Medellin, Colombia used to be on the map for all the wrong reasons. For much of the 1970’s, 80’s and 90’s, the city grappled with violence due to drug trafficking, gang violence, and government unrest while international tourism and the value of the Colombian peso plunged. The city rebuilt itself following the violent climax in the 90s, slowly becoming an off-the-beaten-path destination for backpackers before emerging as one of today’s best-kept real-estate secrets: Dollar for dollar, Medellín beats out countries like Costa Rica, Mexico, and other Caribbean nations for affordability while also offering a state of-the-art Metro system, diverse culinary scene, year-round springtime temperatures, a thriving expat community, and direct three and five hour flights from Miami and New York, respectively. The only question remaining is, how do you go from dreaming about owning a property in Medellín to acquiring your very own piece of paradise in ‘The City of Eternal Spring’?
(1) Location Matters (But Knowing Spanish Doesn’t, Really)
Thanks to an influx of globetrotters in recent years, Medellín’s neighborhoods have evolved noticeably foreigner-friendly areas, each with a distinct personality and plenty of English-speaking pockets, such as: El Poblado, Laureles, Envigado, Patio Bonito, Sabaneta, and Bélen. While El Poblado certainly leads the way with number of English-speaking locals, one could get by and live well in any of these places before mastering the language.
It’s a good idea to familiarize yourself with Medellín’s neighborhoods and speak candidly with your real estate agent about the type of atmosphere you want to live in, as well as whether you’re seeking a fixer-upper project or fully-equipped condominium. Each option presents a different set of pros and cons, meaning that there is no one-size-fits-all approach to buying real estate in Medellin, but that there is unlimited potential.
(2) Your Real Estate Attorney is Your First Round Draft Pick
Hiring an attorney serves multiple purposes. First and foremost, it buffers you from the natural stresses of an international real estate venture—concerns regarding your final choice and the legalities of its acquisition are natural and best eased by a seasoned expert in real-estate legalese. A Power of Attorney might be a good idea if you are going to be outside of Colombia during much of the sale process, as your attorney will be able to work on your behalf. Another good idea is to have your lawyer open an escrow account for you, to protect against any issues discovered during due diligence. When I bought my first property in Medellín in 2014, I used a local law firm that helped to make the process easy for me. At the time, my Spanish was essentially non-existent but they had English speaking lawyers that walked me through each step.
More recently, I sat down with a lawyer from the Gutierrez Group, because they were highly recommended from a couple of friends. They are located in Edificio Forum, near Centro Comercial Sante Fe. I asked a million questions about the process, and left the meeting feeling totally comfortable recommending them here. My friends said they charge a lot – but, as your lawyer is your first round draft pick for this transaction, it will be money well spent.
Contact Us if you would like contact info for either of the firms mentioned here – and please read our ‘just so you know’ disclaimer in the contact section.
(3) The Real Estate Market Operates Differently Than Your Home Country
There is no national licensing system for real estate agents in Medellin, which means anyone can sell property. This has led to a proliferation of inmobiliarias (real estate agencies), with more than 1200 currently operational. Standard commission for real estate agents in Colombia is just 3% (often split 1.5% between buyers and sellers agents) – which is less than typical for North America or many European countries. For comparison, when I sold my first property in Sweden, I paid the selling agent a commission of 5.5%. Also worth noting is that, unless otherwise stipulated, it is the seller who pays this commission to the inmobiliarias.
Many investors may be surprised to learn that it is uncommon for sellers to have exclusive agreements with inmobiliarias, thus the norm is that various different agencies will be trying to sell the same property. This is much different than the norm in the US and Canada, where agents almost always demand exclusivity. While one may presume that having multiple agencies selling a property might result in quicker sales, that is not really the case here. In Medellín, and especially so for high end properties, it is not uncommon for a property to sit on the market a number of years.
(4) Make Bank on Your Real Estate Venture (By Choosing the Right One)
In order to fund your real estate purchase in Medellín, it is necessary to open a Colombian bank account. I’ve heard anecdotal stories of those who have avoided it, but it’s essentially an obligatory step. Opening this can of worms can be daunting, so it’s a good idea to go in with a real estate professional who knows the ropes and can ensure that you have money in your account well before negotiations begin. Your real estate team can also help you determine certain details, such as whether you should buy the property in your name or in your company’s name, while serving as your liaison between yourself and the buyer. I visited a few different banks and finance companies and explored this step in detail, and outlined my findings in the following article:
(5) Don’t Take It Personally – You May Be Discriminated Against as a Foreign Buyer
Most property prices in Medellin are highly negotiable. Your realtor will do research into the properties that interest you, and find out how long they have been on the market, and how motivated the sellers may be. That way, you can draft an attractive opening bid. It is no secret that many of the locals assume that all gringos are rich. The seller may seek to hold out for a higher price if they are aware that the interested buyer is a foreigner. Having a local agent negotiate a price on your behalf is a crucial part of this step.
Personally, I have purchased four properties here in Medellín (and have my eye on a couple others right now), and, while I do all the research myself, I always use a local agent to negotiate the price, while hiding the fact that I am a foreigner until after the Promesa de Compraventa is signed. I would be more than happy to help other foreigners with this step. Send a message in the contact section or reach out to me directly: [email protected]
I think it is crucial to hide the fact that you are a foreigner in order to get fair market value for your property and can’t recommend this enough.
(6) Leave a Paper Trail
Buying and closing on real estate in Medellin is like an advanced salsa dance: Easy to mess up but a seamlessly smooth orchestration when done by professionals.
Once you’ve identified your dream purchase, you and your realtor can make an offer. In the meantime, your lawyer will set about tracking down the Certificado de Tradición y Libertad (Certificate of Tradition and Liberty) which is essentially a dossier of the property. This document is extremely important, as it contains:
- ownership records of the property
- a history of any mortgages on the property
- any liens or other legal claims against the property
- if any builder or other party has registered to conduct works on the property
After all of the information has been verified as up-to-date, your lawyer will obtain the Paz y Salvo Predial (tax free property certificate) and the Paz y Salvo de Valorización (tax free on value gained property certificate) certificates. These confirm that the owner has paid all outstanding property taxes and any other expenses prior to the final sale. This step was particularly important for a gringa friend of mine, Erin, who shares her experiences buying an apartment in Laureles in this article.
(7) Be Absolutely Certain You Can Deliver On Your Promesa
From this point, a Promesa de Compraventa (purchase agreement) needs to be signed and notarized. This is where all the nitty-gritty details go down—what’s included in the purchase, any repairs to be made, who the contract is between, how much, and important dates, such as possession and when money needs to change hands. With this document, ¡Ten Cuidado! (be careful!)…because usually there are large penalties associated with non-compliance.
For example, I recently helped my friend Viktor buy an apartment here in Patio Bonito, and there were possible penalties of COP 75,000,000 for either party, depending on the breach. This represented about 20% of the value of the sale, which was COP 360,000,000, or around $120,000 USD. (Not bad for what is now a six bedroom rental apartment in one of the most sought after parts of the city.)
More specifically, if the seller did not deliver the apartment to us on possession day (and she nearly didn’t), we could have elected to break the deal and receive this large financial penalty. Contrarily, if we had not come up with all the money on the designated final payment date, we could have forfeited the same amount of money and lost the place. Thus, it should be crystal clear to any prospective buyers that being able to adhere to the terms of the Promesa de Compraventa that you sign is extremely important.
Upon reaching an agreement and closing out this step, the escritura pública (public deed) must be officiated, also by a notary. Payment and final signatures follow and – at last! you now own real estate in one of the world’s fastest growing markets!
(8) Follow through
In order to make the purchase and property exchange legally airtight, your lawyer has some final ends to tie off following the notarized public deed. The Department of Registry in Colombia oversees land titles/registries and it’s important that your purchase be reflected in their database (and a subsequent one, the Cadastre) so that your claim to the property is supported on all grounds. The proper registration of your property now will save you all sorts of headaches when it comes time to sell.
The Colombian government can be assiduous in its auditing of foreign investments but are far more lax in auditing transactions at the local level, which makes your choices for attorney and realtor the two most important decisions you’ll make on this exhilarating venture.
The process may seem like a daunting one, especially to someone less familiar with the local language, customs or traditions. I love Medellín, and I am passionate about helping people invest here. Whether you are seeking an income property or somewhere to live, I’d love to be of service. Send me a message with any questions you have about the process or leave a comment below.
Glossary of terms
- Certificado de Tradición y Libertad (Certificate of Tradition and Liberty): A detailed history of the property that provides all relevant records pertaining to its physical and legal condition.
- Paz y Salvo Predial (tax free property certificate): Verifies the good standing of the current real estate owner.
- Paz y Salvo de Valorización (tax free on value gained property certificate): Further verifies the good standing of the current real estate owner.
- Promesa de Compraventa (Promise of Sale): Agreement of sale conditions between two parties.
- Escritura Pública (Public Deed): Official document recognizing property transference.
- Catastro: Subdivision of the Colombian Department of Registry