Contents of this page:

Buying Property in Ecuador
Financing Property in Ecuador
Closing Costs and Taxes
Buying Property for Rental Income
How do I avoid paying "Gringo Pricing"?
Ecuador Economy
Ecuador Political Stability


Buying Property in Ecuador

Anyone in the world can freely buy property in Ecuador. You can arrive in the country, and buy real estate the very same day using only your passport as identification. This is not just a policy of the current administration that can easily be changed – the Ecuador constitution guarantees the right to buy and hold property for everyone, citizens and foreigners alike. In fact, once you are in the country with a valid visa, the Ecuador Constitution guarantees that you have the same legal rights as Ecuadorian citizens, with the exception that you can not vote!

Additionally, there are no restrictions on owning beachfront property as there is in some other countries. There has never been a case of the government "seizing" foreign owned real estate (and to be fair, even in other countries (i.e. Mexico) the problems have mostly been the result of buying property that the seller did not have the right to sell – a proper title search, or buying title insurance, mitigates this risk).

The one caveat in Ecuador is to be wary when buying property that is "Derechos y Acciones" – basically, the rights granted to heirs when a property owner dies and leaves the property to his or her estate. The risk is that unknown heirs could potentially file a claim on the property in the future (see additional info here). 

While title insurance is available in Ecuador, it is not always necessary. Just don't let a seller rush you into any transaction without having a lawyer do a proper title search.

Many people are understandably wary of international real estate investments.  Laws vary from country to country, even within one region (i.e., South America), and you need to understand the local market and analyze the properties that are for sale.  Ecuador real estate is very secure from a legal standpoint - the property ownership laws are very well written, understandable, and constitutionally guaranteed.  If you are thinking of living overseas, Ecuador is a perfect country for International Living.

Financing Property in Ecuador

In theory financing is available in Ecuador, but in practice it is difficult to arrange. The Ecuador constitution guarantees free access to the banking and credit market to locals and foreigners alike, just as it guarantees the free right to own and hold property.

However, there is no "credit rating" system in Ecuador, and the default rate is high - so it's hard to qualify for a loan without a local employment history or a co-signer. A good credit rating in the US does not mean anything here. Interest rates are typically 12% or more, and 30% to 50% down payment is standard. 

You can sometimes get the sellers to provide financing, but they will typically require at least 50% down payment. Another option is with new construction - the builder/architect will often provide financing, especially for "pre-construction" projects.

Your best bet, however, is to get financing from your home country - family, friends, or even tapping a HELOC will often be a better choice than trying to get local financing.

Closing Costs and Taxes

The buyer pays almost all costs in a real estate transaction in Ecuador.  The seller needs to ensure that the property taxes, utility bills, and any building maintenance fees are current, and may owe capital gains tax on the sale, but the buyer pays for everything else.

The costs typically include:
• Legal fees for drafting the contract and performing the title search
• Notary fees
• Translation of documents and translator at signing (this is a legal requirement if the buyer doesn't speak Spanish)
• Transfer and registration taxes
• Real estate agents commission

While it is hard to generalize, as every transaction is different - typically the agents commission is 5% of the agreed up price, and all other costs (legal fees and taxes) are typically between $750 and $1,500 for a regular condo or house purchase.

Annual property taxes are based on the municipals "Assessed Value" - not on the actual purchase amount.  The assessed value can be anywhere from 5% to 50% of the real value of the property.  Depending on where you live, the property tax may be up to 1% of the assessed value.  So, for example, if you purchase a property for $100,000 and the assessed value is $30,000, the maximum property tax would be $300 per year - usually it's much less.

Property taxes are due on January first of each year, and are not "past due" until December 31 - so you have a full year to pay the tax! Property taxes are not pro-rated when a property is sold - so if you buy a house on January 3rd, the seller needs to pay the property tax for the entire year.

Capital Gains tax is based on any increase in the assessed value during the time that you owned the property.  So if you sell the property in the above example, and the assessed value has gone up from $30,000 to $35,000 you will owe $1,250 (25% of the increase in the assessment).  It does not matter if you actually made a gain of $100,000 on the property - or if you even lost money on the investment - you will pay a tax of 25% of the increase in the assessed value (the tax due is reduced on a sliding scale if you own the property for more than 5 years.)

Buying Property for Rental Income

Is it a good idea to buy properties to rent out?  Absolutely!  While there are some homes and apartments that are rented on a "long term" contract, the best strategy is to rent furnished homes on a month to month basis.  Furnished houses and apartments will usually rent for almost twice as much as an unfurnished place.  Tenants are typically people who are coming to Ecuador for a few months to study Spanish, on vacation or short work contract, or people that want to rent a place while they look for something to buy. While you can get higher rents from high end beachfront homes, you will also have more vacancies during the off season.  If you have a nice place with good furnishings, it is likely you will have very high demand in popular destinations like Cuenca and Quito.

How do I avoid paying "Gringo Pricing"?

We encourage foreigners to only pay "local pricing" when buying property. How is this done?

While it is true that an initial quote from a seller will probably be higher if they know that the potential buyer is a foreigner, every seller has his bottom line price and every property has it's fair market value. We specialize in finding out the sellers bottom line price (our first contact with a property owner is usually with a local "property scout" who gets all the details on the property and finds out the "local asking price" and we negotiate down from there) and we use standard appraisal techniques to estimate the fair market value.

Since we represent the buyers only, we have no allegiance to the seller.  We do not take a commission from the seller and we will not "mark up" the price of a property to give a buyer the false sense of having negotiating room - our mission is to find the absolute best price possible for the buyer, and to advise the buyer if that price is a good deal or not.

Ecuador Economy

Following in the footsteps of Argentina, Brazil, Mexico, and other Latin American countries, the Ecuadorian currency collapsed in 1999. The Ecuadorian President made an extremely bold, unique, and politically unpopular move at the time, adopting the US dollar as the official currency of Ecuador in 2000.

This decision single-handedly saved the Ecuadorian economy. Inflation fell from 96% in 1999 to less than 1% in 2002, and has remained under 5% since then.

The dollarization has helped build a very strong middle-class in Ecuador. The population of most of the neighboring countries is either very poor or very rich, with few people in the middle. While much of the population of Ecuador is still very poor (wages for the common laborer average $250 per month), the percentage of homeless people is among the lowest in South America. Food is plentiful and affordable to all, and overall standard of living is rising.

The strong middle-class has led to a housing boom in the major cities. The number of higher end apartment buildings under construction or recently completed is astounding, and here in Cuenca, well over 90% of these luxury condos are purchased by locals.

Government relations with the US continue to be cordial, despite some recent disagreements about the ownership and management of oil reserves in the northeastern jungle.

Major industries and exports are oil, mining, textiles, metal work, chemical production, fishing, lumber, bananas, coffee, cacao, rice, shrimp, sugarcane, sheep, beef, pork, and dairy.

Ecuador Political Stability

Many people write to us to ask about the political situation in Ecuador.  It is true that Ecuador does have a history of ousting the current president before his term is officially up - but it has always followed a constitutionally approved process, it has never been through a coup or military takeover. The core of government operations has been stable throughout.

In late 2006, the people of Ecuador elected leftist Rafael Correa, a PhD economist. He is a reformer who wants to make fundamental changes to Ecuador's political society. The voters sent their leaders a clear message by electing him: they've had enough. A former university professor with a doctorate in economics from the University of Illinois, Correa may just be the man to put Ecuador on the path to a sound economy for the future. Correa gained voter approval to amend some parts of the constitution in 2007, but no changes to property ownership laws were considered or enacted.

Ecuador's government publicly welcomes foreign investment and offers a relatively open foreign-investment regime. The constitution gives foreign investment the same rights and treatment as national investment. The country's most recent law governing foreign investment, the Law on Promotion and Guarantee of Investments of December 19th 1997 (Law 46, Official Register 216), recognizes that Ecuador's development requires the active participation of both national and foreign investment (EIU ViewsWire, New York: Dec 20, 2006)


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