real estate shopping in puerto rico
Unless you’ve been living under a rock, you are probably at least vaguely aware that the Puerto Rican government is currently embroiled in a massive debt crisis. Revenue has not matched spending levels for years and the shortfall has been funded with credit. Figuratively speaking, the credit cards have now been maxed out and revenues continue to fall far short of expenses which now include increasing interest payments on previously borrowed billions. It’s a vicious cycle with no easy way out.
Furthermore, the economy is stagnating which is prompting an increasing number of Puerto Ricans to leave the island in search of a better life. It’s easy to criticize the government and the various laws that share blame for this mess (and probably well deserved), but I’m not going to waste my time or yours by wringing my hands about things I realistically can’t change. I have no idea how the situation will be resolved, but I expect it will take several years for things to fully shake out.
There is however, a silver lining to this dark cloud. It is a buyers market for real estate in Puerto Rico. If you are interested in purchasing your own piece of paradise, this could very well be a great time to start real estate shopping in Puerto Rico. I would caution you however, that you probably shouldn’t buy anything you aren’t willing to hold for five years or more. It could take at least that long for the market to stabilize and prices to recover.
Having recently gone through the process of shopping for and eventually purchasing property here in Puerto Rico, I wanted to share my experience while it was still fresh in my mind. Hopefully, it will be it helpful for those of you looking to do the same.
Finding the right property
In the states, it’s standard practice for the selling agent to clearly offer buyer agent compensation in the MLS (Multiple Listing Service). Typically it is 3% of the selling price. Here in Puerto Rico, the commission has to be negotiated individually between each buyer’s and seller’s agent. This explains why buyer’s agents, at least the way we are used to them in the states, are virtually non-existent here.
This will likely mean that you are going to have to do a lot of the legwork yourself. Here’s how we approached this task. We had to do a lot of preparation before we arrived to have any chance of finding our new home, because we were only able to take a one week scouting trip.
First, we narrowed our search to the general area we wanted to live. On a prior trip, we drove around the whole island with a focus on the Rincón area and Palmas del Mar. While we really liked Palmas, we ultimately decided on Rincón and vicinity. Holly and I fell in love with the eclectic vibe of this little surf town. The beaches are spectacular, the locals are friendly and the lifestyle is laid back.
Next, we had to narrow down specifically what type of property we were looking for. We decided that we wanted at least 2 bedrooms and 2 bathrooms. We also wanted to be within walking distance to the beach.
Now I was ready to start my online search. I used Zillow heavily in the states when we shopped for real estate, but in Puerto Rico, the listings on that site are not even close to a complete picture of what is available. Still, it’s a good place to start.
Point2Homes seems to be more widely used by the agents here. I don’t necessarily recommend that everyone do this, but I registered for a free trial of Point2Agent. This site gives you a much more complete picture of what’s available. You will see how “stale” a property is (how long it has been on the market). I even saw cases where the same property was listed by two separate agents for different prices! Unfortunately, I see that they have changed their free trial period from 30 days to 7 days, so you will have to do your research quickly.
Also, it’s probably worth taking a quick peek on craigslist. However, the site that is much more widely used here is ClasificadosOnline. This site actually has decent filtering capabilities that allow you to have it only return the properties that meet your search criteria.
After doing all this research, I had a pretty good idea of the agents working in the Rincón area, so the next step was to visit each of their individual websites. I would often find properties listed on these sites that I didn’t see listed elsewhere. I would also sometimes find additional information on properties I saw listed elsewhere.
After gathering all the relevant data of the listings that looked interesting into a spreadsheet, Holly and I painstakingly began to sort them. This process took quite awhile as we had to assign value to the various unique features and price points each property possessed. When the list finally started to stabilize, I contacted the agents of our top picks a couple of weeks before our trip starting from number one. It so happened that our five favorite properties were listed by five different agents! Two of these agents never returned any of my repeated emails and phone calls so we were only able to secure three appointments for our first day on the island. I continued to refer to our spreadsheet during our scouting trip. It wasn’t until the last day of our trip that we knew which property we wanted.
I want to share one final tip that was instrumental for us in our search for our home. Find properties on VRBO or airbnb in the neighborhoods or condos you are most interested in and stay there during your scouting trip. We split our time between two different condos that we were considering during our week on the island and the ability to stay in those condos gave us a more complete and authentic feel for what it would be like to live there versus staying in a hotel and having to rely on a 15 minute showing or two. In fact, we ultimately ended up purchasing in one of the condos we stayed at.
Most people looking for financing use one of the local banks or cooperativas (credit unions) because most stateside financial institutions won’t lend here. However, I did find one stateside lender with offices in Puerto Rico, SunWest Mortgage Company. I believe the process is easier with them because their focus is only mortgage loans. I worked with Bob Chamarro who speaks excellent English and was very responsive when getting my prequalification letter. Although we ended up getting our mortgage through FirstBank because they had a special financing deal on the property we wanted, I can recommend Bob without hesitation.
On a related note, I have read that it is recommended to have a lawyer look over your contract. This makes sense because no matter how nice the seller’s agent is, they are ONLY bound to represent the interests of the seller. That said, we did not hire a lawyer and had no issues. One nice thing about obtaining a mortgage is the financial institution will have their lawyers look over everything since they will technically own the property until you pay off the loan.
Real Estate Shopping in Puerto Rico
In the states, the closing date is part of the negotiation and it’s right on the contract. Our experience here is that we didn’t know what the closing date was going to be until a week before closing! Since we knew we couldn’t make it back to Puerto Rico with such short notice, it sounds crazy (and probably is) but we went ahead and made arrangements ahead of time to give our seller’s agent power of attorney to sign all of the closing documents for us! He seemed like a trustworthy guy and offered to do it for us for a nominal fee. We were very thankful for his assistance and like I said, everything has worked out great.