It's diferent over there

Most months you get real estate wisdom and thoughts from Richard.

This month you get me, Rachel. I do all of the website work, and much of the marketing and social media for Expedio and her sister companies, Aventure and High Beam. And, since three years ago, I also live in Northern Chile. How I manage to work remotely with folks back in New Zealand is a story for another day. Today, I wanted to share a little bit about the process of buying real estate here in Chile, based on my experience of buying a house last year. I'm not sure how much you'll learn - perhaps only what NOT to do.

I'd bought and sold only one house in New Zealand before moving to Chile, so I had some idea of how things are done in New Zealand. However, as always when you are operating in a foreign country, it's often best to put any prior knowledge or expectations behind you, as those can be what trip you up.
 
To set the scene, I live in Antofagasta, which is the largest city in Northern Chile. It's population is around 350k and growing fast, as this is the region that 80% of the world's copper comes from. New apartment blocks are growing rapidly around town and demand is high for housing.
 
First of all, finding a house to buy is a challenge.
 
Initially, approaching the search for a house with my kiwi mindset, I started looking online. There is no single place to look here, like Trade Me in New Zealand, nor are there a few large industry players. There is no regulation of real estate agents. Anyone can call themselves an agent and set themselves up in business. Some have websites, but all the websites that I checked in my search were months out of date (indeed, a standard line when I called up to say I was looking at a property on the web was "oh, all the properties on the web have sold"). Incidentally, I was calling up because after sending about 20 email enquiries I didn't get a single response.
 
Marketing, in the sense that we know it, is minimal. Ads are placed in the local paper on Wednesdays, but they tend to have very minimal detail. Some have the equivalent of "$300,000 Manukau" plus a phone number. There is absolutely no marketing with photos.  Placards are placed on houses, but they are not personalized to the property. They basically say "For Sale" and have a phone number, and perhaps a company name. The photos that were used on most websites were from camera phones, often of messy homes that had obviously not been "prepared for sale".
 
So, after months of on/off looking, and frustration with not having my calls answered, or returned (I was still applying my kiwi mindset to South America), we finally found the house we bought the old fashioned way - we saw the for sale sign on an evening walk. I called up, and the real estate agent was happy for me to take a look  - "just knock on the gate, there is a workman there who will let you in to have a look around". We actually looked at the place twice and had decided it was what we wanted before we met the agent.
 
Chile is not a common law country, so documents in New Zealand that would be signed between two parties and be legally binding, like a sale and purchase agreement (or a rental agreement, or a job contract) in Chile need to be signed in front of a notary public, which means both parties taking an entire morning off work to meet up in the center of town to sign documents (and in the case of buying a house, charging about $800 for the privilege). But, I digress.
Standard sale and purchase agreements do not exist. A lawyer needs to draw up first of all a "promise of purchase" document, which is followed by the purchase document a few weeks later. Interestingly, we were not required to pay a deposit, although the promise of sale did include a penalty if the sale didn't go through.
 
In the interim, our lawyer did a title search to ensure the title was clear and free to be sold. Because documents are signed in front of a notary, the actual price negotiation doesn't happen on signed S&P documents, like New Zealand, but verbally, or written, but not on official, signed documents. Because the sale price was lower than the bank valuation, and the property was in demand, we didn't succeed in getting a lower price than was being asked, but we did change some of the standard conditions of sale.
 
Lawyers don't have holding accounts here, so money is usually passed over from buyer to seller as a bank cheque (with a mortgage being handled electronically) once the sale document has been signed by both parties, however, the property doesn't actually change hands until the title has been registered. We negotiated to have the bank cheques left with the Notary until the title change had gone through.
 
Armed with my signed sale and purchase agreement, I went to the title office to present my documents. Everything is written up on typewriters and filed in binders here (correct - the title records are not yet computerised). This costs another $500 or so.
 
Four days later I was able to go back and get the copy of the title document, now in my name, and the notary released the cheques to the vendor and the real estate agent for their commission.
 
Real Estate agents here earn a 4% commission- 2% charged to the vendor and 2% to the buyer, although to be perfectly honest I can't really say I think this guy "earned" his money with this property, as the handyman showed most interested parties around. For his part in it all, my lawyer charged around $2000.
 
So, is there an opportunity here for me to set myself up as a real estate agent and apply some of the real estate basics from New Zealand to really set myself apart in the market? Yes, and no. The frustrations I found in the process are endemic of this latin culture, where people don't respond to email, or return your calls, or may take a year to pay your bills, if they pay at all. I've been told about vendors who will use a real estate agent to find a buyer, then conduct the sale (head down to the notary public) without the agent, and refuse to pay the commission. Even with a contract in place, it's such a long process to fight it and so they get away with it.