Buyer’s Guide to Purchasing in Roatan
Becoming a homeowner on Roatan is easier than you think. Just follow these simple steps to find your dream home.
First, choose a realtor who makes you feel comfortable based on your research and your communication.
Much like you would do when purchasing a property back home, you need to start out by explaining to your selected realtor what your ideal option looks like. Go into as much detail as possible so your realtor has a better chance to match your vision with reality.
Next, you need to go see the property options for yourself. See what the whole neighborhood looks like and what life would be like in that particular property. Once you’ve chosen one, you need to make sure that all paperwork regarding this property is in order. This includes the following:
- – Cadastral certificate – this is generated by the Municipal government, and it proves the registration of the land.
- – Paid tax receipts for the current year, and perhaps the last 3 years if possible.
- – A copy of a signed and stamped survey of the property indicating all the polygonals and points of the property.
- – Copy of the escritura publica– this is the free and clear title of your property
Your real estate agent will then draw up an offer on the property in the form of a sales contract with the following important points:
- – Price offering
- – Specific dates for acceptance
- – Any contingencies you may want to add in
- – The terms of payment
- – A date for when the earnest money (usually 10% of purchase price) is due
- – A date for closing – on this date, the outstanding balance must be wire-transferred to an escrow or holding account previously agreed upon by both parties.
If your offer is accepted, at that time you must contract a Honduran lawyer to represent you in finalizing the purchase of the property. An important point to keep in mind is that as a foreigner, you may buy up to 0.72 acres in your own name, and only one time. If you wish to purchase property exceeding that area or if you wish to purchase multiple properties, you must do so in the name of a Honduran corporation, which your attorney can form for you quite easily. Your realtor can recommend legal counsel to represent you in all these matters.
If you cannot be present on the date of your closing, you may appoint someone with the power of attorney to represent you. On your behalf, he or she will accept the conveying of your newly purchased property. Oftentimes, this person is the realtor you have chosen to work with in buying the property, though it can be anyone you choose. It is much easier to complete the paperwork for the power of attorney while in Honduras rather than trying to complete the paperwork outside of Honduras. For example, if a power of attorney is granted from the United States, it must be notarized by a Notary Public and then an Apostille must be obtained from the Secretary of State of the state in which it was notarized.
Once the closing has occurred, either the attorney or the real estate office will provide you with copies of all documents that were signed on the day of closing. Your attorney will take the original documents to be registered with the Public Registry to obtain an escritura publica (that’s your title), which will be in your name or in the name of your Honduran corporation. This process can take several months. In the meantime, you have copies of your closing documents, and you own your property outright as of the day of your closing.
“All information provided on this website is believed to be true and accurate but is subject to change.”
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The actual purchase process is an easy, uncomplicated process. Foreigners, as individuals, can own up to 3000 square meters, which is approximately .74 of an acre of land per investor. In other words, you can buy a single property under .74 acres in your name but if you want to purchase a larger lot of land or home, a Honduran Corporation must be formed. A Honduran corporation is easily formed with the help of a qualified lawyer at a cost of about $1,500.00. When purchasing in Honduras, it is necessary to have a good attorney who understands the documents associated with the property, corporations to ensure a clear title to purchase. To protect this investment, a qualified Real Estate Broker, Honduran Notary and Lawyer should assist with explaining the documentation.
The Purchase Process
Here is a typical scenario. Once the property has been chosen, the Roatan Realtor will write up an offer to purchase. The offer will contain a paragraph calling for an “earnest money deposit”, which is 10% of the purchase price. The earnest money is typically wired to the Broker’s or Notary’s escrow account within 5 business days of acceptance of the offer. The balance of the purchase price is due at closing which is usually within 30-60 days.
The seller can accept the offer, submit a counteroffer or reject the offer.
Once there is an agreement between the Purchaser and the Seller and earnest money is received, closing can be handled in several ways.
The simplest is to have the Purchaser return to the island for closing and sign the papers in person.
A very common alternative is to have a limited Power of Attorney created (POA) by the Purchaser, appointing someone else (often your realtor) to close on your behalf and accept title in your name.
If a Honduran Corporation is being formed for the purchase, it is common to appoint someone to close on behalf of the Purchaser, (like a limited POA) in the articles of the constitution of the Honduran corporation.
The lawyer draws up a Honduran Protocol which transfers ownership of the property from the Seller to the Purchaser. The Seller signs the document, and the funds (purchase price) are transferred to the Seller. The Purchaser, or his assignee, signs the same document agreeing to the terms of the sale and accepts title to the property in the name of the Purchaser. The lawyer takes this document to the public land titles registry and submits it. The registry then records the sale and issues the new title in the name of the Purchaser which takes several weeks. The lawyer delivers the new title to the Purchaser, or it can be forwarded it to the Purchaser via international courier.
Purchaser’s Closing Costs
A budget of 5-6% of the purchase price should cover the Purchaser’s share of the closing costs. This will cover the land transfer taxes charged by the Honduran Government plus the miscellaneous stamp, bar and registry taxes including the legal fees (3%) associated with the transfer of the title. If a Honduran Corporation is formed because it is required by land size or formed for owner financing, there would be additional costs. If the purchase has a corporation included and the Attorney clears the corporation of any liabilities, the closing costs can be lowered to about 4%.
Seller’s Closing Costs
The Seller is obligated to pay Capital Gains Tax (currently 4%) on the increase of value of the property to the Honduran Government and the real estate sales commission. Seller is also responsible for paying Realtor’s commissions (Buyer & Seller Agents) which is used against their Capital Gains.
Financing may be provided by the Seller, guaranteed by the Purchaser through a mortgage registered against Purchaser’s title at closing or a Honduran corporation. The terms of the mortgage or owner financing package are part of the offer to purchase and therefore open to negotiation by Seller and Purchaser. The interest rates are usually higher than in the US (average is 6-7%) and require about 50% down payment. The duration of the mortgage is usually in the area of 1-5 years but may be longer. It can be structured in a way that gives the Purchaser lower monthly or quarterly payments with a balloon payment at the end of the term, or a short amortization that pays off the mortgage completely over the length of the term. Seller financing is generally intended to help the Purchaser secure the property today, allowing the Purchaser to fund the purchase on their own timetable and terms.