Buying Real Estate on Roatan

Or Chas’s blunt guide to what you need to know to be safe!

The Changing Situation That is Roatan

Buying real estate on Roatan has become somewhat more challenging since the advent of COVID-19. Oh, how COVID has transformed our lives! The world is markedly different from what it was just a few years ago. When people were finally allowed to travel after being confined to their homes, they flocked to Roatan like a swarm of locusts, quickly purchasing the majority of available properties. This surge in demand cleared out years’ worth of old and new inventory.

Additionally, the global economic situation has worsened for various reasons (without pointing fingers at political pundits or specific leaders or parties; inflation is a global phenomenon). We’ve gone from a period where 1-2% inflation was the norm in the first world to a current rate of 8%. Cash in bank accounts is losing its value as I write this, interest rates are rising, and what was true just last week may no longer hold true this week.

These factors are likely to lead to several outcomes in the coming years. Property prices in Roatan are likely to rise as the cost of borrowing money increases, and cash becomes less valuable. The limited inventory available will also contribute to rising prices as more people compete for a limited number of properties.

Can I Legally Own Land in Honduras?

Yes, as a foreigner, you are allowed to own up to 3,000 square meters of land, which is approximately ¾ of an acre for those from the USA. If you intend to acquire property exceeding this limit, you must establish a Honduran Corporation to facilitate the purchase. Initially, the corporation is formed by a Honduran citizen. Afterward, the corporation is transferred to you, and it is through this corporation that the property is acquired.

Can I Buy Direct? Should I Use an Agent?

Honduras operates much like other countries when it comes to real estate transactions. You can indeed purchase property directly, especially if it’s not listed with a Roatan Realty Association (RRA) agent, but it’s crucial to have a thorough understanding of the process. You should also have a lawyer you completely trust and be proficient in reading Spanish.

In Honduras, anyone can become a real estate agent by paying a government fee, but only agents affiliated with the RRA are held to specific ethical standards. The RRA was established to provide both buyers and sellers with assurances that they are dealing with ethical and reputable agents and brokers.

The RRA ensures that properties listed through their agents are owned by the seller, and all documents are up-to-date and in legal order. They verify that there are no liens, problems, or issues with the property that could hinder or affect the sale.

Should I Buy in My Name or Honduran Corporation?

It is slightly more expensive to purchase property through a corporation, but I generally advise people to consider this option regardless of the property’s size. You will need to cover the cost of incorporating the corporation, but there are several advantages:

  • When you purchase property through a corporation, the identity of the shareholders remains confidential
  • In the unfortunate event of the corporation owners’ passing, a letter can be left in the care of an attorney to facilitate the direct transfer
  • Without this provision, your property would have to go through probate

Why Should I Choose You as an Agent Chas Watkins?

Who am I? I have now spent 17 years on the island, so I know it well. I have worked in sales and been a sales manager in the USA and Australia. I have started multiple companies and been involved in technology in Silicon Valley. I have even worked as a life coach and written an award-winning scientific/philosophical book with thoughts on how to live life.

I am a buyers-only agent, which means I have no listings. My primary role is to find the ideal property for you at the best possible price, regardless of who is selling it. My sole interest is ensuring your happiness.

I firmly believe that we all have subconscious biases, and it’s challenging to remain impartial if you are a listing agent. Listing agents often have a financial incentive to sell properties they have listed, whether consciously or unconsciously.

The Offer Process

Once you have settled on a price that has been mutually accepted by the seller, all conditions have been met, and the contract bears all the required signatures, you have entered into a contract. As the buyer, you typically have approximately 5 business days to send a deposit via international wire transfer, which is usually equivalent to 10% of the agreed-upon price.

Critical: Unless there is a blatant breach of the contract, it’s vital to understand that the 10% deposit is non-refundable.

Lawyers

As the buyer, you have the liberty to select your lawyer, and you will be responsible for covering their fees and all associated government charges. Generally, the buyer’s expenses amount to approximately 6 to 6.5% of the total property price.

There are two distinct types of lawyers in Honduras: regular lawyers and notaries. Notaries in Honduras are unlike notaries in other countries. In Honduras, a notary is a lawyer who has presented themselves to the Supreme Court of Honduras and undergone questioning on various legal matters.

The Closing Process

The time it takes to complete the purchase, from the acceptance of the offer, can vary depending on several factors and may range from 30 to 90 days. Typically, I include a clause in my offers that specifies “90 days or before by both parties’ agreement.”

Numerous factors can potentially extend the closing process:

  • Holidays are a significant factor; during Semana Santa (Holy Week) or Christmas, very little progress is made
  • If the land hasn’t had a survey conducted in the past year, the municipal authorities may need to inspect it
  • The lawyer will draft the contract in Spanish and provide you with an English translation

Taxes, Utilities, HOA, etc.

Your agent ensures that all outstanding bills, taxes, HOA fees, and other financial obligations are settled and prorated up to the day of the closing. Regarding property taxes, moving forward, you can anticipate an annual tax rate of approximately 0.4% of the total property price.

Mortgages

The real estate market in Roatan and the rest of Honduras operates primarily on a cash basis. Typically, buyers are expected to provide the full purchase price at the time of closing. However, in some instances, for offers made at the full asking price, sellers might consider short-term private financing with interest rates ranging from 5% to 10%.

I strongly advise my clients to exercise caution when considering financing arrangements. Failing to meet the repayment terms can result in the loss of the property and any payments made up to that point, with no refunds.

New Construction - Promesa de Venta

One significant shift in the real estate landscape has been the increase in new construction. These apartments often sell out quickly, even before completion. A new approach has emerged around these properties, centered on the “Promesa de Venta” or promise to buy.

Contract Structure typically includes:

  • Initial 10% down payment within a few days to secure the contract
  • Upon completion, signing of the Promesa de Venta, where you pay 40%, bringing total to 50%
  • Final 50% and full closing once municipal has all necessary paperwork ready