Frequently Asked Questions
This information is directed towards smaller-scale, individual investors.
For larger-scale & corporate consultations, please contact us.
- Can you explain the purchase process for individual buyers, please?
- How much are closing costs in Chile?
- Can I invest in Chile as a tourist?
- Are mortgages available for foreign buyers?
- How much are property taxes in Chile?
- Do I need to be in Chile to complete a purchase?
- Can I build a home on my farm? Are there zoning requirements?
- Are small-scale farm investments economically viable?
1. Purchasing real estate in Chile
The purchase process for real estate in Chile is fairly straightforward, but can be confusing for first time buyers and if you don’t speak Spanish. The steps are similar to most countries and are as follows (further explanation of each point is below):
- Find a property
- Make an acceptable offer
- Sign a pre-contract agreement, known as the Promesa de Compraventa.
- Perform title search
- Sign purchase contract, known as the Escritura de Compraventa
Find a Property
The hardest part of buying property in Chile is dealing with the local agents. The majority are unprofessional, to say the least. There are, without doubt, some fantastic Chilean agents working out there, and we’ve had the pleasure to deal with some of them, but, in general, local agents are extremely difficult to deal with. Why?
- They don’t return phone calls.
- They don’t answer emails.
- It’s impossible to make an appointment more than a week in advance.
- They don’t speak any English.
- They have no one’s interests at heart but their own.
- They will not advise honestly and objectively.
- They regularly work using ‘over-pricing’, meaning that they will add on a percentage to the true sales price and keep the difference. e.g. a property with a real sales value of us$100,000 will be priced at us$120,000 and the agent will split the difference with the owner, meaning the buyer has overpaid.
- They rarely update their websites.
- They work in a very small geographical area and don’t know about property outside of that area.
This is one area in which Matt Ridgway is very experienced. He is constantly looking for properties to purchase for himself and for clients- he really puts his own money where his mouth is and has bought and sold 8 properties in 7 years- and he knows how local agents work. When with clients, Matt takes charge of making appointments and sifting the wheat from the chaff. If a property is overvalued, he’ll tell you. If an agent is trying to hide something, he’ll find it and tell you. If he doesn’t think the property is a good fit for you, he’ll tell you. In short, if there is any issue at all with a property, Matt’ll tell you.
Make An Acceptable Offer
This can be surprisingly hard to do. Chilean owners are often far more emotionally attached to their properties that you might expect them to be, and usually believe their home is worth far more than it really is. Therefore, it’s hard to bargain them down. Sometimes, owners will pick a value and resist all offers…even if it takes 5 years to sell. We’ve seen this on more than one occasion and we’ve also seen asking prices for properties go up despite not receiving an offer for over 2 years. This is caused partly by a misunderstanding of how real estate markets work, and partly because local agents will talk themselves up and claim they can obtain unrealistic values in order to get the listing. Then, the owner feels like they’re ‘losing’ money if they accept a lower offer (when in reality, that money could never have existed).
The main advantage that you have as a foreign buyer is that you don’t have access to local credit, making you a cash buyer (N.B. if you’re a large-scale investor, purchasing or setting up a business, credit is available). When buying with a mortgage through a Chilean bank, it can take anything from two to six months for the seller to receive their money. This is, obviously, not desirable.
But if you’re buying with cash, closings can take as little as 3 weeks from the time you make an offer and then 2-3 weeks before the seller receives their money. This is a major incentive for an owner to accept an offer.
Sign the Promesa de Compraventa & Perform the Title Search
In Chile, it’s common to sign a pre-contract agreement, in order to lock in both buyer and seller to a deal. It’s usual for both sides to leave a cheque for 10% of the property’s value with the Notary. 60 to 90 days is the standard time allowance to then complete on the purchase. During this time, the buyer’s lawyer will conduct a title search. Always hire your own lawyer, either one of our contacts or someone else you have found, but always do so. Do not rely on the seller’s agent’s lawyers and definitely do not rely solely on the notary.
It is very important to understand that the Promesa very rarely allows for the buyer to back out unless the title is not clean. It is very uncommon to insert clauses relating to anything else, such as a building’s structural issues, surveying and the other common things that are checked in the US and many European countries. The title search generally only looks at issues such as whether the property has bank debt, property tax debt or municipal tax debts, whether there are inheritance issues and if the owner is really the owner and, sometimes (but not always), whether the property has been built with the correct municipal permits. If you want a building survey done, for example, expect to pay for it before signing the Promesa.
If the buyer backs out of the deal for what the seller sees as being no good reason, they can ask to go to arbitration in order to claim the 10% deposit. Similarly, if the seller backs out, the buyer can also ask to go to arbitration.
The good thing is that the property registration service (Conservador de Bienes Raices) is very efficient and probably the best run institution in Chile. It is very easy for a good lawyer to find out whether there are issues that need to be addressed or whether you should walk away. Fortunately, few legal issues are unresolvable in Chile- they might take time to fix, however, and you’re within your rights to walk away if you don’t want to spend that time and money working things out.
Sign the Escritura de Compraventa
Again, this sounds pretty simple, but there are two issues in particular that need to be resolved on the buyer’s side first.
- You need a local tax number.
- You need to find a way to pay for the property.
Tax Numbers & Money Transfers
All Chileans have a RUT, a Rol Unico Tributario. It’s the same as their national ID and passport number. Foreigners without residency obviously don’t have this. You need to obtain a temporary RUT number for tax purposes. This is an easy, but time consuming, process that involves going to the nearest tax office of the Servicios de Impuestos Internos, queuing up for what could easily be more than a couple of hours, presenting your passport and photocopies and applying for the number (which is finally given the same day), all of which we can do on your behalf.
Once you have your RUT, you can, in theory, open a bank account in order to send the funds required for the purchase into Chile. “In theory” is the key phrase here because, in reality, it’s almost impossible for foreigners to open an account without residency. If you are successful, it’s just as hard to send large amounts of money into the country. High street banks (such as Banco de Chile, Scotiabank, BBVA etc) will ask for documentary evidence of the source of the funds- often legalised and notarised by the Chilean consulate back in your home country. This can take anything from 2 to 4 weeks to accomplish, hours of your time and more money spent. And then on top of that, they’ll give you an awful exchange rate (we’ve heard of up to 12 pesos off the official rate), charge you to receive the funds and often not release them for up to two weeks.
How do you get around this? Through our banking contacts, we can open you an account and have you send funds- 100% legally- into Chile in less than 3 hours. The exchange rate you’ll receive will be 1 or 2 pesos off the official, interbank rate and the funds will be available to you immediately. This service will save you huge amounts of time and effort and on transfers of over us$200,000, our entire fee will be paid for by the superior exchange rate. Please contact us for further information.
OK, so now you have your funds in the country. How do you actually purchase the property? Well, your lawyer will draw up the contract and you will sign it at a public notary. At this point, you will leave cashier’s cheques with the notary with instructions for them to be released to the seller only when the property is officially registered in your name at the Conservador de Bienes Raices. This is the way 99.9% of Chilean property transactions take place and it is perfectly safe. You will sometimes get the keys to the property at this point, although it is just as common for the seller to make you wait until he actually receives his money before allowing you access to the property. It’s 50-50 whether you’ll have to wait, completely dependent upon the goodwill of the seller.
Congratulations! You’re now the proud owner of real estate in Chile!
2. Closing Costs
Closing costs are fairly low in Chile- you should budget around 5%, but it can be lower, depending on the value of the property (the higher the value, the lower the percentage). Costs can be broken down as follows:
- Buyer’s commission: 2.5% – 3% + tax
- Title search: 0.5% – 2% (max)
- Notary costs: us$150 – us$800, depending on property value
- Consulting fees (banking, tax numbers, powers of attorney): us$3,000 – us$4,500
3. Can I invest in Chile as a tourist?
Yes, and you have exactly the same legal rights as a Chilean national.
4. Are mortgages available for foreign buyers?
Unfortunately, it is extremely difficult for individual foreign investors to obtain mortgages in Chile and you should budget for making all purchases in cash.
5. How much are property taxes in Chile?
Very low, compared with the US, for example. A us$200,000 apartment might pay around us$800 or less. Agricultural property taxes are far lower.
6. Do I need to be in Chile to complete a purchase?
No, we can act on your behalf via Power of Attorney, and have done so on several occasions for clients unable to attend contract signings.
7. Can I build a home on my land? Are there zoning requirements?
In the Chilean countryside, there are very few specific planning requirements. You can build whatever you want, wherever you want it.
8. Are small-scale farm investments economically viable?
A very qualified “Yes”. If you are managing and living full time on the property, then it is possible to make a living from what is considered small-scale agriculture in Chile (under 30-40 hectares of productive land). But if you want to purchase a small vineyard or orchard and manage it remotely by contracting a farm manager, then you should understand that there is little chance of doing anything but paying the costs.
If you are a pure investor, then we recommend looking for raw, irrigated farmland and renting it on an annual basis for crops such as corn, wheat and pumpkin. Returns range from 3-5% plus potential capital gains.