To briefly sum up:
- Property search
- Written offer to purchase remitted to the seller. This document, without any legal value, is often required by the owner as a warrant of seriousness.
- Promise to purchase/sell, signed before a notary, along with a 10% deposit of the price
- Title search: the buyer’s lawyer or his bank’s analyzes the documents related to the property to ensure that the seller is the rightful owner, that he has the right to sell, and that there are no delinquencies or measures of expropriation for instance, which would prevent the transfer of ownership once the contract is signed.
- Purchase/sales contract signed before a notary. The balance (90%) of the price is deposited at the notary’s office in the form of bank checks (vale vista), and remains on deposit until the end of the process.
- Release of mortgage: the seller’s bank releases the potential mortgage
- Contract registration by the conservador de bienes raices: the buyer’s lawyer (or any person authorized by the seller) registers the contracts, and receives an ownership title.
- Once this title is issued, the seller (and potentially his bank) can get the deposit checks back at the notary’s office.
Yes, the Chilean legislation allows a foreigner to buy real estate, whether he is resident or not.
A passport number is enough to buy a property. Yet, we advise you to ask a temporary RUT to the tax service. This number allows you to perform your fiscal obligations (tax report, payment of the property tax…) on the website of the tax service.
Concerning purchases in boundary zones, some restrictions apply. Citizens and companies from neighboring countries are not allowed to purchase in these areas (DL Nº 1.939 art. 7, Ley Nº 19.256 y DS. Nº 232). Exceptions exist for some properties located near Arica close to the Peruvian border (Ley Nº 19.420 art. 19).
If you are a foreigner living in Chile with a permanent residence, you can obtain a mortgage loan from a Chilean bank, in the same way as Chileans do, provided that you qualify for a mortgage loan. You should check with your bank to know more about the criteria.
If you do not live in Chile, you will have a hard time obtaining a mortgage loan from a Chilean bank. We advise you to try to obtain a loan from a bank from the country you come from.
Indeed, some solutions exist with foreign banks. Some banks offer second mortgage financing, which consist in placing as collateral a property that you own in your country to finance another.
This is classic amortizing loan (monthly repayments of principal and interest) over a variable period depending on the amount to be financed and the desired monthly payment. It can also enable you to benefit from lower interest rates than in Chile.
A seller can offer you to buy derechos de una propiedad. Generally, the price is far lower than for a purchase in dominio. Thus, it sounds like a good deal.
Let’s see the difference:
Buying in dominio (domain) means acquiring a property and officially become the owner. The property is registered by your name and you will receive an ownership title issued by the “Conservador de Biens Raices”.
Buying in derechos (rights), or buying the derechos means buying the right to use a property or part of it. It is frequent in the countryside, where the owner of a 10000 square meters’ land offers to sell 3000 square meters. It raises several issues:
- The seller remains the owner: if he faces financial difficulties, the land can be seized, and you have no recourse against it.
- You cannot mortgage your land to obtain a bank loan because you are not the owner.
- You cannot divide your agricultural land into plots lower to 5000 square meters, and you can only build one house per land. If you buy derechos, you can end up in a situation of illegality if you build a house on your parcel, while the seller already has built one.
Rather than buying in derechos, we strongly advise you to focus on 10) buying in dominio, 2) making a proper title search and 3) registering the contract.
NB: In a few cases that we do not describe here for the sake of clarity, buying in derechos can be useful, especially for companies. If you are an individual, you should better avoid it.
Prices differ a lot from a city to another and even from a neighborhood to another. We are establishing a price estimation tool per area. In the meantime, contact us to get more information, specifying for example:
- Your budget and the type of property you are looking for. We will tell you in which neighborhood you can find it.
- The neighborhood and type of property you are looking for. We will tell you at what price you can find it.
The purchase of a property does not necessarily give right to a visa, as it does in some countries. Yet, it shows that you have assets. The property can also generate income if you lease it. This helps you prove to the Chilean immigration department that you have the recurring resources allowing you to live in Chile.
Even if you cannot obtain a mortgage loan in Chile, we strongly advise you to open a bank account in Chile, in order to transfer the funds necessary to your property purchase. Indeed, during the process, you will have to issue a vale vista (local equivalent of a bank check). In order to issue this document, you need a bank account (or a trusted third-party that can receive the funds and).
First, you need a bank account in Chile, or you can deposit the funds on a trusted third-party’s bank account. Indeed, the purchase/sales contract in Chile is not equivalent to a transfer of ownership. It first need to be registered, and it can take two months and be rejected. This is why you cannot make a direct transfer to the seller’s account.
Once you have opened your account, there are different methods to make the transfer of funds. It depends on the amount of transfer. You can make a SWIFT transfer between two banks but it is expensive. For significant amounts, an asset manager will probably offer you a more advantageous FX rate.
There is no tax to pay when buying the property. Yet, there are some costs:
- Notary costs when signing a contract (around CL$50,000-70,000). To be paid twice, first when you sign the promesa de compraventa, and then when you sign the final contract. Common practice is to split between buyer and seller.
- Registration fees of the purchase/sales contract to the “Conservador de Bienes Raices” (the Chilean agency which registers the owner of each property): 0.2% of the buying price, up to CL$262.200. Usually paid 100% by the buyer.
- Legal fees: 1) writing and/or review of the promise to purchase / sale agreement, 2) title search, 3) redaction and/or review of the purchase/sales contract. Depending on the lawyer, the prices vary in a ratio of 1 to 10. Some charge a percentage of the buying price, others charge a fixed price. $600,000 is a reasonable price for the whole process. If you hire a business lawyer working with foreign clients, the cost will be higher.
- Brokerage commission: 2% + VAT (19%) of the buying price
- Foreign Exchange (FX) costs to convert your funds into Chilean pesos. Do not overlook it. Reducing the FX costs by 1% can cover all the abovementioned costs. Do not hesitate to contact us.