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Mortgages
Real Estate Financing in Mexico,
Latin America and the Caribbean
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Buying Real Estate in Honduras
Legalities and OwnershipForeigners who wish to buy property in Honduras
as individuals are limited to 3,000 square meters of land and must build within
three years from the time of purchase. In case you are not able to build within
36 months, a penalty of 10% of the purchase price will be applied every
succeeding year. This limit, however, can be bypassed by forming a Honduran
corporation.
Forming a Honduran corporation does not necessarily mean
that you will be doing business. You just need to have legal documents
indicating that you represent a corporation. To do this, you can hire a attorney
(preferably bilingual if you don't speak Spanish) to handle all the legal
paperwork in Spanish. The charge for this service typically ranges from $1,200
to $1,800 USD.
Being the owner or general manager of that Honduran
corporation, you will have the same ownership rights as any Honduran citizen.
As mentioned, you need to get a lawyer to handle all the legalities of
incorporation and real estate transactions. Your attorney will not only conduct
a title search; he will also legally register the property to you through the
Escritura Publica or Dominio Plenio. These are public
documents that signify ownership of the property.
Aside from buying land
to build a dwelling, foreigners can also buy previously built houses and villas.
Most of the houses sold are near the coastal areas.
Financial MattersFor most of the real estate transactions in Honduras,
you will be asked to pay in cash in advance. If you are not capable of such
financing is a possibility. However, real estate financing is not common in
Honduras yet as interest rates tend to be quite high, sometimes more than 20%.
Alternatives to bank financing can be owner financing or developer financing.
For owner finance, you will typically be asked to pay a 30% down payment, then
financing the balance over 1 to 5 years at 10% to 12% interest.
Many
foreign buyers use properties they own in their home countries as collateral for
loans as interest rates in their home country tend to be much lower than what is
available in Honduras. Upon receipt of the funds from their local banks, they
purchase the Honduran property in cash.
Honduras' revised laws have
reduced the registration and transfer tax to 1.5% of the selling price or the
assessed value by the municipality, whichever is greater.
Attorney's fee
should also be considered. Usually, it is about 2% of the property price.
Allowing at least 6.5% of the property price for the closing costs and other
fees would be a good rule of thumb. Other fees include miscellaneous stamps,
survey charges, prorated real estate taxes and prepaid property insurance. The
commission of the real estate agent is usually paid by the seller and runs about
10% of the sale price.
Other Important IssuesThere have been some cases where previous
property buyers have complained of corruption during real estate transactions
involving the attorneys, real estate brokers, local officials and judges. Some
foreign investors also reported squatter related issues resulting in costly
litigation. This happened even though local attorneys and Honduran real estate
agents had offered assurances to the investor that the property was free and
clear of encumbrances.
Squatting is common in the Honduras due to
various nation land reform laws. These land reforms, know as dominio util, have
allowed the landless to acquire property by employing labor to clear land for
cultivation or construction in exchange of property rights. Thus, inactive or
otherwise unproductive properties are more likely to be subject to land
invasions and legal disputes.
There have also been a few cases reported
of limited violence against Americans involved in land disputes.
It is
always best to seek assistance from the most reputable attorneys, brokers or
real estate agents. You may want to talk to conduct additional research such as
speaking to foreign property owners who were able to successfully navigate
Honduran real estate laws.
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