Real Estate Purchase Contracts in Puerto Rico Are Not Standardized.
Real Estate Contracts in Puerto Rico
Purchase Contracts Are Different
Real Estate in Puerto Rico has as many similarities as there are differences from what you may be used to if you are from the mainland. One such difference is the Real Estate Purchase Contracts. As you go through the process and depending on how many offers you have made or how many real estate agents you have dealt with trying to purchase a property in Puerto Rico, you will notice that everyone has a different contract.
If from the States, you may be used to the contract looking the same. For the most part, they are. That is because every listing must be listed in the local MLS and all contracts have to be standardized. Unlike the mainland, in Puerto Rico the contracts are not standardized and there are no minimum requirements. Some will be very vague while others are very detailed and address everything that should be addressed when purchasing a property in Puerto Rico. The more detailed the better to protect yourself as a buyer and as a seller.
What should be in a contract
With the absence of standardization in the real estate purchase contracts of Puerto Rico, the following should be the least you should address:
- The full legal name of the buyer and Seller, Marital Status, Current Address
- If buying or selling in an LLC, then the full name of the legally registered LLC, with its address
- The Description of the property which should include the legal description, Catastro Number, Folio, Tomo, and Finca numbers if available
- List of Personal Items that will be staying with the property, such as furniture, Appliances, Light fixtures, Air conditioners, etc.
- The Agreed Sales price
- The Amount of Earnest Money the Buyer has to deposit. Typically held in a DACO approved Escrow account held by the listing agent.
- Terms of Closing which can be 60-90days depending on if you are financing or paying cash. Cash deals with their proper due diligence should take around 15-30days
- Contingencies such as appraised value, inspection, etc. These are important to protect the buyer and their earnest money and should be read very carefully
- Earnest Money Contingencies. Read very carefully. This will spell out what will happen to your Earnest Money if for some reason the transaction falls apart, who caused it and what the penalty is
- Closing Costs. The closing costs should be addressed, and the Real Estate Contract should state which closing costs should be paid by the seller and which should be paid by the buyer.
- Typically, the Seller will pay the notary fees related to the preparation of the Purchase Deed, Government Stamps, and all expenses for the cancellation of any existing liens, judgments, or encumbrances. Seller is typically responsible for the Real Estate agent’s commission
- Buyers typically pay for the Title search, Tax certifications, and the expenses related to their Home Loan that the lender charges them.
- These are not set in stone so you can negotiate this in the contract as long as the terms are clearly spelled out
How Do I Protect Myself
I highly recommend you have a reputable Real Estate Attorney that practices Real Estate Law on a daily basis, review your contract and documents to make sure everything is included in the Purchase Contract and it protects you in all aspects. If you are financing the purchase of your Real Estate property in Puerto Rico, the lender should do all the checks and balances to protect you because they are guided by Fannie Mae guidelines for the most part. But having a 2nd pair of eyes looking at it, isn’t a bad idea.
Also, especially if you are paying cash, hire an attorney and make sure you do your due diligence by getting a title study, check if there is debt owned on the property, make sure that the property description and survey matches what you think you are buying, etc. One thing you need to know is that if there is debt on the property, such as taxes owed, if the seller doesn’t pay them at closing, you now are the new owner of that debt. Do your due diligence and hire a good Real Estate Attorney.
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