1.00%
|Real Estate Agent´s Commission||4.00% - 6.00%||seller|
|Notary Fees||0.50% - 1.00%||seller|
|Costs paid by buyer||1.15% - 2.50%|
|Costs paid by seller||5.00% - 8.00%|
|ROUNDTRIP TRANSACTION COSTS||6.15% - 10.50%|
Source: Global Property Guide
Footnotes to Transaction Costs Table
It is mandatory that a notary prepares the sale and purchase deed. Maximum allowable notary fee is 1% of the property value for the first US$500,000 plus 0.5% of the amount in excess of $500,000.
Registration and Filing Fees:
Several fees must be paid to different offices such as the Municipal Revenues Collection Center (CRIM), Treasury Department and Registry of Property. These fees are minimal and are not expected to exceed 0.5% of property value.
|Property Title Report||100|
|Property Tax Certificate||50|
|Filing fee for Registry of Property||100|
|Filing of Notice of Sale with Treasury Dept.||20|
|Filing of Notice of Change with CRIM||20|
Internal Revenue Stamps:
Internal Revenue Stamps are puchased to be canceled on the original of deed of purchase and sale and first certified copy of deed to be filed in the Registry of Property. The notary keeps the original while the certified copy is filed at the Registry. Before applying for registration, filing vouchers for the Registry of Property must be bought first. Internal revenue stamps and vouchers are acquired electronically by lawyers/ notaries.
INTERNAL REVENUE STAMPS
|Original Copy||US$55.00 + 0.1% of property value|
|Certified Copy||US$27.50 + 0.05% of property value 50|
|Filing Vouchers||US$10.50 + 0.40% of property value 300|
Although not mandatory, it is highly advisable for foreign buyers to hire an attorney or lawyer. Attorney´s fees may vary depending on location and the complexity of the transaction. Most lawyers charge a percentage of the selling price, about 0.5% to 1%, while some lawyers charge a fixed fee or on an hourly basis. Each party pays for their own lawyer.