Chile Forum

Hello all,
I’ve been lurking on this site for a couple of weeks trying to glean some information that might apply to my situation. There seems to be a lot of good info here, I can just never find it again when I need to.

I work for a US based company and have been traveling to Santiago for several years. When I am working, I am in Santiago for a short time, but my job affords me a lot of flexibility and am able to spend off time in Chile as well. I have a Chilean fiancé and have contemplated buying some property and retiring here when the time comes. I have a Spanish handicap but seem to pick up more and more as time goes on.

I recently found some property about 40 minutes south of Santiago. A parcela of a little under 2 acres with an unfinished house. A telephone inquiry from my fiancé revealed that the owner would sell the property for 2 million pesos less than the asking price. I have hired a lawyer to start a title search and so far, things look good. I trust my lawyer but he doesn’t have any experience with this type of transaction with non Chileans.

A few nights ago the three of us took a drive to go visit the owner as I had some questions about the property. Several things that I learned;

The owner had the house built about four years ago and never got a building permit.
There are no plans for the house.
The house was never finished and in fact the roof is not finished for lack of money.
His price has now gone back to his original price and, “oh by the way, you better hurry because someone else is interested in the house”.

I realize this last bit of info is just a game he is playing and I have no intention of rushing into the purchase. In fact I will take my time, get all my ducks in a row, and then offer him 5 million less than his asking price and just walk away if he does not accept.

I have a lot to learn, but the first questions that come to mind are;

Due to some creative financing in the US for this property, the money will be wired from an account that is not mine (a close relative). Will I need power of attorney to conduct the transaction in my name? Are there any tax liabilities in the US for me (I will never take possession of the money)? Should I just conduct the transaction in my relatives name and have the property willed to me?


Thanks for any insights you might provide.

If there are no building permits for the property, don't pay for the building. Pay only what the land is worth, unless your attorney can clear the building permit mess before the purchase.

How much money are we talking about here (ballpark is fine). The money laundering compliance paperwork will depend on the amount. Make sure your attorney understands the procedures and your bank rep understands the procedures involved before you send the funds. We have had many a property purchase seriously held up because local bank branch guys that open accounts all day, don't even know what a SWIFT message is. Your attorney should be coordinating with the bank well in advance.

If you send the funds from someone else's account, you are going to have to accredit the source of the funds if it is over $10,000 US. That can get to be a complicated chain of paperwork in the States to produce. Again, you need to talk to your bank.

Not sure what you are asking in regards to the power of attorney. You are going to physically be here for the signing right?

When the signing of the buy / sale agreement finally comes, make sure that the funds are placed in a vale vista (certified bank counter check) and deposited at the notary with conditions for its release or return. Sellers don't get the money, until your title is registered fully or you get your money back. Don't wire the money direct to the sellers account.

The asking price for the property is 60 million CLP. The owner/builder owes some debts on the property which my lawyer says can be taken care of with the contract. The house is quite large with 4 bedrooms and 5 bathrooms, but is basically just a shell at this point. There are no doors, windows, ceiling, wiring. etc. The vacant lot next door, which appears a little smaller, is for sale for 25 million CLP.

Yes, I would be around for the sale , but since the money is coming from an account in the US other than my own, I thought I would need a power of attorney.

Really Appreciate your time,
Thanks

You need to be sure those debts are cleared. Any mortgages such as a bank might hold on the place, must have the signature of the bank or other loan holder inorder for the sale to go forward. Banks typically do not have a problem with that, as long as you arrange for them to get their money at the time of transfer. For example, we often have to place the bank's portion of the money in a separate vale vista from the seller's portion during a sale.

You need to check on the status of the building permits with the city. Was the process ever started? You mentioned there are no blue prints, which would lead me to believe there are no pending building applications. That should be part of the title search. Much depends on the municipality involved, but sometimes you can clear those things up before purchase. There might be a very real reason they never asked for it, such as special restrictions that are in effect. Without the building permits however, the city can order you to tare down the structure. There is typically two phases. One is submitting the initial plans for approval, and then after the place is built there are another set of final inspections (structure, electricity, water). There may be some others depending on the local municipality standards. I would just keep an eye out because in the central region, the cities have far more refined and organized building codes and inspection process than they do say a remote small town in the Patagonia where there might not even be a formal planning office. You definitely want that one worked out before purchase.

I take it this is likly zoned as rural property at 2 hectares? Does the place have its own well, condominium community well, or is it on city water? Watch the water rights in the central region. Because of the agricultural industry, lack of water, and urban growth, anything that messes with the water table is very serious in the central regions, and can seriously effect the value of a property.

As for the bank situation, you need to talk to the bank. Money laundering paperwork typically goes automatically to money laundering committee after $50,000 US. You will need to show the chain of paperwork of where the money comes from, and where it is going. So, for example you get mortgage in your name in the States, you transferred the money to the friends bank account, the money was sent for the purchase of the property in your name, for which you show a promissory agreement or the draft buy / sale agreement.

You should not need a POA for that, as long as the person on the account in the States does not intend to be the owner of the property in the end. You will need some documents from their bank possibly. Again, that will depend on the bank it is going to in Chile.

My lawyer thinks the debts should be no problem. He does think that the lack of a building permit could be. The house is on a well and septic system and is located in Isle de Maipu. The owner's house is close by and he had originally put in a concrete septic tank. He was told to remove it and replace it with a plastic one on his final inspection. For this house the owner just told the builder what he wanted and it was done. The house was not built from plans, hence there were none to submit for a permit. Perhaps I should buy vacant land and build my own house?

When you say talk to the bank, are you referring to the bank here in Chile or in the US? (probably both)

What is the housing market like here in Chile? Are the market conditions around the world affecting the prices and number of sales here in Chile? Does a buyer have any negotiating power when buying a house?

The owner of this house was trying to hurry me along by saying someone else was interested in this same house.
Thanks

Yea, I know Isle de Maipu area fairly well. My wife's family is all from there. Nice area, and I have plans to buy some land there also to have a second house near the family in the central region. 25 million is a fairly good price. 60 million without permits, useful septic system, and so on would be pushing it. Is the structure at its current state really worth it? It is just a shell, and shells are cheap. It is all the finish work, like electric, plumbing, and so on that is where the real money is at in building a house. Besides, you might be buying the structural errors such as a rushed foundation. If it was me, I would play it safe and go with the a lot. Otherwise you are paying a nearly completed house price, for 20% of a house.

Yea, in the area because of the high water table, growth, and wine industry water rights and water related issue you will need to watch out closely to make sure everything is in order. The status of the septic system is something to watch closely.

I would go with the empty lot, unless the municipality can fix the building permit issue. I would talk to the city and see what they say about the status, and if they are willing to clear it or are they going to force you to tare it down.

As for pricing, that is a standard game sellers play here. This is definitely a buyers market, and their is lots of lots for sale around that area. Don't ever let someone rush you in Chile. There are very few locations right now so hot, that you do not have time to at least think about a purchase. If perhaps he was selling you the land at 80% under market, then I might get jumpy. If you could get the owner say down to around something like 40 million (I am just guessing based on what I know so far), then you might have a some sort of deal. 2 hecatares, in that area, and a house you may or may not need to start over on, it would be a reasonable deal. The fact the owner could not finish the house, cut a bunch of corners, and there is a pending mortgage (how much is it?), indicates the owner needs to unload the place ASAP. Likly his point of crying uncle is slightly above his mortgage. He is looking to get out. If his mortgage is say 55 million, chances are he is not going to move much. If it is say 20 million, then you have some room to likly move him a bit. Even if he is resistant, I would just leave the offer on the table and tell him something like it is good for a month or two if he changes his mind. This is just my sense of the situation, I might be totally off base.

You need to talk to the bank in Chile where the money will be transferred in order to know what they are going to require for money laundering paperwork. Explain the situation at the bank in the States with the money coming from someone else's account, and find out what you need as far as documentation. Make sure you talk to the international wire desk, not just some account executive.

I really like the area and my wife to be's cousin lives two lots down. I do like the design of the house but it is just a shell.

I am on my way back to the US tonight but will be back to Santiago 4 more times this month. I'll manage several days here around the middle of the month. I'll see if I can get some info from the bank in the US. I believe I will need a temporary RUT for the purchase. Can I do that now and get it out of the way or is a pending transaction necessary first?

Thanks Again

The rut is the easy part. When ever you have time to visit the IRS and fill out the form, you can get one.

If you buy this house, you deserve whatever happens to you. Like Charles said, offer him the value of the land, and that's it. No Plans. No Permits. Not finished. Shady Seller. Prior liens. Lol. Hell, I'd be leery about even buying the land at this point. The guy probably has some bodies buried under the foundation.

I'd rather miss out on 100 great deals than buy 1 nightmare, unless I was planning on making a career of buying distressed properties and was prepared to totally write off my investment as a learning experience / cost of doing business. Are you prepared to do that?

You should ask the guy for the R.O.L. number.

With this number you can go to the office of the bien riaces, to check if there are any leans, who the owner is and any issues with the property.

Also becareful please,........

you need to get a topografico guy, with a copy of the map from the bien riaces, he needs to mark the exact corners of the lot for which you have the R.O.L. number, the one you want to buy....

Sometimes the sellers will pull a fast one and sell you something that is not theirs, maybe some trees which are just over his property lines....

Don't trust any fences for borders of a property, the chileans won't hire a topo guy to set a fence......

When you tell him you are bringing a topografico the price might begin to change......

Well, strictly speaking everything you said is correct, but just sufficiently correct to get a foreigner with no legal background to get in a whole lot of trouble.

Hire a lawyer. You don't have to hire us, but hire someone to help.