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Property ownership laws in Honduras are favorable for foreign nationals since the Honduras Constitution (Article 107) was amended in August 1990 by Decree Law 90/90 and its implementing regulations published in October 1991. From that time forward, foreign nationals may personally own (as ‘fee simple’ or freehold) up to 3,000 square meters.
For the most part, the real estate purchase process in Honduras is an easy, uncomplicated process, if performed by a competent real estate broker and with the help of a qualified Honduran Notary and Lawyer.
Foreigners, as individuals, are not able to purchase more than 3,000 square meters of land which is about 3/4 of an acre - or 1Â½ acres for a couple buying the land together - and must build within three years. This, however, does not make it impossible for you to purchase a parcel of land that is more than 3,000 square meters. To overcome these limitations, you must form a Honduran corporation. Forming a corporation in Honduras is an easy process with the help of a qualified lawyer. The cost is about $1,200 to $1,800. If you don't speak Spanish, an English speaking lawyer is essential, as all documents have to be written in Spanish. We can recommend a reputable bilingual attorney for you, if needed. By forming this corporation, which you will fully control, and by designating yourself general manager and administrator, you are entitled to all the rights of a Honduran citizen regarding ownership of your property. When purchasing land in Honduras, it's important to understand the documents needed for clear title. To protect your investment, a qualified Real Estate Broker, Honduran Notary and Lawyer should assist with reviewing the documents. Title insurance is also available.
The Purchase Process
Once you find the property you like the Broker will write up an offer to purchase. The offer will contain a paragraph which talks about an "earnest money deposit" which is 10% of the purchase price. The earnest money is wired to the Brokers or Notaries escrow account within 72 hours of acceptance of the offer, or within 72 hours of you returning home. The balance of the purchase is due at closing which is usually within 60 days.
Closing can be handled in several ways.
The first option would be for you to return to the island for closing and sign the papers in person.
The second option, which is very common, is where you would have a limited power of attorney created (POA), appointing someone else (your Honduran Notary or Lawyer) to close on your behalf and accept title in your name.
A third common option is in the articles of the constitution of your Honduran corporation (if one is being formed) you appoint someone to close on your behalf, similar to a Limited Power Of Attorney.
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. This takes several weeks. The lawyer then delivers your title to our office where we keep it safe until you come to pick it up, or we can forward it to you via international courier.
Purchaser’s Closing Costs
You should budget for 6% to 8% of the purchase price which should cover all additional costs, including 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. Real estate agents charge 10% commission, usually paid by the Seller. Property taxes are extremely low. Forming a Honduran Corporation, taking a mortgage or purchasing title insurance, would incur additional costs. If you buy your property using a Honduran corporation, many lawyers will give you a package deal, which includes the corporation and the transaction. This could save on your overall expense.
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. Many buyers will refinance their homes or other collateral in the U.S. in order to purchase property in Honduras since the interest rates are much lower in the U.S.
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.
Your lawyer will conduct a title search, and also register ownership of the property via a document called an Escritura Publica or Dominio Pleno. Your lawyer will make sure that the title you are transferring is official. A publicly registered document has a square stamp on it with the court's registry number. If a survey is not furnished, you may need to hire a surveyor to determine your property's boundaries before your land documents can be registered. Escritura Publica means it is and was a public document when transferred. Dominio Pleno means that there was not a prior public document and a judge had to make a decision to grant title to a property owner based on his testimony and documents. Notice would then be posted for 30 days. The judge will verify ownership by talking to the surrounding property owners. When he issues Dominio Pleno, it is then a public document and holds as much validity as an Escritura Publica.
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