Buying a Caribbean Vacation Home: The Purchase Process

So you've decided to buy a home in the Caribbean. Here are five things to consider.

Couple looking out at Caribbean property

Nowadays, almost everyone seems to want a tropical getaway home in the islands. Fortunately, there are myriad options, as smaller islands such as St. Kitts and Barbuda have seen luxury villas and condos rise to compete with larger destinations like Puerto Rico and St. Thomas. In part 1 of our story, "Considering Buying a Home in the Caribbean?" we explain how to narrow your search based on criteria important to you as well as how to make the decision about whether buying or renting is your better option. But once you've done that, you still may have some work to do. How you actually buy a vacation home in the Caribbean may be a different experience than buying a property in the U.S.

Get professional representation
There are numerous reasons to consult with an agent who's experienced and connected in Caribbean real estate.

"There is no institution regulating real estate licensing, so buyer beware," warns Jesse Salas, Director of Rentals and Sales Associate for Casa de Campo Real Estate. While Salas is referring to the Dominican Republic, his advice is valid for many islands. "Buyers need to understand what they are looking at and who the lister is." Your agent should be able to help you with this.

As in the States, "Realtors ... will often represent both buyer and seller," so a realtor should be "well-trained in negotiating fairly for both sides," says Silvina M. Andrews, Estate Agent and Broker at Bahamas Realty Limited. And while an agent is crucial in the search and purchase process, you should also look for one who's willing to help you out once the deal is done.

"Once our associates realize the buyer is serious, we introduce them to lawyers, accountants, architects, designers, engineers, and management companies," says Salas. A good realtor will also add opt-out clauses to the contract.

Adds Tom Smythe of St. Barth Properties Sotheby's International Realty, a real estate agent can also assist in transferring all utilities and can educate you on how to rent out the property if you want to make it an income-producing asset. 

Research the nitty gritty 
There's more to finding the home that works best for you than simply liking the layout or location. Other details may not be romantic, but they are critical. Aside from the standard numbers you'd consider, such as the property's sales history and comparable sales on the island, be sure to get information on its history of rental income and expenses if you're considering renting it out while you're not there; operational or maintenance costs; management costs; and homeowners association, legal, and government fees, says Joe Zahm, president of Turks & Caicos Sotheby's International Realty.

Also before you choose your dream home, make sure you will actually be able to purchase it. In some countries, you may need a tax identification document or other certification before you can buy property as a foreigner. In others, you may need to be physically present to complete the deal.

"Take a close look and ensure there are no hidden costs or surprises," adds Walter Zephrin, founder and Managing Director of 7th Heaven Properties Ltd.  

Many Caribbean villas are sold as cash purchases because local financing can often be significantly more expensive than financing in the U.S.

Consider the pros and cons of resort homes
Not sure whether to buy in a resort or look for a stand-alone home? You'll find differences in price, lifestyle, and amenities that you'll want to consider. 

"Resorts often operate management and maintenance programs, and many also operate rental programs," says Zephirin. Moreover, homes in developments and resorts may provide amenities such as golf, spas, and restaurants. This may not only suit your lifestyle needs, but can also be a bonus if you are buying with rental income in mind, notes Kieran Kelly, Chairman of Caribbean Collection

On the other hand, a stand-alone villa or house may provide you with a greater sense of luxury, exclusivity, and privacy, says Lily Dash, broker, attorney, and CEO of Caribound. There are also fewer limitations on owner usage, and your monthly operating costs may be lower because a stand-alone home may not be subject to maintenance and other fees associated with resorts. 

Dash adds that while the amenities of a resort may sway some potential renters, "Villas are typically more successful than condos as vacation rental properties because modern vacation rental travelers prefer their own villa and their own space." 

Think about your purchasing options
Salas estimates that "95 percent or so of all villas sold are ... cash purchases, mainly because local financing is two to three times more expensive than in the U.S." 

Mortgages in the Caribbean may also include other fees, notes Dash. "The mortgagee will be required to pay a stamp duty of 1 percent of the mortgage amount, as well as the mortgagor's legal costs," she says.

If you're intimidated by jumping into a purchase, other options may be available. "The majority of our international owners are people that came as renters before investing," says Salas, and some potential buyers may choose to sign a multiyear lease with an option to purchase at the end of it.

However, many homeowners may not offer that option, says Andrews, with Bahamas Realty, because "other buyers could be lost while the current client is 'test driving,'" Still, if you can't try out the home you want to buy, maybe you can rent a similar one. 

Plan on three to six months to seal the deal
Realty experts agree that choosing a property may take just one or two visits because most shoppers are former renters who already know the island. "Often, the first trip will narrow down a couple of areas, and the second will be for making a decision," says Andrews.

"The closing takes about three months from signing the purchase contract," adds Kelly. "A lawyer is appointed and a 10 percent deposit is paid to the seller. The attorney checks to ensure that you have clear title, and usually within 90 days, completion occurs upon payment of the final 90 percent." 

And once you're done, you can relax and enjoy your home — whether it's just for a few weeks at a time or you've decided to become a more permanent resident.

Ed Wetschler, Executive Editor at Tripatini.com, has contributed to The New York Times and other major publications.

Image by Thinkstock

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Experiences like travel can make life memorable, but you have to prepare. Your team will be happy to help you with financial needs.

This information is provided for educational and illustrative purposes only.

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