Note: This article was originally written in March 2019. The original text remains, but it was updated in October 2021 to reflect several more years of working as a buyer’s agent in the real estate industry in Medellín, Colombia. It includes examples from the field, some trends and changes I’ve witnessed and additional lessons learned. These changes are marked with this style of text and start with “2021”.
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’?
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, 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.
2021: On location – if you are investing in a rental property here, I would not recommend buying outside of the areas of El Poblado, Laureles, and Envigado. Between the three of them, countless quality options abound, and they have so much name recognition for newer expats or tourists that the demand will always be strong in those areas. Sure, other parts of the city are great to live in, and if the apartment is for personal use then that is another consideration, but for short term and medium term cash flow these three places always have the most demand. If you are thinking about appreciation over the long term (10+ years), you may want to consider parts of Belen near La Avenida 80 (where they are building a new metro line) or something close to the major exit roads in El Centro.
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 (POA) 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. 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.
2021: The potential problems that a good real estate attorney can identify are innumerable. I will list two quick examples here. One deal last year, the seller seemed like a totally legitimate and honest Colombian businessman and a client proceeded to make an offer on his place. About a week before signing, he said he was travelling and would have a friend with a POA sign the promesa de compraventa for him. We took the POA to a notary and had it validated, but our lawyer noticed that the POA, while including the correct address and description of the property, contained other different identifying details (codigo catastral) than the property we were trying to buy. The notaria had not noticed and had given us the green light to proceed. After signing, a 20% downpayment would have been sent, and because the POA was invalid, there would have been no recourse. Its as if the client would have signed a meaningless promesa with an owner’s friend and then sent the $ to a different person. We have reason to believe the mistake was intentional and quickly abandoned the deal and found another place.
A second real-world example demonstrating the importance of a good lawyer was when another buyer wanted a place that had a mortgage. The mortgage was originally in favor of Davivienda but they transferred the mortgage to Bancolombia. The real estate attorney had to make several trips to each bank to talk with executives in those banks that would confirm how and when the mortgage was transferred between the two and provide the proper documentation that would allow for the cancellation of the mortgage and the liberation of the property. We’ve in fact seen other deals where the existence of a “messy” mortgage has been cause to desist from the sale altogether, but in the case the lawyer’s diligence and efforts allowed the person to get the property that they wanted.
In the majority of real estate transactions there are some small legal quirks that need to be dealt with to make sure that the entire process goes smoothly. This is not to dissuade anyone from investing here, as you can and should invest with confidence in this booming market. Just make sure you do it with the right team.
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% (sometimes 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. Buyer’s can start working with an agent for free and typically not have to pay them any commission (at least directly).
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.
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:
2021: I’ve now seen quite a few cases where the buyer did not need a traditional Colombian bank account to buy a property, but they did need to get a brokerage account. The purpose of these accounts is to transfer the $ into the country and properly register it with the Banco de La Republica. The main two companies that provide this service are called Alianza Valores and Acciones y Valores – please reach out and I’ll provide contact details for helpful workers at these companies that can get you started with this crucial process.
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.
Buying and closing on real estate in Medellín 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.
2021: Worth noting here is that the seller needs to be pretty helpful and cooperative during these steps, as many of the necessary documents require them to initiate the solicitation. That is, your lawyer will know that we need these documents, but they might not be provided without the seller specifically asking the relevant government agencies or building administration. You would think that any seller would be extremely cooperative due to a desire to effectuate the sale (and some are) – but that is not always the case. Many are not particularly responsive or don’t have the motivation necessary to go through some of these steps, which can be tedious. Working with uncooperative sellers is an important job of your realtor or lawyer.
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.
2021: I can’t emphasize enough how important it is to make sure you can have your money properly “legalized” in Colombia before any payment dates are necessary. The process can take anywhere from 2-6 weeks (or more), depending on a myriad of different factors. Do not make the mistake of thinking it is just as simple as sending a wire transfer – its not. Most local banks will automatically block incoming wire transfers and require paperwork to unblock the wire. Maybe you’ve heard anecdotal evidence that this was easy or smooth – but every case is different and trust me, in many cases it is not smooth. The easier route is using one of the companies listed in #4 above, but even they can take weeks and weeks.
Some Colombian sellers may be flexible or lenient if you are not able to legalize the $$ on the stipulated payment date – but many will not be and will see this as an opportunity to simply collect the penalty clause in the contract and keep the property or sell to someone else.
To summarize, be absolutely certain you can deliver on your promesa…
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!
2021: This sentence here is definitely easier said than done. The lack of an escrow account in Colombian real estate transactions means that the chronological order of “payment and final signatures” can foster intense distrust between the parties. Should the seller sign over the deed, and then buyer sends payment? Or should full payment be sent, before the seller signs over the deed? There are a few possible solutions here to reduce risk and put the parties at ease – (using an intermediary such as a realtor; using a Cheque de Gerencia) but I would definitely not recommend any buyer sending full payment and then trusting the seller to appear at the notaria and sign everything later in the day or week.
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.
2021: An important part of this final step is the proper payment of the “gastos notariales” – which are closing costs related to the sale. I’ve recently written a detailed explanation of the different costs involved and how to calculate them in the following article:
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.
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