Who's this guide for?
So...you’ve found your dream home in the Dominican Republic!
Maybe you've got your eye on a great condo by the beach near Sosua. Or a hillside villa overlooking Puerto Plata. Or maybe you discovered a place near one of the fab surfing spots close to Cabarete.
Whatever your dream, you’re now ready to take the first steps to make it your own...
Below, we outline the entire process to follow when purchasing a home in Dominican Republic, step by step.
What you need to know first
Okay, so you’re looking for—or at least, you’re seriously thinking about—buying a home somewhere warm.
Good news item #1:
In the Dominican Republic, there aren’t the same restrictions on land that you’ll find elsewhere in the Caribbean and Central America.
Foreigners are allowed to purchase land in the Dominican Republic with the all same rights as citizens.
In fact, it’s spelled out in the country’s constitution!
Good news item #2:
The real estate market is structured like it is in North American. This is a good thing, because it gives you, as a buyer and owner, full legal protection.
This isn’t the case in a lot of other places in the Caribbean (and in Mexico). One of the great things about the DR is that it has a fully regulated system of land titles.
What does this mean?
Every property has a title that spells out who specifically own it. When you buy a property, your name goes on that title. In other words, you have full legal ownership of both the house and the land, or for a condo, full ownership of the unit.
Good news item #3:
The process to purchase property in the DR is a lot like it is in the United States and Canada.
With an experienced agent and the right lawyer, you'll have no trouble finding and buying your Caribbean dream home.
New Builds vs. Pre-Construction
When buying a home, you’ll be looking at one of two scenarios:
a) You’re buying an existing home
b) You’ll be building a new home
By an existing home, we're talking one of two things:
1) A new home still owned by the developer and not yet sold to anyone.
2) Or a resale, so previously owned by another individual and is now on the market.
The other scenario is that instead of buying an existing home, you’re going to build a new home.
You’ve got your eye on a piece of land and will pay a developer to build a new home, sometimes based on an existing design and other times totally custom designed.
Either way, this is called pre-built, and the process has a few differences.
Timelines for existing and pre-built homes:
For an existing home, a deal can be finalized within weeks or even days.
When you build your own home, obviously construction takes time. So the time from when you reserve a lot until you move into your new home will take at least several months.
For a pre-built home, the price for a given model or design is only an approximate at this point. Various factors could affect the actual final cost, for example if the lot is sloped, which will affect construction costs.
A good agent can estimate any extra costs using benchmarks based on previous builds.
Make an offer (or reserve a lot)
If you’d like to purchase a home that’s already built, you and your agent will prepare an offer.
Your offer outlines the important details about the purchase:
- the price and what’s included in that price
- what payments you’re going to make
- when you’ll make those payments and how
- details about taking possession
- other important information.
Making an offer for a pre-built home
On the other hand, when you’re constructing a new home the process starts a little differently.
You need to first choose a lot to build on, which requires a Reservation of Sale.
The Reservation of Sale, along with your deposit, reserves the lot you’ve chosen.
No surprise there.
In a nutshell, it clearly describes the lot, including dimensions and location—and of course, the price and any conditions.
Usually, the price isn’t negotiable, at least of pre-construction and new builds. However, for resales, you might be able to negotiate with the seller on price.
Transfer Your Deposit
When purchasing an existing home, you’re not going to pay the deposit to the seller just yet.
The seller won’t actually receive the funds until after you’ve signed the Promise of Sale (more on this later).
For now, you’ll transfer the deposit to a third party, for example your agent or lawyer, who will hold the funds in a trust account.
A deposit is usually between $5,000 and $15,000 US. Transferring the deposit signals your commitment to your offer.
At this point you won’t yet have paid the deposit to the seller.
If for any reason either you or the seller decides NOT to move ahead with the deal and sign the Promise of Sale, you will get your deposit back.
However, once you’ve signed the Promise of Sale, the seller receives your deposit and there’s no refund.
Making an offer on a pre-built home
For pre-built, the deposit serves a different purpose: it reserves your lot and it’s usually non-refundable.
Typically, if you’re reserving a lot for a new home, the amount of the deposit will be towards the higher end (so in the $15K range).
This is because it covers initial design and construction costs (like reserving materials).
Once you’ve reserved your lot, you’ll need to choose a model and design and settle other construction details. To get this done, you’ll work with the developer’s architect and designer.
This is the fun part!
You decide which add-ons to include, for example an extra room, larger bathroom, rooftop terrace, etc.
Depending upon the developer, you’ll have more or less leeway for these types of customizations.
Find a reputable lawyer with a U.S. based trust account. That way, you can easily transfer US dollars to the Dominican Republic as required.
Sign the Promise of Sale
If the seller accepts your offer, the next step is for you to sign what’s called a Promise of Sale. This document is going to outline most of the information in your initial offer, as well as a few other terms and conditions.
For pre-construction, your Promise of Sale will also include the developer’s quote. it outlines what they’re going to build and for how much.
In other words, the scope of work and the price.
Upon signing the Promise of Sale, your deposit will be released from trust and sent to the seller.
What's Included in the Promise of Sale?
The parties involved
The first section names the buyer, and the seller and describes the property, including size, rooms and location. The rest of the document then lays out various terms and conditions.
Price and payments
The first set of conditions states the total price to be paid and details about payment, including number of instalments, timing of instalments and how payments will be made (say, for example, via an escrow account).
Outlines the release of the deposit to the seller, with any conditions. Once you sign this document on the dotted line, you’re agreeing to release your deposit from wherever it’s being held.
Taxes and adjustments
States that the seller is responsible for any outstanding taxes on the property. If you’re exempt from any expenses or taxes related to the sale this will be clearly outlined here too.
This will state that the seller is responsible for providing the title to you, free of liens and other claims.
Details the date you can take possession of the property, and conditions that must first be met, typically a dollar amount that must be paid.
Make sure all the details are in writing. Don’t ever rely on a verbal agreement. And don’t ever sign a generic offer; make sure the offer is specific to your purchase.
Your lawyer will now conduct a title search.
The title is a legal description of the property and buildings on it, as well as the location of the property. Most importantly, it states who has legal ownership of the property.
To search, your lawyer will look at the title to see if there are any liens or lawsuits associated with it. You don’t want to be on the hook for these, so if anything is found, the seller will need to remove these—or the deal is off.
For pre-built, a title search shouldn’t be necessary. The developer should have clear title on all properties.
If everything looks good on the title, you’ll then release any conditions in the contract.
You’re ready to buy your new home!
A good agent will know which developments have clear titles and which ones don’t have proper title—and make sure you don’t waste your time with these properties.
Now, it’s time to pay for your purchase.
Like you did for the deposit, you’ll transfer all funds through a 3rd party, possibly via a trust account that your lawyer set up for you.
Any money to be paid will go in the trust and then released when the order is given.
You’ll transfer funds for the remaining balance owing at this time. Usually, this means paying all of the outstanding balance, so the agreed price minus your deposit.
In some cases, your agreement will only require a portion of the total price, say 50%, at this time. You’ll be able to take possession at this point, but only have to pay the remaining 50% after a certain date, say in 3-4 months.
If you’re financing part of the purchase, you’ll pay whatever’s required to cover the down payment.
Payment: pre-built homes
For pre-built, this is when you’ll transfer your first instalment payment, which gets construction going.
This first payment is usually around 30-40% of the sale price, minus whatever amount you paid for the deposit.
During the construction of your new home, you’ll continue to transfer instalments as construction meets key milestones.
Before officially taking possession of your new home, you’ll need to do a final walk-through with your agent and the builder, developer or current owner to make sure everything looks good.
This walk-through is especially important for pre-built homes.
You’ll likely have visited one or more times during construction to monitor progress and inspect the build as key milestones are reached.
The final inspection is your last chance to make sure everything has been built to your specifications.
If you're not based in D.R., for the final inspection, you’ll fly down and stay within the development or at a place nearby (some developments will cover the cost of your stay, others won’t).
There’s absolutely no reason to rush the final inspection. You want to take your time. Be a stickler. Make sure you’ve spoken with your agent and know exactly what you need to look for. Before you go in, put all the details you need to inspect into a thorough checklist, and as you do the walk-through, write any deficiencies you see down on paper. Take pictures!
Many real estate agents don’t understand construction and what’s involved in building a home in the DR. So they don’t know what to look for or which questions to ask. You need to make sure your representative has the knowledge and experience to spot deficiencies.
Sign final agreement
It’s now time to sign the final agreement, which is called the Agreement of Final Sale.
If you’re financing through the seller, the final agreement will include a mortgage addendum outlining the rate, term and payment schedule.
At this point, the title will be transferred, meaning the developer’s name or previous owner’s name is removed and yours is added to the title.
You’re now the sole owner of the property.
Your new home is now yours!
How to choose an agent and lawyer
First, find an agent who can represent your interests.
- Your agent should REALLY know the real estate market on the North Coast.
- Not just what’s for sale and how prices compare. That’s pretty standard.
- Your agent should also know the specifics and the pros and cons of each development.
- And a good agent will understand construction, how homes are built in the DR, and be able to spot quality building.
A good agent will want to find you the home that’s best for you.
And of course, once you’ve found a good agent, make sure you follow his or her advice!
As well, you’ll need a lawyer who’s familiar with real estate law in the Dominican Republic. Because the DR has a rules-based real estate market, a lawyer is critical.
The lawyer will prepare documents and make sure the process follows the proper legal path. All the paperwork will be prepared in Spanish and can be translated into English for you.
Dreaming D.R. can help you find an independent lawyer in the D.R. who can fully represent your interests.