The actual purchase process is an easy, uncomplicated process, if performed by a competent real estate broker and with the help of a Honduran Notary and Lawyer. Foreigners, as individuals, can own up to .75 of an acre of land. In order to purchase more than .75 acres of land a Honduran Corporation must be formed. A Honduran corporation is easily formed with the help of a qualified lawyer at a cost of about $2000.00. When purchasing land in Honduras, it is important to have a good understanding of the documents associated with clear title. To protect this investment, a qualified Real Estate Broker, Honduran Notary and Lawyer should assist with reviewing the documents. Title insurance is also available.
Here is a typical scenario. Once the property has been chosen, the Broker will write up an offer to purchase. The offer will contain a paragraph calling for an “earnest money deposit”, which is 10% of the purchase price. The earnest money is wired to the Broker’s or Notary’s escrow account within 5 days acceptance of the offer, or within 72 hours of the purchaser’s return home. The balance of the purchase is due at closing which is usually within 60 days.
Closing can be handled in several ways.
The simplest is to have the purchaser return to the island for closing and sign the papers in person.
A very common alternative is to have a limited power of attorney created (POA) by the purchaser, appointing someone else (your Honduran Notary or Lawyer) to close on your behalf and accept title in your name.
If a Honduran Corporation is being formed for the purchase it is common to appoint someone to close on behalf of the purchaser, (similar to a limited POA) in the articles of the constitution of the Honduran corporation.
The lawyer draws up a Honduran Protocol which transfers ownership of the property from the Seller to the Purchaser. The Seller signs the document and the funds (purchase price) are transferred to the Seller. The Purchaser, or his assignee, signs the same document agreeing to the terms of the sale and accepts title to the property in the name of the Purchaser. The lawyer takes this document to the public land titles registry and submits it. The registry then records the sale and issues the new title in the name of the Purchaser which takes about 9-12 months. The lawyer delivers your title to our office where we lock it in our safe until you come to pick it up or we can forward it to you via international courier.
A budget of 6% of the purchase price should cover all closing costs. This will cover the land transfer taxes charged by the Honduran Government plus the miscellaneous stamp, bar and registry taxes including the legal fees associated with the transfer of the title. If a Honduran Corporation is formed, a mortgage is required or title insurance is purchased, there would be additional costs.
Seller’s Closing Costs
The Seller is obligated to pay Capital Gains Tax on the increase of value of the property to the Honduran Government and the real estate sales commission.
Financing may be provided by the Seller, guaranteed by the Purchaser through a mortgage registered against Purchasers title at closing. The terms of the mortgage are part of the offer to purchase and therefore open to negotiation by Seller and Purchaser. The interest rates are usually higher than in the US and of the Sellers who will provide financing most will only finance half the purchase price or less.
The duration of the mortgage is usually in the area of 1-3 years. It can be structured in a way that gives the Purchaser lower monthly or quarterly payments with a balloon payment at the end of the term, or a short amortization that pays off the mortgage completely over the length of the term.
We prefer to ask the Sellers to write “No Pre-Payment Penalty” into the terms of the mortgage. Seller financing is generally intended to help the Purchaser secure the property today, allowing the Purchaser to fund the purchase on their own timetable and terms.
Feel free to CONTACT US with any specific questions.”