Purchasing property in the Dominican Republic involves various steps and considerations to ensure a smooth and lawful transaction.
Here’s a guide to help you through the process:
1. Research and Identify:
Determine the type of property you want to buy (e.g., land, condo, house) and its location in the Dominican Republic.
2. Legal Guidance:
Hire a reputable local lawyer specialized in real estate to assist you throughout the buying process. They’ll ensure legal compliance and protect your interests.
3. Financing:
Arrange financing if necessary. Determine if you’ll need a mortgage and for how much, or if you’re purchasing the property outright.
4. Property Search and Due Diligence:
Explore available properties through real estate agents, online listings, or private sellers. Conduct thorough due diligence on the property you’re interested in, including a physical inspection, title search, and survey.
5. Offer and Negotiation:
Make an offer based on the property’s valuation. Negotiate terms and price with the seller or their representative.
Make an Offer:
iHola Realty prepares a thorough Offer to Purchase, which is signed by the buyer and then delivered to the vendor/developer.
If you wish to buy a resale property, you and your real estate agent will make an offer.
Your offer describes the essential features of the acquisition, such as the price, installments you’ll make, when you’ll make the payments, and specifics about taking ownership, among other things.
However, when purchasing a pre construction property, the procedure begins in a slightly different manner. You must first select a lot to construct on, which needs a Reservation of Sale. The Reservation of Sale specifies the lot in detail, including measurements and location—as well as the price and any stipulations. The Reservation of Sale alongside a deposit secures your lot.
Accepted Offer:
The seller accepts and signs off on the price and terms outlined in the Offer to Purchase. Buyer meets with a real estate lawyer for detailed instructions and information.
Deposit & Financing:
The buyer provides the deposit to their lawyer’s trust account. Monies are held until the completion of the lawyer’s due diligence on the property.
Contract of Sale:
Once the seller accepts your offer, you will need to sign a document known as a Promise of Sale. The majority of the details from your initial offer, along with a few more terms and conditions will be outlined in this paper.
For pre-construction the Promise of Sale will also constrain the developer’s quote. It lists the things they plan to build and their estimated costs.
The Seller will receive your deposit once you sign the Promise of Sale, releasing it from trust.
What does Promise of Sale aka Contract of Sale consist of?
Who’s Involved
The first section introduces the buyer and seller and details the property’s size, rooms, and location followed by an outline of numerous terms and conditions.
Price & Payments
There will be conditions specifying the total amount to be paid as well as payment information such as the number of installments, the number and timing of installments and how the payments will be made (i.e via lawyer trust account)
Deposits
Outlines the requirements for releasing the deposit to the seller. When signing the contract you are agreeing to release your deposit from wherever it is being held.
Adjustments and taxes
Declares that the seller is liable for any unpaid taxes on the property. It will also be explicitly stated If you are exempt from any expense or taxes associated with the sale. Types of taxes and fees will be listed further down under “Taxes and fees”.
6. Sales Agreement:
Once terms are agreed upon, have your lawyer draft a sales agreement (contrato de compraventa) outlining all conditions, purchase price, payment terms, and other specifics. Ensure the agreement protects your interests and includes contingencies.
7. Money Deposit:
Consider providing an earnest money deposit to demonstrate your serious intent to purchase the property. This is usually held in escrow.
8. Due Diligence Period:
Utilize the due diligence period specified in the agreement to conduct further inspections, review legal documents, and secure financing.
9. Closing Process:
Coordinate with your attorney to schedule the closing meeting. All parties involved (buyer, seller, attorneys, and sometimes a notary) will meet to finalize the transaction. Sign the final contract and make the payment.
10. Transfer of Title and Payment:
Once all conditions of the sales agreement are met, make the full payment for the property. The title deed will be transferred to your name.
11. Taxes and Fees:
Pay all applicable taxes, transfer fees, and any outstanding property-related payments (such as utility bills) associated with the purchase such as:
Transfer Tax
A one-time transfer tax of 3.1% (of the government determined value of the property) will be charged. This tax transfers title from the vendor (seller) to the new buyer. Taxes are paid based on the market value of the property as established by the tax authorities, not on the purchase price specified in the deed of sale. Historically, tax authorities have valued properties lower than market worth.
Property Tax
A 1% annual tax is imposed on real estate properties owned by individuals (depending on the total worth of all the properties they hold) *as evaluated by government authorities. Please keep in mind that the valuation of the property may not always reflect a true market value assessment, but is usually lower. Most owners pay far less than the actual market value. Property is evaluated without regard for any furniture or equipment that may be present.
The 1% tax is applied only to values more than 9,520,861 DOP (about $173,000). The 1% tax is computed on the actual appraised value of unbuilt parcels without the exemption.
The real estate tax is due on or before March 11, each year, or in two equal installments: 50% due on or before March 11, and the remaining 50% due on or before September 11.
The amount of the exemption is adjusted for inflation each year.
The following properties are excluded from paying real estate tax: (a) farm properties; (b) homes whose owner is 65 or older and owns no other property; and (c) properties held by corporations, which pay a separate tax on their corporate assets
This tax is waived for some investors.
Legal and Professional fees
Your real estate lawyer will charge you a portion of the property’s purchasing price. This sum includes all disbursements, due diligence, and the transfer of title into your personal or corporate name, depending on how you choose to buy.
The seller or developer pays the real estate fees, not the buyers.
12. Registration of Ownership:
Ensure the property ownership is properly registered in your name with the appropriate authorities.
Important Considerations:
- Familiarize yourself with local laws, regulations, and taxes related to property purchases in the Dominican Republic.
- Work with trusted professionals and avoid proceeding solely based on verbal agreements.
- Keep all documentation and communication transparent and well-documented throughout the process.
Always seek advice from qualified professionals familiar with Dominican Republic’s real estate laws to ensure a legally sound property purchase.