May 24, 2024

Jocuri

Mad about real estate

Antigua, Guatemala – Buying a Home – How It Works

You’ve selected your home and your offer was accepted, what happens next? When buying a home or property in Antigua, Guatemala here are some of the key processes you will want to know at this crucial time. The good thing is if you are dealing with a professional realtor all these and other steps will be handled for you.

Who pays for what at the time of closing a purchase?

When a property is purchased, the responsibility to pay all associated costs is the buyer.

This includes the preparation of all legal documents, the title search, the review of the sellers and the buyer’s documents, the registration of the property, and payment of the required sales tax (IVA).

Whose lawyer am I entitled to use?

As a buyer, you are entitled to choose your own lawyer to do any required legal work.

In many cases, the seller will try to insist that their lawyer prepare all documents, but this can be a costly venture for the buyer. If you agree, whatever fees the sellers lawyer decides to charge you will have to pay.

The lawyers have a published rate which is based on a percentage of the value of the transaction, but it is seldom applied, unless you are using the sellers lawyer, and then you are at their mercy.

The solution to avoid this potential over billing can be done in two ways.

Prior to any agreement, get a firm quote in writing from the seller’s lawyer, then select your own lawyer, and do the same.

If you don’t have any specific lawyer, shop around and keep comparing. It doesn’t cost anything to get a quote.

We personally recommend two lawyers in Antigua. For Spanish speakers, we suggest Azucena Chavez de Rosales, or for English speakers, we recommend Manuela Rosales. They are located in Antigua, and in the same office.

If you find a better rate with your selected lawyer, and the seller is still insistent, then you can simply tell the seller that your lawyer will prepare the documents, and send a draft copy to the sellers lawyer for review and approval.

In this case, the seller will need to pay their lawyer for the review.

Sales tax on purchases

Sales tax, or as it’s known in Guatemala, IVA, is 12{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} and paid on the registered value of the purchase. I will explain this in more detail later on in this article. That can be a scary figure if you just purchased a $300,000.00 property, and you have to add an additional $36,000.00 plus legal fees.

What is a promesa de Compra Venta, and a Compra Venta?

Promesa de Compra

In most purchases, there are two steps, but not all the time.

A promesa de compra venta, is a promise to buy and sell. This is generally used when the buyer has made a decision to purchase, but is not prepared to close the sale immediately. The reasons can be that funds need to be transferred, money is tied up in a term deposit, financing is approved, but the application is in the final stages of approval etc.

The buyer is in a position to make a deposit to show good faith, which is generally a minimum of 10{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the agreed price.

This document outlines all conditions, such as the full selling price, the anticipated date to finalize the transaction, and the information of both the seller and the buyer (passport, cedula, date of birth and so on).

The document is a private document, and each party receives a notarized copy, and the lawyer retains a copy. The contents are not made public, or registered.

If the document contains the term “arras”, it means that if the buyer does not complete the agreement as stated, the buyer is entitled to keep whatever deposit was made as liquidated damages. If that clause appears, be sure you can fulfill what you have promised to do, or don’t sign.

Even though the seller has promised to sell, they can change their mind prior to the actual closing. The seller has no penalty attached, except to return the deposit, unless the buyer insists that a clause is added that states something like ” If the seller should sell to another party during the agreed term specified in the promesa de compra venta, the penalty will be an additional amount equal to 100{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the amount of the deposit”. That really means that if the seller receives an offer after the promesa is made, then it had better be at least 10{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} or higher than what was agreed to in the promesa. On the sellers side, they can insist on the same penalty should the buyer change their mind, and decide not to proceed.

When everything is finally ready to proceed, the paragraph below covers what happens next.

Compra Venta

In many cases, the buyer can enter directly into a Compra Venta, and bypass the Promesa.

This is normally done if the buyer has the required cash on hand to close immediately, and the buyers lawyer has inspected all the sellers documents, and if comfortable that everything is in order.

The lawyer will create a document that describes the property in detail (size, the registration number in the central registry, the owner, etc.)

Disclaimer

The following information regarding sales tax/IVA is how the system works in Guatemala.

I make no recommendations or statements, other than what actually is the current process, and this is handled between the lawyer, the seller and the buyer.

Now, as I mentioned in the Sales Tax/IVA paragraph, here is how the tax is generally handled.

The registered value is much less than the true value of the sale. Your lawyer will walk you through it, and explain all the details.

An example is the following;

When the lawyer researches the property, the Central Registry will show the previous registered value.

In 99.99{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the cases, it will be, for example purposes.  Q200,000.00. In that case, the sales tax is calculated on that amount, or an amount slightly greater than the last time it was registered, as you really can’t register for the same previous amount. Lets say that the lawyer recommends you should register for Q225,000.00.

You sales tax is then around $3400.00 or Q27,000.00. That’s a long way down from my example of $36,000.00 for a $300,000 purchase.

Some exceptions can be if you are purchasing the property from a corporation. You will need your lawyer to review the corporation to verify what value was placed on the property when it became an asset of the sellers corporation. A corporation must issue a facture (invoice) to the seller, and the corporation must pay the tax they receive for the sale. You may find out that the tax is much higher than a purchase from an individual party, so be sure to have it clarified in advance.

Another point to consider is if you purchase from a developer, and it is a new property, the sales tax /IVA can be around 40{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the actual value. The developer will inform you what you can expect to pay in this case. If it is a resale in a development that is within 5 to 6 years old, you may have to pay a little more than the 40{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the actual registered value.

Once all is done, signed and paid, your lawyer will then send the completed documents to the Central Registry, and you can expect to receive the title to the property in about 2 weeks.

Now, you own a home, and congratulations!

Additional Information:

How are property taxes arrived at?

Everyone from countries other than Guatemala is astounded by the small amount of property taxes compared to what they are accustomed to paying.

Here is the calculation to arrive at your annual property tax.

It is in 2 phases.

For example, if the property is registered below Q70,000.00 here is the formula 7 X 69,500.00 divided by 1000. In this example, the annual tax would be Q486.50. Using the current exchange rate of today (Q8 to $1), this is $60.81 annually.

For another example, if the property is registered for Q70,000.00 and above, the calculation is

9 X 200,000.00 divided by 1000. In this case if the registered value was Q200, 000.00, your annual tax would be Q1800.00, or $225.00 annually.

In Guatemala, taxes can be paid quarterly, or in one payment. If you don’t want to stand in a line for an hour to make a quarterly payment, we always suggest doing it once a year.

For more articles about real estate in Antigua, Guatemala please visit my website at www.antiguafinehomes.com