Three Steps to Buy Real Estate in Chile
- Category: Real Estate
The three major phases of any property purchase in Chile are: negotiation and title search, contract signing or closing, and title registration and payment. Each particular property purchase may have many other considerations, the timing of these stages may very greatly; but, broadly, all properties in Chile will go through these three steps or the property purchase sooner or later, or it is not a legally valid or complete purchase.There is one additional phase, that is generally optional, but common. We could call this the “preliminary negotiations and purchase agreement phase”. Sometimes it is useful to lock in the general terms of a property purchase with a formal promissory agreement, prior to the completion of a title search or other work on a property. This contract is exactly what it says, a "promise" to go through with a purchase if certain conditions are met. It is not legally binding in so far as it will force a property transfer, but it can contain conditions or penalties for the buyer and seller if they do not go through with the purchase. For example, sometimes 10% of the value of the property is posted in escrow to encourage the parties to fully complete the purchase. This instrument can be useful while a title search is completed; perhaps a property needs to be subdivided or some other tasks / procedures done before the other formal phases can move forward in the purchase. Again this step is optional, and depends on the particulars of a purchase.
1. Title Search Phase
This is the detailed investigation of the property. A qualified attorney must collect all legal documents related to a property in Chile, and examine in detail the status of the ownership rights and obligations of the seller. The question to be answered, is the property and the seller in a legal position to fully transfer the property? This can range from answering if the seller is really the owner, to much more complex issues such as a title that does not exist at all and must be reconstructed.
Although, people do sometimes purchase property without a title search it is extremely risky, and simply foolish, to purchase property anywhere without knowing the full legal status of the property you are buying. A full title search is also the basis for the correct drafting of contracts in the next phase. Without a title search, you may not own the property free and clear until the statutes of limitations run out, between 10 and 30 years in the future. In some cases, you may never legally own the property, if some form of fraud or essential legal error was made.
Although, people do sometimes purchase property without a title search it is extremely risky, and simply foolish, to purchase property anywhere without knowing the full legal status of the property you are buying. A full title search is also the basis for the correct drafting of contracts in the next phase. Without a title search, you may not own the property free and clear until the statutes of limitations run out, between 10 and 30 years in the future. In some cases, you may never legally own the property, if some form of fraud or essential legal error was made.
A title search MUST be conducted by YOUR ATTORNEY, and no one else. Notaries do not conduct title searches, real estate agents are not qualified, and property registries are not legally allowed to conduct title searches, even banks issuing mortgages for a purchase are only conducting a title search to protect the bank. We often must tell clients to simply walk away from a purchase that is too time consuming and costly to complete, or it is simply a bad purchase (e.g. the seller has no right to the property). Most problems with real estate in Chile, are found at this phase. Thus, we consider skipping a title search to not be an option for our clients.
Typically also at this point in a purchase, final details of negotiation such as price, logistics of where and when the transfer will occur, verification of property lines, and many other things may occur. If problems are found with the title search, this is typically when they should be fixed.
2. Buy / Sale contract signing (a.k.a. real estate closing)
A contract must be signed at a Chilean Notary Public in Chile, and in no other form, for a contract to be legally binding for real estate in Chile. The sale or purchase of property is void, by any other method. You can not receive and accept an offer for property by such things as letter, email, or any other methods.
At this point, payment for the property is traditionally deposited with the notary public in the form of a bank counter check. It is placed in escrow with the notary public, along with instructions for either its release to the seller or return to the buyer, should certain conditions obtain.
3. Title registration and payment
The notarized buy / sale agreement will be submitted to the regional property registry. The regional property registry will either include the property in the official real estate registry; or, in the event of problem, reject the registration with an explanation. Also, at this point certain things like mortgages or other limitations on the transfer will be registered on the title.
If all goes well, only after the property is registered at the regional real estate registry, the seller will receive the bank counter check.
Again, there are nearly infinite ways a property purchase may stray from this general phases, but most nearly all property transfers will go through these steps sooner or later in one form or another. For example, in the case of a property purchased by a mortgage, the final phase of the title regeneration, with a fully registered title in your name, may not occur for years when the mortgage registered on the title is lifted.
