Originally published April 3 2008
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How to Avoid Real Estate Property Scams in Ecuador, Panama, Costa Rica and other Central / South American Countries
by Mike Adams (see all articles by this author)
(NaturalNews) This is a special update for those individuals who are looking at buying land in Central or South America. It contains some very important information about avoiding scams when seeking property there (this information applies to anyone looking at information in Panama, Costa Rica, Peru, Mexico, etc.). I learned all of this in my travels there, and in talking with the many Americans, Canadians and British citizens who already live there (and who went through a lot of trouble to learn these lessons).
After sending the last e-mail about land in Ecuador, I received over 1,200 requests for more information about the particular community I was recommending in Ecuador. That e-mail was distributed very widely, and it ended up reaching many people who had already purchased property in Ecuador, including in Loja, Cuenca, Vilcabamba, Quito and even regions such as Esmeraldas. Some of these people offered warnings about how they were nearly ripped off by unscrupulous real estate agents, property developers and land owners.
In order to help NaturalNews readers avoid such property scams, I have compiled this list of the most common real estate scams in Central and South America, specifically covering Ecuador and Panama.
To put all this in perspective, let me reiterate that even though buyers need to watch out for these scams, there are many beautiful, productive and health-enhancing pieces of land available where you can pursue a natural, green-living lifestyle at relatively little cost. The land in South America is rich and abundant, the local labor prices are very affordable, government regulation is usually minimal, the cost to immigrate is very low, and a little bit of money goes a long, long way.
Truly, I believe that South America is far richer than North America in terms of its natural resources, environment, climate and even the health of its citizens (in most cases). If you follow my advice here and avoid these scams, I think you can find a very enjoyable piece of property in Ecuador (or elsewhere) and live a very high quality of life far from the high-stress lifestyles of North America or Europe.
So don't let these warnings discourage you from seeking out a nice place to buy, but do pay attention here so that you don't get ripped off by the various real estate scams you'll find operating in these countries. Also, if you decide to live in South America either part time or full time, please respect the local people and Mother Nature, and find ways to build a house in a small footprint, sustainable way. (I recommend building with compressed earth blocks, or "mud blocks" that are usually made by the locals. These result in some really nice adobe-style homes that are very much in tune with the Earth.)
Avoiding Real Estate Scams in Ecuador
If you are considering buying property, a vacation spot or a place to live in Central or South America, please read this carefully and pay attention. It is very easy for Americans, Canadians and other first-world citizens to get scammed in South America, because protections do not exist for land zoning, title insurance, real estate disclosure laws, etc.
Furthermore, don't trust the local Americans without checking them out first, because some of the local Americans see newly-arriving Americans as fresh meat Gringos with a pocket full of cash and very little local street sense. Some of these folks are going to rip you off if they get the chance, so don't let them get the chance!
Virtually all the real-estate related lawsuits taking place today in Ecuador right now, for example, are between gringos (two white people suing each other), not between locals. Remember this: You are far more likely to be scammed by a white person than a local South American citizen. I have personally found the local Ecuadorian people to be far more honest and trustworthy than some of the gringos who moved there from the U.S. Do not be suckered into trusting someone just because they speak English. (On the other hand, some of the coolest gringos in the world also live there, and I've met some incredibly wonderful people there who are really honest, ethical and compassionate! Ecuador is a place where you find both really good people and really bad ones...)
Here is a list of some real estate scams to watch out for:
The Resort Real Estate Broker Scam
In this scam, you arrive at a nice resort or hotel, and you notice a sign at the front desk that says, "Looking for real estate?" You inquire about the property, and the hotel operator starts telling you about some properties that are available, but they are about to be sold because someone else wants them. They also give you a price on the property, but what they don't tell you is that they've added $100,000 to the actual price being asked by the land owner (a local person who doesn't know about the $100,000 add-on price). This actually happened in Ecuador to a person who wrote me, and the land purchaser had to sue the hotel operator to recover the $100,000 mark-up. This is apparently a very common scam.
How to avoid the scam: Always hire your own local translator. First, ask the broker to disclose their brokerage fee up front. Then ask to meet the land owner and discuss the selling fee directly with them so that you know the actual selling price. And remember, the seller should pay the brokerage fee, not the buyer. Failure to follow this strategy will get you screwed about half the time in Ecuador. Don't believe hotel or resort operators. They may seem nice at first, but they're most likely just trying to make money off the tourists (you!).
The After-the-Fact Zoning Alteration Scam
In this scam, the properties in a community or development area are sold to early buyers based on a map that defines a certain number of lots, such as fifty. After you buy a piece of land in the community, the developer changes the rules are starts dividing up the lots next to yours into smaller and smaller pieces, inviting a greater number of homes to be built right next to yours. A community that once was limited to 50 lots might balloon to 150 or more, and there's no way to stop it because there are no zoning laws! (This is also a true story that happened to another person who has been sending me e-mails from Ecuador.)
How to avoid the scam: If you buy property in any development or community, ask for a written commitment to the existing development plan, and make sure the language says that no further properties will be developed or subdivided next to yours. If you do not ask for this, do not be surprised to find the properties subdivided without your knowledge. The next time you return to your land, guess what? There might be nine houses built right next to yours, on a piece of hillside you once thought was going to be preserved.
The Inaccurate Survey Scam
In this scam, the property is described to you as being a certain number of square meters costing a certain dollar amount per square meter. But when you are about to sign the contract to purchase the property, it turns out that the square meters are wildly inaccurate, and you're actually buying a lot less land than you thought -- yet still paying the full price! I saw this happen more than once in Ecuador and Panama, too. This is extremely common. How does it happen? The surveyors are bribed, of course!
How to avoid the scam: Bring your own 50-meter tape measure, and measure the boundaries of the land yourself! Then do the math and find the actual square meters before you decide to purchase something. While your numbers won't be perfect, they'll be close enough to know if you're getting scammed. Also, don't use the surveyors recommended by the person selling the land. Hire your own surveyors.
The Hidden Lien Scam
This scam results in someone selling you a piece of property and you thinking you own the property even though someone else still has a lien on the property. Without title insurance and a title search, there's no way to know about this in advance. One day you simply find out that someone else has a claim on your property. Since liens are sometimes very complicated in South and Central America, this is one to be especially careful about.
How to avoid the scam: Hire your own attorney (don't use THEIR attorney unless you're a fool) and make sure your attorney looks over everything first, while watching out for YOUR interests! Remember, there is no such thing as title insurance in South America. Buyer beware!
Additional ways to avoid getting conned
• Never buy a piece of land without seeing it. Do not rely on websites or photos to give you an accurate sense of what's really there. You might show up and discover you bought a piece of land right next to the city landfill or a smelly pork ranch.
• Always confirm that the square meters of a piece of land are correct before buying it. Don't be fooled by the survey scam mentioned above. South American surveyors, even when they're honest, are not always right.
• Beware of the sound pollution that might exist in properties near yours. I met one couple in Ecuador who owns a nice piece of land on the edge of a valley overlooking a river. The problem is that every Friday night, pigs are slaughtered across the river, unleashing a terrible sound of squealing death that echoes across the river. Beware that there are no laws against noise pollution in most of South and Central America.
• Please note that some development communities are located near landfill dumps. There's one in Ecuador, in particular, that's located frighteningly close to a former landfill (this is NOT the community I recommended, by the way, it's a different one on the SE side of that small town). You have to ask the locals in order to find out where the old landfills are, because there are really no government offices that keep track of those details. You have to do the footwork yourself.
• Beware of cost overruns on construction! I met an individual in Ecuador who hired a local developer to build an elaborate stone driveway (with stone walls and everything) that was supposed to cost $20,000. It ended up costing over $60,000! Stories like this are frighteningly common in South America. Nobody seems to know how much something will cost up front, and if you launch a construction project with an open checkbook, you're just asking to have your bank account drained. How can you protect yourself? Ask contractors to give you fixed bids from the beginning, and don't agree to open-ended fees for construction projects.
• If you subscribe to publications like International Living be sure to understand that they have a vested interested in selling you properties (they earn around 3% on each sale), and thus they do NOT have an independent, objective viewpoint on what's available. Although I think International Living is a great publication and offers wonderful information for people looking to live somewhere other than their home country, I do not consider International Living to be 100% objective. They tend to promote the properties that earn them dollars. Nothing wrong with that, as long as you understand that's part of their business model. The best deals are found by working with LOCAL people (actually going there and dealing with locals).
Buyer beware
The bottom line for gringos seeking land in Central or South America is that you should beware of real estate scams and do not have blind trust in any local laws to protect you, because chances are, there are NO local laws! There are no zoning laws, no real estate laws and no laws governing property titles (technically, there may be such laws, but they are routinely ignored).
If you want to avoid being scammed, you must be vigilant. You must ask questions, and you absolutely must NOT trust a local gringo just because you share the same country of origin. Just because some person you meet happens to be from the U.S., Canada or the U.K. doesn't mean they're not using that built-in trust to exploit you and rip you off on a real estate deal. Remember the $100,000 ripoff deal I mentioned earlier? That happened between two women, both of whom were from the United States. One woman tried to rip off the other woman to the tune of $100,000! (And these two women got along really well and trusted each other!) Think about that for a minute before you enter into any real estate deal.
The proper attitude to hold when purchasing real estate in South America is the same attitude expressed by former U.S. President Ronald Reagan about whether the U.S. should trust the Russians to reduce the size of their nuclear arsenal. Reagan's famous quote says it all: "Trust, but verify."
In other words, don't blindly trust anybody. Verify everything. If you don't, you stand a very high chance of being ripped off.
The true stories I'm sharing here, by the way, are taken from individuals I have personally met from the following locations:
• El Valle de Anton, Panama, and Panama City
• Vilcabamba, Ecuador, and Loja, Cuenca and Catamayo
• Cuzco, Peru (and Lima)
• San Jose, Costa Rica
My favorite country remains Ecuador, in terms of the really nice local people, the cleaner streets, and the more affordable property prices. I still believe that if you're looking for affordable South American property, Ecuador is the best choice, and Southern Ecuador is the safe part of the country (Northern Ecuador is too close to Colombia).
Remember, even though real estate scams exist, South America is a beautiful part of the world in which to live. The climate in Southern Ecuador, in particular, is much like Hawaii. It offers year-round growing, clean water, virgin soils, a ready labor force to help with gardening, and safety from the chaos of North America. And even though there are real estate scams in South America, the truth is that virtually the entire North American real estate market has been one giant scam for the last five years anyway (as homeowners and banks are now starting to discover). The truth is, there are scams everywhere. The difference is that in South America, the scams are run by individuals, while in North America, the scams are run by institutions! (Banks, the Fed, etc.)
While it is true that you can lose money on a bad real estate deal anywhere in the world, the truth is that the people who are going to lose the most money real soon now are those who keep their savings in U.S. dollars and end up losing it all due to the Fed's attempts to bail out rich bankers by inflating the currency (thereby making savings worthless). In the end, which one would you prefer to end up holding; Worthless paper currency, or valuable land on which you can actually grow food?
Questions to ask before you buy property anywhere in Ecuador or South America:
• Is it FLAT? (And therefore usable...)
• What's NEXT to it?
• What is the SOIL like? Hilly land typically has poor soil.
• Is there ELECTRICITY or a ROAD to it? (If not, how much will it cost to bring that in?)
• What is the WATER source? Can you drill a well? Is it good water if you do?
• Is there SECURITY? (Is it in a community, or does it have a gate, or what?)
• Can you get a clear TITLE to the land?
• Who are your neighbors?
• Is there any hidden POLLUTION source, such as a factory or gold mining operation upstream?
Good luck to you! I hope you've found this information helpful. I couldn't resist passing it along, since I want my readers to be protected and informed if they're shopping for land in Central or South America. I've spent quite a bit of time in the area, and I've heard some really sad stories, but I've also met some incredibly wonderful people down there, too (both locals and gringos).
South America, in general, seems to attract the extremes of white folks: Either really good people or really unethical people. Almost everybody there believes in personal freedom, natural medicine, etc. Most folks are Ron Paul supporters. Most are into green living. Most really value their freedom. There are good people there, so don't let my true stories about the crazy ones scare you away. The truth is, there are good and bad people everywhere, in every country! It's all about who you choose to connect with, and who you choose to avoid. Just be on your guard. Ask around before you trust people. In the small towns, peoples' reputations are well known! If you don't speak Spanish, find a local translator, hire them for $20 / day (which is a lot of money there) and ask them to help you do a little footwork to gather some local intel on the situation.
New Report: How to Build Your Financial Safety Net, by Mike Adams
Twelve ways to achieve prosperity during (and after) the global financial crisis • click here to read
• The 7 types of income streams • 15 online resources • The 18 basic human drivers you need to know • Why the global financial crisis may now threaten your paycheck • How to earn a living from doing what you LOVE!
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