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Something to think about- When buying property

The following is my opinion.

The economy is PR has driven many people to loose their homes or move to the states, this means that there are good properties for less than in 2006 at the hight of the economy.

While you can find a good deal, neither the banks nor the people are giving their property away.Investments firms are buying cheap promising properties from the banks and putting them up for sale. In order to compete with them you need to go to the Auctions and bid on properties (which I plan to do in a few years for rental units).

You are not likely to find super cheap properties like 20K or anything less than 50K unless the roof has fallen thru and the windows are holes in the walls that allow rain to get it and trees are starting to grow inside the house. Most properties in PR sell for 150K to 400K, you can get something in the 70-100k in an "Urbanizacion" where houses are almost touching each others and you can hear the conversation on the house next door. You can find a plot of land in the middle of nowhere up in the mountains fairly cheap but you will be far from Supermarkets, Pharmacy, doctors and not likely close to the sea or most things a mainlander would be interested in. You can always get lucky and find a little property with water front but those are very hard to find and getting there may be a problem unless you travel by boat. I said water front, not BEACH.

The board imposed on Puerto Rico, PROMESA, could help the island recover or may make matters worse in the short term by squeezing money out of the economy, raising unemployment and selling the best properties to foreign investors in order to pay the bond holders. It is hard to say which way it will go since they have not yet even started planning what they will do. Likely they will do next to nothing until Feb next year and that will be just their first step, so do not expect things to get better in the next 2 years.

Likely you will not see any benefits until at least 5 years from now.

So ....... It is very important you understand that if you buy a property, it is not likely to go up in value by much for at least 5 years and if you try to sell it, you will be among the tens of thousands Puerto Ricans with a property in the market that will take at least a year to sell.

Pick something that you can afford, it is in a good area and that you do not plan to sell for a long time, if you are not sure, then rent until you find what you want. It makes no sense to buy a property with the idea of making money the short term, you may end up selling cheaper than you bough.

SO get something nice and over the next 3-5 years make improvements to the land and house/condo that others will appreciate but make sure you still make yourself happy with the changes, you will be living there and there is no need to be miserable making marketable improvements that will not pay of for many years.

I will be  building in my property and have no plans of ever selling the place, what I will build will be for my family and my enjoyment. So to me makes no difference if the house prices go up or down as I am returning back for good to PR and will be buried in the family plot.

Some of you may disagree with what I stated above, but like I said it is my opinion and I am trying to open your eyes and help you get something you will be comfortable in for a fair price. Not trying to sell you the equivalent of the SF Bridge for a song.

Which you all luck.
Rey

Rey -

I know others have access perhaps to better data, but Zillow shows over 5700 properties currently for sale in Puerto Rico.  Their listings would not typically include those for sale by owner or otherwise not listed with a real estate firm that shares its listings.  So, maybe the real number is 7000.  Who knows.  Regardless, when I look at properties in areas I tend to follow it is not surprising to find a lot of properties that have been on the market for six months and some literally for years!  So, my unofficial assessment is that generally prices have yet to adjust down to demand in many cases and sellers generally are still pricing at "hoped for" prices, not realistic prices.  In other words, reality has not sunk in for much of the sellers.  Buyers should be aggressive and patient in their offering.

You are right SawMan, the sellers think they have gold and the idea that things have changed have not yet sunk in. A year or two with few if any bites does tend to make them see reality. But it does take a while for it to sink in. Also pride get in their way.

Not all locations and house styles are going to move or attract the right buyers.

A seller will see a low ball offer from a potential buyer as trying to steal the property from him or as an insult. It is best to have the realtor talk them down over a period of time and make them see reality. Unfortunately a lot of seller agents tend to just walk away from the property because the price is too high and while they may have the contract to sell it, then just let it sit there and not promote it or bother to show it. Usually a second realtor will be the one that talks them down after the property been sitting with no offers for a year.

A big motivated seller is one that sees a chance to loose the house to the bank and if that happens, all the previous money is lost. So he needs to sell in order to get some money from the property. Banks are not really motivated sellers, they prefer to just auction off the property and be done with it. If they would sell the property for what is left in the mortgage plus 10% more, those properties would move fast, but they opt instead for auctioning to get a lot more than what the poor fool that lost the property had left to pay. However the banks move slow so a property may not go on the bock for a year or more, mean time it decays and becomes a forest. a nice house for 300,000 may only have 40K left to pay, but in auction, the bank may get 150K from it for a profit of 110k after paying off the morgage.

There are also a lot of properties that may never be sold, these are houses that have no debt but the owners died and nobody can find all the inheritors, if one is missing typically the others can not sell it or take it over so the house just dissolves and brings drug users, homeless people and vermin of all kinds.

If you can wine and dine a bank employee maybe he/she tell you which places are in trouble and you can talk to the owner and see if you can take over the mortgage and throw him a few K above that. However it would be rather illegal for the bank to disclose that info.

Many sellers are upside-down on their mortgages, and banks don't do short sales in PR. It's also difficult to get financing, since FNMA and FDMC abandoned PR 8 years ago, and sellers have to come up with more down payment and better credit ratings to qualify. As a consequence, many sellers are stuck with properties they can't sell.

Furthermore, properties have to appraise to the sale's price, otherwise the bank won't lend, so it behooves no seller to overprice a property,  unless an AITD or cash sale is negotiated where there is no financing involved. Sellers and buyers can also do trust solutions, but I doubt few agents there even know what that is, let alone have a clue how to set it up.

I purchased my apartment at a fair price. For me it was about potential and the location. Old Town will always be desirable and I might not get much, if any, equity for a while, but that's OK. In the meantime, I have this awesome place where I can wake up to ocean breezes and the crash of waves.

People just a few bullets

Financing options are available FHA FNMA RURAL VA are welcomed but you need to consider each program has guidelines.. theres more than meet the eye when you say "this is going to be my primary residence"

Buy cheap in good places as opposed as cheap in bad places... is simple bad places are always cheap for the same reason.. nobody wants them

Check the areas, buying without doing proper assessment can bring lots of unwanted disappointments and you don't want to start with the left foot, climate demographics economy cost of living adjustment employment education health services sometimes people come to me with properties just because price that's a huge no no, right now there are endless possibilities buying good real estate why bother buying cheap real estate that even the locals won't by??.. things to consider

Finally buy where you feel happy where you want to wake up every morning either mountains sea view or beach front..ask yourself what is your happiness and well being worth??.. after all once you bought it your stuck with it for a while, in a buyers market... lot of properties  not that much buyers

Some people has said that there are gringo prices, there is some truth to that but it is not gringo related. It is mostly paying too much because you do not know what is a fair price and the seller is always asking too much. Being native help, some people on their own have offered to drop prices by 20K for me because our great grand parents knew each other long ago (no Joke). Unfortunately the place did not exactly meet my needs, but the price was very reasonable for PR (120k for a well maintained 4 bedroom, 3 baths, 2 car garage plus 1/2 acre fenced in concrete with electric gate). He was hinting that he could possibly go down another 10K before I told him no.

I highly recommend getting a professional to appraise the property and if you are using a buyer-agent listen to your agent and ask what would be fair for the offer, the buyer agent is working for you, ask him/her if they noticed anything you can use as a barganing chip to lower the price. If you can talk to the seller, see how motivated he is to sell and what is driving him to sell. In PR people will tell you things that are not good for them to tell you. Use what you can to lower your price.

No matter if you are buying cash or using a bank, get the property appraised. If you don't you may kick yourself later for paying what would be fair in the states, but over paying for PR (Gringo Price).

During one of my trips, I saw a house that the wife and I loved for a bed and breakfast, 4 Bedrooms (huge master), 3 bath, 2 dining areas big enough to sit 16 people at a table each. Very large kitchen. It had apprised 3 years before for about 440K. It was in the hands of investors and the house was left empty for about 3 years. During that time they had stollen all the fixtures, pulled the wiring from the walls, stolen all the appliances, some of the exposed pipes were gone, and some windows have been stolen. They were trying to sell it for 140K but when I got the numbers to restore the house to its full glory, the number was like 90 to 110k. A little outside of what I wanted to pay. The area was great, a fairly flat 1.2 acres at the foothill of El Yunque, in an exclusive neighborhood, 10 minutes from Luquillo Beach. The freacking house inside even had an inside garden in the middle of the house with skylights and a bridge to walk across it, plus a small fish pond. A perfect Bed and Breakfast place. The kitchen pantry was about the size of a bedroom, easily 5,000 or more square feet open layout house and a 4 car garage. But the repairs were more than I could afford at the time.

There are real bargains out there if you can afford the repairs and you dig deep.

I don't get the point of paying for an appraisal before making an acceptable offer. Comps are free and if a buyer does his homework, he and his agent will know what fair market value would be. And if the property doesn't aprraise after the offer is accepted, the buyer can't get financing anyway.

And as far as FNMA and FHA, etc. is concerned, the guidelines have severely tightened for PR. You can forget it for Old Town. It's often available on new construction, for example.

If you're willing to do a little work, you can find really good deals with the FNMA "Home Path" program.

Well banks have ways to asses risks and they can put additional stress on approval, remember now they are responsible on what or who they lend, no more sorry!... I worked as a mortgage branch manager, loan agent for new developments unit in 2 of the island largest banks for 20 yrs and been a real estate broker since, one of the worst problem a bank faces is that he doesn't know the client, the client have no roots here hence is easier for a client to flee, when real estate was gold banks lend to anyone I did 100% financing without insurance with 500 score!! even second homes!... they shot themselves in the foot, as many people just turn their keys or just left the island letting those properties rot.

So now more than ever is very important that you team and be willing to pay, the right professional one that knows both financing and real estate, it can make all difference in the world between a flunk or a sound decision, some people expect 24/7 availability, concierge, financial advise, etc etc etc... but are not willing to pay adequately and that's a reason why some agents won't bother moving a finger, however they expect 5 star service, many times I've been a buyers agent more than a lister, gone out of my way to save a client pains chores and thousands only to get a cold thank you, because not even a single water bottle being invited after being showing them around not properties but the island, having all this experience.. its true many agents get lazy, and after all who wouldn't like to earn 3-6% commission without moving a finger or two?..be honest... not the way but it happens..not to me yet anyway!!!   :D

I got a couple from US that after a month going around the island and 30 homes later, found them a property got them the offer they wanted and at the end they just step back and left, they promised 6% on a 380k home even if they didn't bought it.. all I got by mail was a mere $1,000.00 after a months work.. you learn fast... what if this happens to you ?

Well the best way to get real out of this world service from anyone no matter the industry be good business, be a nice client too, know your agent, respect your agent, be nice, teamwork, be his friend and be honest let him work and if you don't feel you are getting what you deserve tell him in a good way and be sure he understands you if not look for another, be reasonable but don't make him waste his time that's no good karma

And if earned be generous is not a good business when only you win my biggest satisfaction is your satisfaction, but remember this is how I earn life.. no salary no certainty only the good faith of doing well to somebody who will appreciate it.

Good night

FYI: realestatepr, I was an agent myself in Southern California, one of the hardest markets in the country, where the disclosures were 100 pages long, and escrow couldn't close without buyer and seller signing off on the CC&R's (sometimes 3 associations were involved) and more.

I bought my apartment in PR over a year ago, and STILL have not received any association CC&R's, nor any budget reports, financial statements nor list of the officers and contact info. for that matter. Before closing, I refused to sign unless received, was promised I would and never did.

Sorry, but PR has a seriously corrupt real estate industry, and had it not been for the fact that I knew the business, I'm not sure I could have closed on a property there. 

My broker/agent was born and raised there, his family was traced to Spanish royalty, he knew everybody. Yet, I negotiated my own contract with the seller, wrote it up, hired an attorney and got it done. For doing nothing but show me the listing, he got his 4%.

Well seems you are having very bad luck with your agent and chosen property HOA probably exactly what I mention as lazy and more, its a human tendency I guess and if you add the island time mentality, well.. the HOA is composed of residents just talk to the president go to meetings and see if your needs might be met, as part of buying a condo or gated community I always advice buyers to go and meet admin.. ask for details, after all you'll be living with them until you sell.. BTW I have many happy customers hope you can be one of them someday!

If you need any help just reach out!

RealstatePR: I wanted VSJ specifically. It was a pocket listing.

VSJ=Old San Juan??

Yes.

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