Buying property in Colombia is a complex process, as it is not regulated in a very detailed manner. Therefore, it is essential to emphasize the care that must be taken when managing a successful real estate sale and to be accompanied by real estate lawyers.
Legal Step-by-Step
Is legal advice necessary to invest in real estate in Colombia?
Colombia offers special protection to real estate consumers through the Consumer Statute (Law 1480 of 2010), the Safe Housing Law (Decree 1203 of July 2017), Law 338, and the Single Circular of the Superintendence of Industry and Commerce. However, the real estate agent profession has many legal gaps that prevent it from being exercised appropriately. Currently, real estate agencies do not have a law that regulates them and provides them with certain protections during real estate intermediation.
Considering the above, we provide a step-by-step guide and the necessary documents to successfully manage the sale and rental of real estate as an intermediary.
To buy a house in Colombia we must have the following documents:
- Promissory purchase agreement
- Brokerage agreement
- Power of Attorney
- Confidentiality agreement
- Exclusivity agreement or pact (optional)
- Real estate brokerage collaboration agreement
- Receivable or invoice depending on each case
Legal Step-by-Step to Buy Property in Colombia
Step 1: Choose wisely and secure with a brokerage agreement
As a first step, it will be necessary to find the property to be sold. This involves using acquisition and marketing strategies that will not be covered in this article. Subsequently, it is very important to sign a brokerage agreement with the property owner, which ensures the payment of the commission. We must clearly state the bank account number into which the funds will be deposited if the deal is closed.
Step 2: Exclusivity
Likewise, an agreement or exclusivity pact may or may not be sealed with the property owner, in order to obtain the right of exclusive intermediation over the property in question; in other words, to be the only person authorized to offer said asset. In less technical terms, this step refers to the possibility of signing a contract with the property owner so that only you (or your agency) have the right to offer that property for sale or rent.
Additionally, sign a power of attorney to receive the funds if the essential condition of the brokerage agreement is met, i.e., that the property is sold as a result of our intermediation, thus preventing the owner from receiving the funds and not paying the commission.
Step 3: Confidentiality Agreements
After finding a potential buyer for the property, they must sign a confidentiality agreement with the real estate agent, including an indemnification clause established by mutual agreement, in case the provided information is misused.
It is very common in the real estate sector for properties to be sold through two or more agents, where one agent finds the owner and another finds the buyer. For the agent who found the owner to maintain control of the transaction, it is necessary to sign a confidentiality agreement with the agent who found the buyer, ensuring that the information is kept confidential, under penalty of paying mutually agreed-upon compensation.
Step 4: Collaboration Agreement
It is also necessary to sign a collaboration agreement for real estate intermediation with the agent who found the buyer, so that if the buyer decides to purchase the property, the buyer’s agent receives a portion of the commission.
Step 5: Promise to Purchase Agreement
Following the buyer’s decision to make the purchase, it is necessary to draft a promise to purchase agreement where the promising buyer commits to making payments to the owner for the future purchase of the property. This promise to purchase is fundamental because it will provide security to real estate intermediaries when receiving their commission. In the same promise to purchase, the commission percentages allocated to the acquiring agent or agents (if there are two or more) are established. It should be noted that for the promising buyer to sign this contract, it is necessary to demonstrate payment capacity for the purchase of the property and to have credit approved by the financial institution if necessary.
Step 6: Title Study
In most cases, it is of great value and importance to conduct a title study of the asset, in order to determine if there are any obstacles to its transfer or acts that could jeopardize the buyer’s future ownership. Also, given that we live in a country that has suffered for so many years from the scourge of drug trafficking and armed conflict, it is valuable for the study to review each person mentioned in the certificate, in relation to the Anti-Money Laundering and Terrorism Financing Risk Management System.
Step 7: Signing the Promise and Going to the Notary
After signing the promise, a term will be established for the notarization of the property in favor of the promising buyer. It is necessary to have a collection invoice or bill, where the property owner commits to paying the commission value to the involved intermediaries. This document has the value of an executive title and will be much easier to collect legally, both in terms of evidence and the time the procedure takes.
In conclusion
Real estate intermediation in Colombia requires more than just finding buyers or sellers: it involves following a well-structured legal process that protects the interests of all parties. From the brokerage agreement to notarization, each step ensures transparency, the right to commission payments, and legal certainty.
Applying this step-by-step approach not only professionalizes your management as an agent but also provides you with legal support in every transaction. If you seek to close sales with confidence and avoid future problems, this approach is key.
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