Knowing What You Don’t Know
Buying land in Ecuador is a very different experience from buying land in the US or other markets.
It’s not only the differences in the due diligence process and the actual mechanics of the purchase – which are significantly different, it’s also, and equally as important, the valuation. A major and perhaps overlooked part of the valuation process is costs. Understanding costs, and where the potential hazards/pitfalls lie.
Back home, valuation is relatively straightforward. Or at least more so. Where is it located, what are its attributes both good and bad, what do the comps look like, etc. Depending on what type of property you’re looking at you may bring in engineers to study the soil and other things, but within reason you can come up with a fairly straightforward process.
Now imagine transplanting that process to a foreign country, where all the parameters and processes are different, where you don’t have professional contacts or speak the language and are trying to assess land you are looking at.
We were in just that situation a few years back. And since then we have dealt with many clients who find themselves there as well.
In part, having gone through that process ourselves, we formed this company to help those looking for land here have a straightforward way of doing their proper due diligence and evaluation and not getting hurt.
Here are a few things to keep in mind when looking at property here or elsewhere in South/Central America.
Is the title clean?
Here you must do your own title research, there is no title insurance. Chain of ownership structure is different here and you can run into serious problems if you fail to research the title properly.
How much land is actually there?
There are many properties here with major discrepancies between the amount of land on the title and the amount of land that is actually owned. A certified boundary study at the very least is necessary and in some cases there are more steps that need to be taken.
Are you on stable ground?
There are places where either from shifting earth or too much groundwater, anything you build with ultimately fail. Ask the neighbors about the area, but more importantly hire an engineer to check and make sure what you are buying is sturdy and ready for construction.
Are there water issues?
Having water is vital. Many places in Ecuador have a dry season where water can be at a premium depending on location. You may see a canal or some other source of water when looking at a property, but find out during dry season you are waterless. Ensuring a good, year round water source, both for drinking and irrigation is extremely important.
Are there access issues?
Many properties may require you to build a road, either within the property itself or even to reach the property. While that is not necessarily a huge cost, it can be. It can also mean obtaining permission from a neighbor to go through his property. These studies and official permissions need to be done prior to purchase so that the costs, and parameters of your project are clearly understood and you’re not left without access to your new property.
Is there electricity?
If electricity is not currently hooked up on the property, you need to make sure you understand your costs and the process for doing so.
Other things to consider when looking at property are; will the property washout or flood, are there things above you that you need to concern yourself with, and what’s security like.
These things can take some time to sort through when you haven’t been through the process.
Prices as well take some time to understand.
A flat hectare versus a mountainous one could have a 1000% price difference. The more land you buy the cheaper it is per hectare. Depending on location, climate, and desirability, prices vary significantly. Land that’s really good for grazing cattle, or has many mature fruit trees, or has a river and lots of water, or an excellent road/water/electricity situation is going to be more valuable and therefore costlier than properties without some of these attributes or with some of the issues outlined previously.
We are here to help you understand all the parameters, both good and bad.
We dot the I’s and cross the T’s.
I hope this helps give you a little food for thought if you are considering land south of the border.
This is a spectacular place to live. And we formed this company to help people experience the beauty of life here without falling victim to some of the pitfalls associated with a different research, evaluation, and purchase process.