We moved to Puerto Rico in January 2016, planning to buy a home within a year. Well, that didn’t happen. I can blame hurricanes and more plausible sounding reasons, but I did not purchase for several reasons, including not wanting to deal with the process of buying a home in another language!
Nine years later, we have bought two homes in Puerto Rico! I wish I had purchased years earlier! So do not let intimidation or the unknown delay you from purchasing property in Puerto Rico.
Purchase a Current Rental
We rented various homes in Palmas del Mar, moving to better accommodate our lifestyle and needs from year to year. Every time we were ready to move, I dragged my feet and signed another year lease instead of finding the right property to purchase.
The next big lifestyle change involved moving to the West coast of Puerto Rico in 2019/2020. I contacted many realtors and NONE of them returned my calls or emails. After discussing neighborhoods with friends in the area, I found a great home with ocean views through Classificados. No realtors needed. I rented directly from the homeowner and scheduled my move.
After renting for 9 months, our property owner decided to sell and offered us first opportunity to buy. She named a fair price and we agreed to skip using realtors for the property sale thus eliminating the realtor commission.
Home Purchase Timeline
In less than 1 week, I hired Fembi mortgage broker and received pre-approval for the home loan.
2 months later, a formal contract was signed. We updated the mortgage lender with the final purchase price and signed the contract to purchase, we were ready to start the home purchasing process in Puerto Rico!
5 months into this process included scheduling and obtaining the appraisal, switching lenders, and delays to obtain the HOA rules and financial records from the HOA administrator. Our mortgage broker coordinated the appraisal, assisted with home inspection and guided us through the home buying process in Puerto Rico. I would be hesitant to buy a property in cash without some professional guidance, and frankly my mortgage broker was less expensive and far more attentive than realtors on the island!
Since we are buying in a beach community of Cabo Rojo, all lenders consider this property a “Second home” despite this being our primary residence. The classification of vacation home / second home results in higher interest rates, larger down payment, and fewer options for lenders. Apparently, it is pretty common for homes in the “beach resort” areas of the island to be classified as Second Homes, regardless of who is buying and living there. Mortgage rates for second homes are higher and require a larger down payment.
The HOA admin will only release insurance and HOA related documents to the homeowner. As the purchaser, I cannot obtain the correct insurance to close, nor complete the approval process without these HOA documents. Fortunately, I have a great relationship with the property owner and the appropriate documents are requested and received, unfortunately this added further delays to an already slow process.
After 6 months, 1 week before our scheduled closing, the credit union we selected fired the entire board of directors during a “routine” audit. This added an additional 2 week delay as our mortgage broker switched to another lender. It was pretty seamless for me, but my mortgage broker definitely earned her commission!
During this entire time (6 months), we provide bank statements and paystubs every month to the mortgage broker. Keeping all of our financial documents current made the last minute lender switch much easier.
Property Title Search
Property ownership is different than what you may be used to in North America and other parts of the world. Inheritance laws are based on old Spanish laws and there are many properties that are in dispute for ownership rights. Title search is extremely important to determine exactly who holds the title to the property and if they are authorized to sell. Often, there are multiple “owners” on the Title that will need to reach unanimous agreement and all parties need to sign for the property transfer. The more “owners” involved, the more headache, hassle, and likelihood that the deal will stall or never reach consensus.
Before entering into a purchase agreement, verify the owners on the property Title. Too often there is a single family member trying to sell a property, that they are only one of the owners of and you will still need to reach agreement with the other owners. Title issues can waste significant time and money, and often result in no sale. Many abandoned and neglected properties around the island cannot be sold due to property Title issues.
Closing Process
The estimates for closing documents changed multiple times the final week, and even twice the morning before closing.
The mortgage company requires a wire transfer or bank cashier’s check, and due to the ever-changing costs, it would be impossible to initiate a wire transfer with any confidence for the correct amount and to post before the closing date. Late afternoon, the day before closing, I received the final closing amounts in order to buy the money order for closing costs.
The morning of closing, the final documents were sent for electronic signature, then those same documents were printed and signed in person (again). The Seller was in the next room signing, the attorney and loan processor walked between rooms with the various paperwork. The mortgage documents were in both English and Spanish, as I do not trust my Spanish reading comprehension for legal details. The Deed of Title is Spanish only, signed by the Seller and Buyer, witnessed by the Attorney/Notary. All Notary’s are Attorney, not all attorneys are notaries.
The entire signing process took less than 2 hours. After 6 months, everyone was in a great mood to finally complete the sale!
Owner Financing
A few years later and I purchased another property in Puerto Rico. Friends are selling their home and offered me the opportunity to make a purchase offer. Again, without involving any realtors, we negotiated price and purchase contract details, then to meet our seller’s timeframe, they offered owner financing – no mortgage brokers involved! Owner financing removed all the delays and headaches from the process, and from signed contract to move-in was less than 30 days!
Owner financing is more common in Puerto Rico than I realized, and the terms can be whatever you and the seller negotiate. The sellers’ attorney drafted the purchase contract, and our attorney reviewed it for minor changes and protections. We confirm the property has a clear title, no liens or HOA. Earnest money transferred and contract signed within a week!
Home Financing Options in Puerto Rico
- Fembi Mortgage
- Money House
- First Bank
- Credit Unions
- Banco Popular
Lesson Learned & Questions to ask for next time:
- Do you really need a Realtor? Obviously, if a Realtor helps you find the property, then they will be used for the property sale. If you find a property on your own/For Sale by Owner, you may not need to hire a realtor.
- Are you paying cash, owner financing, or obtaining a home loan?
- How is the property zoned? My property in Cabo Rojo is zoned as a second home which required different financing, down payment, and lender options.
- Is there an HOA?
- How difficult is the HOA to deal with?
- What are the HOA fees and frequency?
- What does the HOA insurance policy cover? This made a difference in the Homeowners Insurance policy costs and coverage.
- Verify the property has had water in the last year. An additional plumber’s certification is required if the property has not had water in the last 12 months. Expect additional delays and to pay $100-150 for the plumber’s certification, assuming there are no plumbing problems to repair.
- Does the property currently have power and an electric meter? An additional certification from an authorized electrician will be required for homes that have not had grid power in at least 12 months. Expect to pay $100-200 for this certification and additional delays for account activation, and there is a longer wait if you do not already have a meter on the property.
- Bring your blue pen – All contract documents are signed in blue ink
Utilities
Living in Palmas del Mar the water service is a completely separate system and setup via Palmas del Mar Utilities (PDMU) as a private water system with extra reservoir tanks at a higher rate.
While our home in Cabo Rojo has an additional water cistern, the main water service is the island-wide AAA public utility company. Setting up water service involved a $35 deposit to activate the AAA Water service at www.acueductospr.com and verify there was no outstanding balance due. The account application was submitted online. Then I received 3 phone calls informing me how to pay the deposit, which I was unable to complete on the initial phone call, followed by 2 more phone calls from confused service technicians wanting to turn on my water, which is already on.
Finally able to register my AAA account for water service and switch the account after 4 weeks. No deposit required, despite being told they would require a deposit when I spoke to them 4 weeks ago. I registered for electronic bills and receive an email every month of charges and reminder to pay my bill. Online payments to AAA are very easy and reliable.
Electric service took a couple weeks and 1 phone call to transfer service and previous balance. This may have been easier since we already had a previous electric account.
Liberty internet is easy to set-up for first time users. However, when moving from the west coast of Puerto Rico back to the east coast, we need to switch out the region specific Liberty cable modem. Otherwise, this was a simple transfer.