Welcome to our website ! Our vision is to inspire & promote international understanding through education and cultural exchange between South America - Ecuador and the rest of the world. To help people rediscover life with purpose, integrity and compassion, benefit from our experiences, and acquire knowledge for living in harmony in a globally interdependent and culturally diverse world. To share our "life changing adventure experiences" with family and friends worldwide. We have consolidated a wealth of the best resources on Ecuador, along with travel journals and photos. Our hope is that you will find this a valuable, user friendly resource network, which enriches your life, enables you to learn, challenges your thinking, and empowers you to discover and undertake your own new experiences and adventures.

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Monday, November 21, 2016

Buying property in Ecuador - " Eyes Wide Open "

Buying property in any foreign country comes with considerable risks. Ecuador is no exception - just look at the devastation of coastal property caused by the earthquake of April 16, 2016.  You should not be buying property in any market which you don't fully understand.  Because there is no multiple listing services here any given "realtor" will only be aware of the few properties available to which they are personally connected. Prices can and will vary significantly from buyer to buyer.   No one person can show you everything available at any given time.  As a result, to really understand this market takes significantly more time, and effort, than in your home country.

Lured by sun-dappled tropical paradise landscapes, lower living costs, and a gentler pace of life.  Who can resist the polished marketing fantasies of "living like a king in a tropical paradise" ?  Ensure your " foreign living abroad dream home" doesn't become your worst nightmare. 

We have almost a decade of experiences here and have bought and sold several properties in different areas.  During our time here many foreign purchasers have experienced: 

A significant loss of money due to: 

  - being unaware of local market values and significantly overpaying
  - purchasing in a "new development" which never materializes beyond a conceptual                   drawing and website  

  - unaware of legal encumbrances that transfer with property title 
  - purchasing property with significant undisclosed problems, poor quality materials or construction, pending lawsuits, or in the path of future government expropriation
  - entrusted power was abused for one's private gain

Loss of property due to:           

 - developments illegally situated within the beaches protected tidal line
 - natural disasters  earthquakes, tidal surges, mudslides, and volcanoes
 - the seller misrepresented the property and never held legal title. 

 - theft

Buying a " romantic notion "quickly, while enjoying a vacation, or perhaps through internet photos and then subsequently regretting the purchase altogether. With residency the discrepancy between the exquisite scenery and landscapes, and the brutal living conditions, and poverty of their local surrounding neighbours becomes a stark reality.  They discover their lifestyle focused on consumption and leisure patterns does not fit. Obvious linguistic, racial, cultural, and socioeconomic disparities quickly become problematic.  Crime, drug violence, notoriously ineffective judicial systems, slower pace of life, and infrastructure / utilities expectations, notorious bureaucratic delays, poor signage, lack of lighting,  uneven sidewalks, scheduled appointments that never happen, confirm that the reality does not match their dreams.

Here is a Checklist to help prevent your dream from becoming a disaster.

* DO NOT BUY anything sight unseen, or based on future development promises. 

* Invest in a thorough, unbiased, professional inspection of your prospective property. 

* Review the experience, track record and past projects in this country and obtain testimonials from previous clients.  Be wary of current clients of this project who are already invested, and have a heavy bias to see the project move forward in order to preserve their investment. 

* Search for outstanding lawsuits and actions, or settled claims against the developer or administrator both in Ecuador and in their home country.

* Be aware that any legal contracts written in English have no legal validity in Ecuador. Spanish documents missing information or not publicly signed before a notary in Ecuador have no legal value. Have your Spanish language contract thoroughly reviewed by a competent, trustworthy professional. ( these are hard to find )

* Understand your potable water source, electrical system & provider, sewer system, and infrastructure for internet service, television, and telephone. Service quality, reliability and cost vary widely.  What is your proximity to medical, education, and retail shopping services.   Unserviced, off-grid property in a remote location is cheap anywhere in the world - why are you paying a premium ? 

* Review the security plan, systems and protocols. Here, you simply cannot leave your house and property unattended.

* Review the turnover of key staff.  When employee turnover is high, with little continuity it raises another significant warning flag.   

* Obtain a copy and review the escritura ( property deed ). Undertake a current title search at the Property Registry to ensure its current owner and no liens or encumbrances have been registered.  Review all legal permits, permissions, & documentation. Review current property tax receipt, and utility bill receipts are current. In a developing country you cannot take any of this for granted like you might in your home country. Permissions and permits are obtained from a variety of authorities, and levels of government. " Development permission " is obtained at the local community level and is often obtained illegally with a bribe. One coastal residential development now plagued with coastal erosion was built closer to the ocean's edge than permitted by federal law. Look for the Ministry of Environment's development permission, and the federal government's permission to sell a legal " condominium development. "  This law was enacted several years ago to prevent the " ponzi schemes. " It requires that developers have all legal permissions, sufficient funding for infrastructure, and that it is all approved and in place prior to starting to sell any units. This is when you may discover that are " buying a future promise " from an unregulated offshore company. Ensure the company is in compliance with all its obligations with the " Superintentencia de Compañías. "

* Speak with, ask questions, and observe the site and as many owners, & neighbours as you can, to get unbiased and fundamental information.

* For any condominium or new developments request financial statements to ensure financial future viability, and sufficient reserves to cover long term employee obligations, and major repair costs. Developments that rely on future sales to fund the project are effectively Ponzi schemes !

* When did sales and marketing start ?  Although development here is slow, and the promoters will usually slide this date forward, caution is warranted when it has been over 5 or 6 years and infrastructure is still minimal.

* Immediately be cautious when promoters make many luxury amenity promises, or "trendy claims"  of sustainable living, preserving natural resources, and environmental sensitivity, all of which are fundamentally contradictory to the nature of their project -changing forest or agricultural land to densely populated, infra structured, resource intensive usage of the development !

* Escrowed funds are not a common practice here.

* Be aware that culturally integrity and trust are very foreign concepts here. If you have a language barrier you are easily manipulated.  Do not trust or take anything for granted - it is buyer beware !

* Ensure your real estate agent is professionally licensed in Ecuador. Many, especially transplanted english speaking gringos, are not.   

* Preventative maintenance is not common in this culture. In coastal areas huge costs are incurred to combat the effects of the corrosive salt air, swirling abrasive sand particles,  and blazing sun. Take note of the condition of common areas and facilities. HOA fees can be a soaring future cost and a potentially unlimited liability.  

* Review operational rules, regulations, and bylaws that you will become obligated to follow.

* And if your decision is to " build " here please ensure you are consistently on site.  There are many cultural differences when building such as windows for natural light- they prefer solid walls and darkness for security and privacy; heights - Ecuadorians are smaller stature; we prefer generous room sizes and open space concepts - they have larger families and have more and smaller room sizes;  the range of stairs steepness, width, and safety railings vary widely,  hot water plumbing not necessary, kitchen sinks, availability of electrical outlets, artificial lighting etc etc  Being present also ensures unforeseen circumstances are addressed to your liking, the quality of materials is not substituted, nor compromises in construction quality which are very common here.
* Finally understand your future resale ( exit strategy ) it will take significant time as there is significant inventory for sale, and this is a cash market where there is a lack of mortgage financing. This limits your potential buyers to those scarce few who have the excess cash to invest.

Even after completing your due diligence foreign investors are warned that because of problems with corruption, gaining protection for property rights from the local court system is complicated and often unsatisfactory.

Purchasing real estate consists of a down payment along with a signed contractual promise to purchase. Final payment, and transfer of the property deed  once the property is ready to be delivered to the buyer.

Six years ago there were over 182 proposed developments on the coast of Ecuador just between Manta and Esmeraldas. To date, only two have shown signs they may be successful.  There are countless more along the Pacific coastline of Ecuador, Mexico, & Panama where little more exists than a faded sales promotional billboard, and perhaps some cleared land and an entrance gate in anticipation of future sales.  Prudent caution is always required where an elaborate internet sales presence exists without any tangible physical development.

This has become so problematic here that the government introduced legislation prohibiting developers to market their properties until infrastructure and all legal permitting is in place.  While this may seem obvious from a North American perspective it is not here ! While the law is now in place there is little operational enforcement, and illegal sales continue. 

Buyer Beware !

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