What Is the Most Important First Step Needed for Foreigners to Purchase a Property in Medellin?
Since 2007, Primavera Realty Medellin and its predecessor companies, have assisted more than 600 foreigners to purchase a property in Medellin. And all 600 of these purchasers had to take this critical first step: to open a Colombian brokerage account in order to bring their US Dollars into Colombia and convert their USD into Colombian pesos (COP).
Foreigners need to understand that because of very strict money laundering restrictions imposed by the Colombian Government, opening a brokerage account here is not like opening a brokerage account in the United States or even Canada and Europe. The Government (and Colombian brokerage company) need to have a little more information about you, your background, where your money is coming from and for what purpose are you bringing those funds into Colombia.
It is not difficult or onerous and the process typically takes 2-4 weeks and is done by email. Once your account is approved and set up, you then will bank wire your funds to Citibank New York who will in turn forward those funds to your Colombian brokerage account. Depending upon which Colombian brokerage firm that you use you will have the option of setting up your account in your personal name, a joint account, as a corporate account (both US and Colombian), a trust account or an IRA account.
And what is the cost for opening your account?
Nothing, there is no cost. The only cost that you will incur is when your transfer your funds from Citibank NY to Colombia. Most brokerage firms have a sliding scale of 0.4-0.6% cost to convert your USD into COP. When that is done there will be an additional government charge of 0.4% that is referred to as the ¨cuatro por mil¨. So, figure worst case 1% to get your funds transferred into Colombia for your property purchase.
For example, if you are buying a home for $200,000 USD you would need to add another $2,000 USD to your wire. Additionally, you also need to consider any legal costs for using a qualified real estate attorney (Primavera Realty can make an excellent referral if needed) which typically are about $1,000. Also, a buyer will need to have funds in place for the closing which is 1.8% so in this case, $3,600 USD. Thus, for a $200,000 USD purchase the buyer should plan on sending a minimum of $206,600 USD. Finally, if furniture, accessories and appliances are required, an estimated amount can be included at this time or bank wired later.
Primavera Realty is proud to be associated with and able to recommend two excellent Colombian brokerage firm options:
The first being Acciones & Valores. Acciones & Valores is the oldest brokerage firm in Colombia and was established in 1959. You can see their growth and history on this page. Also, their Linked In page and Facebook Page. And finally, this informative, in Spanish but easy to follow two-minute You Tube Video.
The second would be Alianza. Alianza is one of the leading financial and investment companies in the Colombian marketplace. They also offer accounts to be opened under LLC’s, trusts, and IRAs rather than just individual accounts. Here you can see their Linked In page as well as Facebook Page.
When buyers make their initial inquiry to Primavera Realty, their assigned realtor will encourage serious buyers to immediately open their Colombian brokerage account. They will by introduce clients to an English-speaking brokerage representative who will assist them in the account opening process.
So why should a buyer act promptly and open up their Colombian brokerage account?
- The account is free to set up and open.
- By having the account set up and ready to fund, foreign buyers have equal leverage, or even better, than competing local buyers who may not have their funds in place.
- You do not have to fund your account right away or send any money, simply get the account opened.
- Sellers are more motivated in price negotiations with buyers who they know are serious and already have their brokerage accounts set up.
- For more desirable property’s sellers can change their minds even after agreeing to sell to a foreign buyer, if the seller receives a better offer and the buyer has not sent at least a 10% down payment to secure a Promesa (a legally binding sales contract). Over the past 15 years there have been a number of instances where foreign buyers have lost some great deals because they were slow to set up their brokerage accounts and get their funds in place.
- When the buyer´s account is set up there is no cost or obligation to ever fund, in case the buyer does not find his or her ideal property.
- Once the funds arrive in the buyer´s brokerage account it starts earning money market interest which typically is 2-4 times that being earned in US money market accounts.
- For those investors who will be renting out their Medellin apartments/homes, they can direct rental proceeds to their Colombian brokerage account and earn money market interest.
- Foreigners visiting Medellin can tap into their brokerage account for pesos that they can use for spending during their trip or making additions to their property.
- At any time, buyers can direct their brokerage firm to send their funds back to the United States or any other country they wish.
In summary, the buyer´s most important first step is to open a Colombian brokerage account, quickly and in a timely manner.
Your Primavera Realty bilingual real estate agent is ready to assist at the very beginning of the real estate process to ensure that all goes smoothly as you explore being a Medellin homeowner.
Are there any fees associated with this brokerage account.? My hope is to buy a condo in colombia in the next 5-7 years. Seems like a good idea to have this account up and running as soon as possible.
Great question and the good news is that there are no fees associated with setting up and opening your Colombian brokerage account. In fact you are not even obligated to fund it, if for some reason you decide not to purchase a property here. However, there will be two charges when you send your funds (USD) to Colombia and your brokerage firm converts them to Colombian Pesos (COP). The first charge is a standard government mandated fee called the ¨cuatro por mil¨ which is 0.4% of the funds being sent. The second charge is the brokerage firm fee which typically is 0.6% but can be a little less for larger amounts. So worse case assume the fee will be 1% and this should be kept in mind when wiring funds. For example, if you wish to send $200,000 USD then bank wire $202,000 USD thus netting $200,000 USD in your brokerage account.
Your comment, ¨seems like a good idea to have this account up and running as soon as possible¨, is very astute. Over the past 15 years we have had several foreign buyers find a great property, agree to a price with the seller and then get delayed on getting their brokerage account set up, and the seller ends up selling to somebody else. There is no legal recourse until a Promesa (sales contract) is executed and a 10% down payment is made to the seller. This is legally binding and by having your brokerage account already set up, you avoid losing that great property that you fell in love with, negotiated a price on and mentally banked. Thus, it is wise to get your brokerage account set up immediately and it does not cost you a dime for doing so.
David,
There are no fees to open the account. You are only charged (about 1%) when you wire USD to your brokerage account.
Rich
im from usa.what papers do i need to bring to setup a brokerage account with you?
Michael,
You will need to set up a brokerage account in order to purchase real estate in Colombia. I will send you that information by email.
Rich
I bought my land in Altos de Las Palmas without having a brokerage account in Colombia. I simply made a wire transfer from my US Wells Fargo bank account to the seller’s business Bancolombia account. Even got a great exchange rate. After 2 weeks the transaction showed in Banco de la Republica as an international investment under my name ( this way I won’t have to pay super high capital gain rates in case I decide to sell my property in the first 2 years).
Cristian,
You may wish to consult an accountant or real estate attorney about you being able to avoid capital gains taxes upon selling your property for a profit.
Rich
Rich, great questions here but why do I need to incur the 1% fees when a wire transfer can be done in one business day as Cristina Boda did for her purchase. Once under contract, can I not wire the 10% deposit to the seller’s attorney and then when ready to finalize and close the deal, wire the balance?
I understand that one would eventually need a bank account eventually of they are doing rental business with the property.
I don’t see why it is necessary to setup a local bank acct and transfer money into local currency when banking is so global these days.
Niaz,
You will incur two charges when bringing money into Colombia no matter if it is through a bank or a brokerage firm. The government mandated 0.4% and the charge by the bank or brokerage firm which typically is around 0.6%. If you wire money to an attorney or a seller it will go through a bank or brokerage firm so there will still be a charge. A bank account is not needed later unless you plan to manage a property yourself or plan to live here. Global banking has nothing to do with the very strict money laundering laws in Colombia.
I am USA citizen, currently living in Costa Rica and have a two year temporary visa. I purchased a beach house 3 and a half years ago, and now have it on the market, and plan to relocate to Medellin, I spent a month there in 2019, and probably should not have left. I would like to move ahead and open my brokerage account, in preparation of purchasing my apartment,as well as any other documents that would be needed to assist me with my visa application. Any advice or recommendations would be greatly appreciated, and I am looking forward to perhaps acquiring your services in my pursuit of building a new life in Medellin.
James,
We look forward to assisting you and we are the go to firm for foreign buyers as we have closed more than 650 homes for foreigners since 2007. If you would like for me to send you an introductory package and to have a bi lingual agent assist you, please inquire at our web site or you can write to me, rich@primaverarealtymedellin.com.
We can also introduce you to an excellent bi lingual real estate attorney who can assist you in both the real estate process and the visa process.
Rich
I have been studying, real estate in Medellin for some time now, and I have enjoyed your website for its nearly complete description and location of the property. My question is and always has been, who do you represent, in regards to seller or buyer, and will one of your brokers, become my agent and work with me to find a property, wether or not it is a in house listing. I am reaching out to a number of firms,in hopes to find a good fit for both of us, to enjoy the pursuit of property hunting.
James,
Our 500 listings are non-exclusive so we do not represent the seller, but do represent our buyers. Your assigned realtor will qualify your interests to determine if we have matching listings in our inventory and if not, we have plenty of outside agents in our network, some pocket listings and new listings coming in daily. We appreciate the opportunity to serve your interests.
Rich