We have a friend who’s buying an apartment here in BA. He let us tag along throughout the process… which allows us to give you a simplified overview of how it works…
We learned about the three main stages in the buying process… the Reserva, the Boleto, and the Title Deed.
The Reserva is pretty much like going under contract in the US. It’s making an offer and putting a token amount down to engage the seller.
Next is the Boleto, which is typically a few weeks after the Reserva is signed. At this stage the buyer forks over around 30% of the purchase price. And the Seller hands over all the title documents to the buyer’s Notary.
Now, there really isn’t any title insurance here in Argentina, like we have in the US. The Notary is your title insurance, so, you want someone with a great reputation.
The Boleto itself is a bill of sale, that outlines the specific terms of the transaction. Once signed it binds the buyer legally to the property. The seller can’t back-out at this point.
Then, at the Title Deed stage, the buyer pays the balance of the sale price and the seller signs the deed over to the buyer…
Now, as a foreign buyer, the trickiest part is getting the money for each of these stages.
As we understand it, there are three main ways of doing this and many variations… You can:
- Make a wire transfer from your bank to a bank in Argentina (or sometimes via Uruguay) then the bank gives you cash, that you give to the seller. This is done in a secure location, and you basically push the cash across the table and the seller counts it… (costs about 2.5%)
- Buy Argentine bonds and then turn them into cash, or transfer ownership to the seller. (costs about 1%)
- Transfer money from your account in the US, to the seller’s account in the US. (costs about 1%)
The first method is the most common. The last two are more sophisticated and require a more sophisticated and cooperative seller. Also, these methods are not necessarily recognized by the Argentine government.
Tax-avoidance is much more commonplace here than what we’re used to. When you buy, there’s typically a difference between the actual sale price and the reported sale price, so that the seller can avoid some tax. And as the buyer you can avoid some too.
There’s some ‘black money’ in the transaction when this is the case, which complicates matters slightly. This practice, while still common, is being increasingly scrutinzed by Argentine tax authorities…
Above all, the most important thing is to have good people helping you through this. A good lawyer to represent you and help you get the money together, and a good real estate agent to deal with the seller.
We’ve glossed over a lot, but hopefully have given you a some-what accurate overview of the buying process. But we’ll probably have some actual experts on this topic write in to tell us, that we are mis-representing the process entirely. If they do, we’ll be sure and share that and whatever else we learn with you dear reader…
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May 19, 2007 at 11:19 am
gdlead01
Transfer money from your account in the US, to the seller’s account in the US. (costs about 1%)
Why would this cost more than the standard wire fee for transferring money bank to bank (my bank charges $25 to wire money)?
May 19, 2007 at 1:59 pm
matteo
A few notes to foreign buyers in BsAs -
1. As a foreigner: If you DO NOT bring your real estate purchase money into Argentina via the central bank or via a transfer agent that processes your purchase through the central bank, you will have more problems than you can possibly imagine when it comes time to sell the property.
2. As a foreigner: You need permission from the AFIP (Argentina’s version of the IRS) to sell your property. This can, and has taken several people I know, more than 90 days. It is at this ‘point of exit’ that you will need to prove that the $ you used to purchase the property came into Argentina via the central bank. If the $ came via another unauthorized/illegal way, the AFIP will penalize you with fines and a process that takes months. This ‘how did the money get here?’ item usually snags foreigners that bought property prior to 2006. Before late 2006 it was very common to circumvent the Central Bank using transfer agents/houses. You will also need to prove that you actually lived in the property OR paid taxes on rental income from the property. So what if you bought a property and only visited it once a year and did not rent it? As of recently, you will be fined for not reporting rental income. Yes, it will be assumed that you had income and are not disclosing it. There are other things you will need to prove as well. However, if you are a foreigner with a DNI, you are not subject to any of this.
3. As a rule of thumb, the BUYER should expect to add 9-11% to the price of the property in order to actually complete the deal. There are many taxes, fees, taxes on fees, and comissions that are calculated on the sale price. For example: the buyer pays the notary/escribano around 2% of the sale price; the buyer will pay a 21% tax on the real estate agents’ commission; etc…etc…
4. Both the BUYER and the seller pay a commision to the real esate agent. If you see a property with a 3% commision - that is the buyers expense. The seller is also paying a commision but it will not be disclosed.
5. There is no such thing here as an escrow agent here. For expample, if the buyer uses a ‘boleto’ (a down payment of 20-40%) - that money goes directly to the seller at that moment…not at the closing/signing of the deed.
6. As a foreigner, using a boleto type of down payment presents a significant issue - A boleto is not recognized by the central bank. For example, a foreign buyer uses a boleto down payment of 20%. Well how did that $ get into the country? It wasn’t through the central bank… Now refer to item #2 regarding the AFIP. Real estate agents will tell foreign buyers “Oh, it’s no problem. Just report the sale to the government as 20% less.” In the current climate that is not the best idea. All purchases by foreigners are, as of recently, being reviewed by the AFIP. There are new laws that increase a foreigners chances of getting caught in this actual sale VS. reported sale situation. I’ll let you do your own research on that…
7. There is a lot I am not mentioning since this is becoming a wall of text. The above is enough to let foreigner buyers know that it makes sense to pay/hire a real estate advisor who is NOT your real estate agent.
…
As a foreigner, I am still very optimistic on the BsAs real estate market in the longer term. However, the BsAs local government is moving quickly and using aggressive techniques to cut foreign speculative/short term investment in real estate. It will be interesting to see what further types of government intervention occur to keep real estate ownership from becoming an unreachable goal for people that earn incomes in Argentina. On the surface Argentina appears to be a free market economy - but when you start to do international transactions, you will quickly understand that it is not. Personally, I am a strong believer in the government intervention being a stabilizing rather than disruptive force in Argentina’s economy.
May 19, 2007 at 4:19 pm
Steve
This is another take on buying property in Argentina:
http://www.escapeartist.com/efam/91/art_bariloche.html
May 19, 2007 at 5:16 pm
Editor
Very good and important points Matteo… I glossed over these issues, but as far as I know, you’re spot on…
WB
May 21, 2007 at 2:21 am
Pali
With all due respect you’re wrong Matteo. You HAVE to bring the money through the Banco Central. I dont want to get into something very technical but you bring the money for a “direct invest” with is buying a property you wont have any problems with your money. If you wire the money through casa de cambio you migt have some tax problems in the future. Just get advised by a good attorney and you will have no problem.
By the way, dont you ever buy a property through [Censored], that guy is a scammer. Many foreign people that I met talk very bad about them.
Have a good time guys.
Pali
May 21, 2007 at 2:53 am
carlos nevares
AS A NOTARY PUBLIC I WANT TO CLARIFY SOME ASPECTS OF THE BUYS OF REAL ESTATE DONE BY FOREIGNERS IN THE ARGENTINE .
FIRST:HOW TO BUY.–.-YOU MUST TO TRANSFER THE CURRENCIES FROM ABROAD VIA CENTRAL BANK,OR ONE BANK EFFECTED(BE CARRIED OUT), .NORMALLY YOU MUST MAKE A RESERVATION(RESERVE) OF ABOUT 5 % AND AFTER ONE WEEK YOU MUST SIGN THE BOLETO THAT IS A CONTRACT WHERE THE CONDITIONS ARE STIPULATED AND NORMALLY THE 30 % IS COMPLETED. ALMOST ALWAYS THE BUY IS DONE Across A REAL-ESTATE AGENT .
LATER A PUBLIC NOTARY, WILL REALIZE LA ESCRITURA TRASLATIVA OF DOMINIO (CLOSING) TO 30/60 DAYS OF THE DATE OF THE BOLETO SECOND EXPENSES.AT BOLETO IS USED TO PAYING 3 % TO THE REAL-ESTATE AGENT ( COMMISSION).+AT THE MOMENT TO THE ESCRITURA:IF YOU ARE A FOREIGNER SELLER,YOU NEED THE PREVIOUS APPROVAL OF THE AFIP(IRS)(IT IS NOT NECESSARY FOR THE BUYERS).IF YOU ARE AN INDIVIDUAL ALWAYS THE TAX FOR IMPUESTO A LA TRANSMISION DE INMUEBLES IS 1,5%IT IS IMPORTANT TO KNOW THAT IS IDENTICAL FOR THE ARGENTINIAN THE SELLER WILL HAVE TO PAY LIKEWISE THE HALF OF THE TAX OF SELLOS Or 1.25 % IN THE FEDERAL CAPITAL, MORE EXPENSES THAT DO NOT OVERCOME NORMALLY DOLLARS 500.
THE BUYER WILL HAVE TO PAY THE OTHER1.25% OF IMPUESTO DE SELLOS 0.2 % OF RATE OF INSCRIPTION, 2 % OF HONORARIUM TO THE NOTARY AND ABOUT DOLLARS 400 OF EXPENSES.
IF SOMEBODY NEEDS ANOTHER INFORMATION,WILL BONNER HAS MY TELEPHONE NUMBER
CARLOS NEVARES
May 21, 2007 at 8:17 pm
gdlead01
First there is the comment “If you DO NOT bring your real estate purchase money into Argentina via the central bank or via a transfer agent that processes your purchase through the central bank…”. Then there is the comment “You HAVE to bring the money through the Banco Central”.
In many countries these “rules” are the result of Laws that are passed or Agency Rules and Regulations that are published so everyone can see them. If this is true in Argentina would the people who make these statements please also say “this is in Law Number xxx” or “found in Rule Number xxx of Agency Name” (such as AFIP).
This is a very important issue and as you read the many Internet resouce sites explaining how foreigners buy property in Argentina there are always different opinions and advice.
If there are Laws or Rules that say how to do this in a legal way we can go to them and answer the questions once and for all.
For those who want to follow the Law or Rule they can buy property this way. For those who say it is not important they can buy property their way but there might be an end to the different advice.
On the other hand what Matteo said about residents not having to worry about this is a reason to seek residence status - but that is a different issue.
May 22, 2007 at 2:29 pm
matt Ridgway
If at all possible wire the money directly to the seller’s account-the biggest issue involved in this is that there is no escrow like in the US (or in the UK where the lawyer holds the money), the funds go directly to the seller who could, theoretically, run off with the money and not sign anything. Although the escribano will tell you that it works fine (and in my experience, it does) there’s still a risk that the seller will take your money and not sign the escritura. It comes down to trust at the end of the day-the seller won’t sign anything until the money is sent and you won’t send the money ’til something is signed. it’s like a mexican stand-off. and someone has to make the first move.
you can read http://realbapurchaseguide.blogspot.com/ for more info and http://www.realba.blogspot.com for contacts who can help organise everything involved with buying property in BA. i’m no longer involved in BA property so i left all my contacts for everyone else. ain’t i nice??
May 23, 2007 at 3:36 am
matteo
Hi ‘gdlead01′ - Actually ‘Pali’ and I are probably not saying something different. A transfer agent that has a working relationship with the central bank can organize the money transaction from start to finish. So, when you(the foreign buyer) actually go to wire the money to Argentina, you will wire it to the central bank. The transfer agent, acting on your behalf, will at some point receive the money from the central bank, take care of the documentation that goes along with the transaction, and put the money on the table for the deal. If you try, as a foreigner, to bring money into the country without a transfer agent and deal directly with the central bank process yourself..well….good luck with that.
Regarding ‘laws’ and ‘rules’ - there are a lot of shades of grey since the laws here are not clear and have been changing frequently…at least laws relating to foreigners. Which brings us back to one of Will’s original points: get a good escribano/notary.
May 30, 2007 at 4:59 pm
Micheal
Its funny but this guy Matt Ridgeway has been talking the same tune for a year about Buenos aires property prices going down .
They are talking from a position of sour grapes as him and Lorena did not make many friends in this town and in the end they have decided to bail out to Valpairiso Chile,
For your information Matt property prices continue to go up and all going to continue increasing for the next few years.
Bad luck you sold Congresso and Chacarita
July 9, 2007 at 9:46 pm
ApartmentsBA
First of all, I just stumbled onto this website which seems to be very informative. I think people should stick to facts on these real estate informative websites. I’m one of the largest buyers of real estate in Buenos Aires and have been for the past few years. I’m actually buying more real estate now then at any time before. I see more and more foreign and local interest in buying here.
I can’t speak for anyone. The only one that I’ve met on this website so far is the poster “Matteo”. I actually met him when I saw a property he was selling a while back. I have read some other posts he wrote about Argentina and fromt he time he posted until now, property prices have gone up.
It’s always advisable if you can’t wire directly to the seller’s bank account OUTSIDE of Argentina to go through the Central Bank. Many foreigners before 2006 simply wired in “black” because it was very easy and less hassle. Keep in mind the AFIP didn’t really care if you brought in money before then. There were anti money laundering laws established last year.
I’ve sold several properties for clients. It is true that you do have to get an AFIP permit to sell as a foreigner. It can take up to 90 days. My quickest was 30 days and my longest was about 120 days. AFIP has only asked 1 time in all the sell transactions how the money was brought in. For one of the clients, we were honest and told them it was brought in “black”. They simply asked for documentation to show that the money was legal. They did grant the permit in ALL of the transactions we have handled.
I do think AFIP is making a mistake making it so cumbersome and time consuming. They are actually making money on various taxes so I believe it’s in their best interest, as long as everything is in order to grant the permit very quickly.
Make sure as a foreigner you are up to date on your asset/property tax each year. If you are not, it severely slows down the permit process. In the cases where it took more time the seller was not up to date on their asset tax and it delayed it. For ALL the properties that I purchased for my client and that we have managed, the AFIP permit was quicker than the others as we have paid all taxes and all the documentation was all together and organized.
As others mentioned, there are a lot of “shades of grey”. It’s almost impossible to do everything in “white” even when you want to. For example, many local owners refuse to sell to you unless you declare a false lower price. On new construction, good luck finding a company that will allow you to declare the full actual price. Some are doing it now but over the past 3 years, most of them demanded that you declare a false lower price so they saved on taxes.
And actually the politicians are the worst. I’ve purchased real estate from some high ranking governmental officials in Buenos Aires and they wanted to do things that were EXTREMELY illegal and wanted to declare VERY low prices. One governor of a local province wanted to only declare 25% of the actual price!! Of course I refused to do that.
I have accurately called the real estate market, the exchange rate and tourism trends here since 2002. I continue to see real estate prices increasing as it’s an all cash market, nothing else to invest in Argentina, increased foreign demand, great returns with short-term rentals and overall real estate prices for this quality of a city is still extremely cheap.
Good luck all.
July 24, 2007 at 2:38 am
ApartmentsBA
Also, Matt Ridgway, what you posted above is wrong information. You would NEVER want to do a closing like you described directly wiring to the seller’s account BEFORE you signed something. If you are advising that method it’s very dangerous and any good Escribano/lawyer would NEVER advise what you are suggesting.
I’ve bought and sold many properties directly with NO MONEY entering Argentina and it’s completely legal with NO problems. The proper method to do it is a 2 step process where the buyer and seller (or their authorized representatives that hold a legal power of attorney to act on their behalf) get together and they sign the Escritura. No money exchanges hands and the Escritura specifically says it’s not valid until the wire transfer has been received. Then the 2nd step is for the seller to sign the form saying the money has been received. There are protections for both sides this way. The buyer has proof via their bank that the money was received by the other party.
Certainly you would NEVER want to just wire funds to the other party without this 2 step process. No decent Escribano would recommend what you are mentioning to their client…
July 26, 2007 at 2:04 am
Reuben Pacheco
Hi Matt and fellow readers,
I’ve been reading this blog for some time now and I wanted to add my two cents worth of info. My partner Tim and I purchased a property in BA a little over a year ago and yes, we agree that it will be a trying and emotional event. Even though I’m a realtor in LA I was still concerned and in awe over some of the events.
Not having an escrow company is hard to contemplate but you want to have a SIGNED RESERVA and BOLETO before you wire any funds - PERIOD. Not to mention that you need to have both documents ENG / SPAN version read the same. Our agent was typing the English and Spanish version- not very well I might add. Had we not been able to read and make corrections, we feel that there would be a real problem and my thought is - the Spanish version would hold up. Probably would be worth the extra fee to have a secondary person NOT associated with the broker re-read and make corrections- before you sign and agree to terms. I would make one exception and that would be if it was an American owned company like ApartmentsBA and Mike was handling my deal. Mike reads and writes Eng/Spnsh very well and is trustworthy.
Also, you really want to shop your agent and make sure that you are getting a knowledgeable person and one that can communicate with you on a level that is acceptable to you. I would have a list of questions and outline of what I expected from them. If you feel that they are resistant to any of it, then you need to find another person or agency that can represent you properly. There is alot of info that seems to not get delivered that may be a deal breaker. Interview them prior to any agreement of working together and insist on constant communication either by phone or e-mail and let them know of you do not have this type of commitment form them then you will be forced to work elsewhere. Test Them!
Many times..just like in the US, if there is Dual Agency you might be able to work out a deal with the sales commision. Always ask!
Something that wasn’t mentioned concerning the signed Boleteo is…There is a clause that states that if the Seller backs out then he will be responsible for 1.5 times the actual deposit paid. I don’t know if you’d actually be able to retain any monies from the Seller, should he breach his/her agreement but I would definitely ask about having a Escribano hold the funds in “Trust” with actual instructions - in the Boleteo -to return funds in the event of a breach. Also, should you breach your agreement you will forfeit your deposit - NO AND IFs OR BUTs. One other point is to see if they have an account in the US. It would seem to me that if you had to make claim, you would have a easier time dealing with an North American banking system. And the fee for wiring the funds will much less. You’d be suprised at how many Argentines have US accounts.
In the sales process you will find that you will more than likely have to sign a power of attorney. Just like the States you want to make sure it is a SPECIFIC POWER and NOT GENERAL. Also, you want to make sure that you have in writing the person(s) or agency that is going to pay your taxes for you. There are two types of taxes that are due at two different times tables - personal and real. Make sure you understand the exact costs associated with both and the fees associated with any third party assignee.
Being that you might have limited info regarding the sellers motivation and direct and true sales comps - I would employ a third party to evaluate the property. I hired apartmentsBA to do this for me. Mike answered questions regarding sales trends/current market conditions and desireability. I felt way more comfortable with this handy service.
Lastly, it isn’t common place for you to have physical inspections however, I would make it a part of your transaction - anyway. Just like in the States you just don’t know what you’re buying until you inspect it. Ask for a contingency that gives you the right to have your deposits returned in the event you decide to back out based on the inspection. All contingencies should have a reasonable time frame.
Also, get used to the idea that the appliances, A/C heating units, phone lines, light fixtures, and most attached items are NOT INCLUDED IN YOUR SALE, unless specifically outlined and agreed to by both Seller and Buyer. Even though your agent may say it come with it - GET IT IN WRITING!
All in all, our experience was a good one and we’re extrememly glad we purchased the property. We’ve had a great experience with it being a vacation rental and would encourage anyone to do it - of course with due diligence.
You can view our web-site at http://www.aptsbuenosaires.com if you want to see what it looks like.
Reuben Pacheco
August 25, 2007 at 1:53 am
Pali
Hi guys,
I came across this buyer’s guide that might help to clearify the process of buying property in BA. http://www.buenosaireshabitat.com/realestate/
Have a good time,
Pali