After watching the recent episode of House Hunters International in Buenos Aires, many foreigners are more seriously considering buying property in this great Paris of the South. Yes, it’s true. When compared to other major world capitals, real estate prices are relatively cheap here in Buenos Aires. But what exactly is involved in the property buying process here in Buenos Aires? And what should foreign buyers be looking out for?
To answer these questions, and even more, here’s a quick low down of the real estate purchasing process here in Buenos Aires. In essence, this process involves 6 steps:
1. Find an escribano (real estate lawyer)
2. Get a CDI (Argentine tax identification number)
3. Shop for property and a real estate buyer’s agent
4. Make an offer
5. Place a down payment
6. Finalize the deed transfer
Sounds simple enough, right? Unfortunately, it’s not. Each of these steps involves its own set of caveats. Prospective real estate buyers should be keenly familiar with these processes and their potential loopholes before even beginning their search. So, let’s begin.
Step 1: Find an escribano (lawyer)
Before seriously shopping for property in Buenos Aires, it is best to find a good lawyer. In Argentina, lawyers who have gone through the extra training necessary to assist with real estate transactions are called escribanos. Your escribano will be your personal watchdog through each step of this process, so it is of utmost importance to choose a careful and reliable lawyer whom you can trust. Furthermore, if your Spanish is not absolutely perfect, it is a good idea to find an escribano who is fluent in English so that s/he can explain what is going on every step of the way.
Unfortunately, finding a good lawyer is not an easy process. Interview several lawyers before deciding on one, check references thoroughly, and most importantly, feel confident (and not rushed) in your final decision. Foreigners seeking to buy property in Buenos Aires reportedly find their greatest challenges with their lawyers. Some of these crafty figures try to stick unknowing foreigners with phantom taxes or fees. By taking your time and finding a trustworthy lawyer, you will avoid such deception from the legal end, and have a hero on your side who will help you to monitor the potentially dubious activities from real estate agents.
A skilled escribano, who speaks fluent English, will typically charge 2.5-3% of the purchasing price. This charge should include all additional fees: registration fees, power of attorney documents, English translations and CDI number (see step 2). Although some lawyers may charge a smaller percentage, they will charge extra for fees to process registration and other documents, and could possibly slip in a few extra or bogus taxes into your final bill.
Often times, foreigners looking to buy property in Buenos Aires first seek out a real estate agent, who then suggests an escribano. This is a terrible mistake. Since the real estate system here in Buenos Aires gives real estate agents opportunities to be deceptive, it is best to hire a trustworthy third-party as your lawyer. That way s/he can check to be sure that all of the papers that you sign are legit.
Step 2: Obtain a CDI
If you’ve already hired a lawyer, they will probably offer to help you get a CDI (Argentine tax identification number). If you want to go about this process on your own, here’s how:
First, bring a photocopy of your passport and your actual passport to the police station (comisaría) nearest to your hotel or apartment in Buenos Aires. Once there, tell the officer at the desk that you would like to obtain a CDI. They will ask you to fill out a short form, and pay a small fee (AR$10). They will ask you for the address of where you are staying. The next day an officer will come to your place and verify that you are, in fact, residing at that address. Upon this verification, the officer will hand you a paper that will then need to be taken to the AFIP office nearest to your address.
AFIP is the Argentine equivalent of the IRS in the United States. Since lines at the tax office tend to be long, plan on arriving early in the morning and having to wait in line for hours. Come prepared. In order for AFIP to process your CDI application, you will need two copies of your passport and the actual document. Once your number is called, the AFIP official with whom you are working will write your CDI number on your application form and you are done.
Step 3: Shop for property and find a Real Estate Buyer’s Agent
Once you have your CDI number in hand, you are ready to start shopping for property. If you’ve come from the United States, you’re probably expecting that a buyer’s agent would be the best resource to help you shop. In Buenos Aires, this is not so. More often than not, buyer’s agents here will only show properties listed by their own agency. So if you choose a buyer’s agent first, you will be limiting your search to just a fraction of the available listings.
When shopping for property, foreign buyers typically deploy one of three strategies: internet searches, leg work or hiring a consultant. The first two of these strategies are most commonly used by those confident with their level of Spanish proficiency. Those who wish to shop on their own, but aren’t quite sure of which part of town they want to live, browse listings on any of a number of online real estate websites (see list below). After compiling a list of several properties, these web shoppers then begin to make contact with buyer’s agents with access to these properties.
Those who already know the general areas of the city find better success by simply walking around. If you know where you’d like to buy, just go for a long, long walk. Take note of the addresses and listed agencies of properties you’re interested in, and then begin contacting buyer’s agencies.
Buyers who are not comfortable conducting business in Spanish, who aren’t familiar with the general lay of land here in Buenos Aires, or who just want some help throughout this long and complicated process hire a consultant that charges a flat fee. In the end, consultants can help buyers to save money as they are experienced in the real estate industry here in Buenos Aires and can help to protect clients from fraud or being overcharged. Be sure to check any consultant’s references first, however, and be sure that the consultant does not only work with a limited set of realtors in the city.
Although shopping for property can be a lengthy and arduous task, this is only half the battle. Once you’ve found a few properties that you like, you should meet with the buyer’s agents and tour the properties. While visiting the properties, you will often be accompanied by a buyer’s agent, a seller’s agent and often times the current owner. If the current owner is there, it is a good idea to exchange business cards. This exchange helps to keep real estate agents honest. If you decide to make an offer on a property, stay in touch with the owner to be sure that neither your buyer’s agent nor their seller’s agent is being deceptive.
As always, it is a very good idea to check your buyer’s agent’s references thoroughly. If you do not speak Spanish, it’s important at this stage to either hire someone to check these references for you, beg a favor from a local friend, or hire a consultant. Since your buyer’s agent will be helping you process large sums of cash (as crazy as it sounds, real estate transactions are almost always conducted in cash here in Argentina), and since you will be paying this agent a commission of 3-4% on top of the purchase price, your decision regarding which property is best for you should also involve a thorough and careful analysis of the person in whom you invest a great deal of trust and cash.
Step 4: Make an offer
Once you’ve found a property and decided on an agent, you will be ready to make an offer a (reserva). Typically, property in Buenos Aires is priced a bit high, so you will have a little room to negotiate. Prices here are rooted in a base per-square-meter price, and are subsequently adjusted for location and amenities. Since buyer’s agents are paid a commission, it is not a good idea to rely on your agent to help you decide on an initial offer. Those unfamiliar with property pricing throughout the city may also find it helpful to hire a consultant.
When you are ready to make an offer that you are comfortable with, your buyer’s agent will help you with the paperwork and send your offer to the seller’s agent. Before signing anything, however, be sure to beckon the services of your escribano. At this point, you will also need to put down a deposit on your offer in order to show that you are serious about this transaction. Typically US $1,000 is enough, but a larger sum may be required for more expensive deals. This deposit will be held in trust with your buyer’s agent.
After your offer has been submitted to the seller’s agent, the seller has three options: to accept, reject outright, or to counter your offer (most common). Your offer has an expiration date, this is very important to remember. Here in Argentina, until the seller has rejected the reserva, or the reserva has expired, the property is not supposed to be shown to other prospective buyers. Even after the offer has been accepted, it is a good idea to call the seller’s agency anonymously (from a pay phone, perhaps) and inquire as to whether that property is available for showing. If you discover that the seller’s agent is still showing a property that is pending sale, contact your buyer’s agent immediately. Also try to keep in mind that the acceptance of your reserva is not official until the next step in this process, the boleto. So act quickly, and be diligent as to what both sides are doing at this stage in your transaction.
Step 5: Down Payment
Ah, you’ve made it this far. How much longer to go? Miles. At this point, you’ve got a lawyer, a tax identification number, have spent days tirelessly shopping for properties, have ruthlessly combed through buyer’s agent references, have finally decided on a property and an agent and have had success in the negotiation of price, and your reserva has been accepted. What now?
At this stage, one of two things will happen. You will meet with the seller and his/her agent and negotiate the contract for a boleto (down payment), or you will contract a sena.
A boleto is a larger down payment that is typically contracted for the purchase of a property that is not immediately available for deed transfer or move-in. With this contract, the buyer provides 30% of the purchasing price as a down payment, pays the buyer’s agent’s commission (in effect, releasing the buyer’s agent from future proceedings), and confirms the date of the final deed transfer. If the buyer pulls out of the deal after the signing of the boleto, s/he loses this deposit. If the seller pulls out, the deposit is returned to the buyer and doubled. This procedure was established to keep sellers from backing out of deals in the midst of legal processing in an attempt to accept a better offer. While it is rare to see sellers back out of a transaction once the boleto has been signed, it is common for the seller to back out the evening before the boleto appointment. This is a discouraging moment, and unfortunately, a regular occurrence. Try not to get discouraged.
The other option, the sena, works much in the same way as the boleto , as a contract is signed, a down payment is provided, and penalties are agreed upon if either party backs out of the deal. A sena, however, is typically a sum that is much smaller than the 30% boleto (usually around $5,000-10,000). For a foreign buyer, a sena is a much safer option because this contract does not involve the payment of the real estate agent’s commission, thus keeping the agent in on the transaction, helping to keep subsequent transactions on track.
At this point, it is important to note that unless you are lucky enough to be working with a seller who is not from Buenos Aires, all of these transactions will be required to be offered in cash. Furthermore, it is neither easy, nor cheap to get the US$ necessary for these transactions into the country. For the sake of keeping this article as brief as possible (ha!), I will go into the specifics of money transfers here. Please, stay tuned for the second installment of this article, all about money, transfers and fees.
Step 6: The Final Deed Transfer
The final step in this epic effort towards property ownership here in Buenos Aires is the escritura, or final deed transfer. Every property purchase must go through this process and every property buyer must hire an escribano. Because escribanos charge a percentage on the final purchase price, this is an expensive process. If you’ve done yourself a favor at this point in the game, you will already have a reliable lawyer on your side and feel comfortable moving forward with these proceedings. For this reason, I want to re-emphasize how very important it is to spend a lot of time, effort and careful thought in hiring a good lawyer.
Once you have your boleto or sena in order, and a good escribano on your side, you will be ready to finally close on your new place. This is almost the end, but has one sad caveat. More often than not, the seller will want to inscribe a lower selling price on the deed than that which you have agreed to pay. This is one of the reasons why sellers want cash and not electronic transfers, which can be tracked by AFIP (the tax office). Not only does inscribing a lower price on the final deed transfer help property sellers to evade capital gains taxes, but also helps property buyers to avoid a portion of property taxes. This also commits you, as the buyer, to either doing the same to whoever buys the property from you, or losing great sums of money by working “in the white” when the time comes for you to sell again. This is not a happy ending to this story, but it is true. This is a common practice here in Buenos Aires, one you should be aware of before attempting to buy property here.
In the end, however, you will have gained an affordable property in one of the best cities in the world. So please, be careful, be wise, but enjoy the thought of plenty of time spent in Buenos Aires in the future! And if you just want to rent or need a place to stay while you shop…click here!