How to Sell Your Property in Colombia
In Colombia, the most common forms of agreements used to acquire or sell real estate properties are the promise to sale and purchase agreement and the sale and purchase agreement.
Before deciding to sell your property, you need to figure out whether you are going to give a realtor an exclusive deal or not. Since there is no MLS SYSTEM in Colombia, you would have to do as much publicity done as possible on your own.
If you decide to sell through realtor, then the realtor will do all the publicity. Realtors help show properties and take phone calls and emails regarding the property if you are a busy person.
You will need to organize papers on the property regarding monthly expenses, such as condo fees, electric, taxes and have receipts to show costs of remodeling work that you have done if any.
Be sure to specify what is included or not as far as electronic appliances in the home, cabinets, curtains, blackouts, water heater. All of these items are optional in a sale of a home.
How to Do Tax Planning before Selling Property in Colombia?
You must know your registered tax value on the property. Also, you must know the purchase price of the property on the title when you purchased it as this will give a guide to capital gains you will have to pay. Remember that capital gains tax is 10% if you sell a property after 2 years as a person.
If it is less than two years it is taxed as normal income, which depends on your tax bracket. Here is an important tax tip – work with your accountant to raise the value of your property as high as possible before selling so that your capital gains is lower
Before selling the property always check identity of persons purchasing property carefully. Due to money laundering laws, you want to make sure that persons buying property have received income in legal ways.
How much is the Commission of a Real Estate Agent in Colombia?
Beware of usual commissions to real estate agents are 3% in total split between agents but if you are outside of a major city you may want to give more incentives and raise the commission. It is common for fincas to pay 4% commissions. It is also common to pay more out if you have many agents or it may not be worth it for them
If you are planning on taking your money to another country after the sale of the property the banks will ask for proof of the sale of the property such as a notarized sales agreement. They will also ask for proof of a wire transfer or source of payment when you purchased property
- If you are a foreigner and purchased property as a foreign investment you will need to show your Banco de Republica wire transfer form, or a report from the Banco de Republica certifying your wire transfer was registered correctly.
- If your property was paid with cash from within Colombia, for example from profits or salaries earned in Colombia then you have to show proof of source of funds.
It is a good idea to make sure that tax office is notified to make sure property tax bills are transferred to new owner’s name
How Can Foreign Exchange Rates Affect the Sale Value of Property in Colombia?
Technically, if you are making a foreign investment your investment cycle does not finish until the money is returned to the original currency. So you could make money in pesos but then after you convert money back you can still come out negative.
How to Manage Transfer of Funds after Selling Property in Colombia?
Only banks are allowed to administer escrow accounts in Colombia. Lawyers and realtors do not have escrow accounts. Don’t let realtors or attorney process or handle any money. They do not have escrow accounts.
If you have a relationship with a realtor that has been managing your property that is alright for small amounts of money. We don’t recommend that 3rd parties manage or receive payments on your behalf.
Remember there is a new law called the ley de financimiento that went into effect January 1, 2019 stating that you must declare the full amount of the sale of the property or related items on the title. The new law states that not declaring the full amount you may be fined up to 4 times the value of the sale price.
You must declare the full market value on the title when you sell the property. Previously the law stated that you could sell based on the established tax value of the property. NOW YOU MUST STATE THE FULL commercial value.
What are the Notarial Aspects of Selling Property in Colombia?
The transfer of real estate in Colombia must be done with the formality of a public deed held before a Public Notary. The officials of the pubic notary will inquire which legal transaction such as purchase or a sale is going to be held and request the documents required for each specific deal;
In the case of the sale and purchase agreements, the required documents are:
- No liens’ certificate (certificado de tradición y libertad) of the properties involved in the transaction;
- Documents of existence and legal representation of the parties;
- Proof of payment of property taxes of the last five years;
- No debts certificate issued by the applicable tax authorities in relation to the properties;
- No debts certificate issued by the administration when the properties are subject to the condominium regime;
- Proof of payment of the consumption tax when the real estate exceeds the amount defined by law (applicable only until 31st December, 2019).
The deed process takes approximately 5 business days and the notary fees are regulated by decree for the entire national territory.
Afterwards, the public deed must be registered at the Registration Office to which the property is linked. Finally, be aware of the fact that notary will charge seller a withholding tax.
Also, there is a Penalty clause in purchase / sell agreement, free of all problems. Meet all the conditions by date of signing. If you don’t meet the conditions by signing date, then the penalty can be 10 to 20 percent of the property value.
Can You Lose Your Investor Visa After Selling Property in Colombia?
The short answer is yes. You can lose your investor visa once you sell your property assuming that you were in Colombia on real estate investment. Fix immigration status in 30 days.