14 Things We Learned Buying a Home in

Puerto Rico
Nov 11, 2014

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Weedy foreclosures, se vende signs everywhere, Homepath bank-owned homes, even in nice
neighborhoods The Puerto Rican real estate market feels like scorched earth. 2008 hit hard,
and housing never really recovered. Of course this is what makes it so interesting.
Puerto Rico may look a bit rough around the edges, but certain areas hold much potential. Big
money, attracted by the Act 20/22 tax incentives, has started to invest. You can see it on the
streets of San Juan in Condado, in Palmas del Mar just outside Humacao, and along the main
drag in Dorado, home of the recently opened Ritz-Carlton Reserve. Seeds of investment have
been planted, news of the incentives is spreading, and more people are coming to check out the
island.
The hubby and I bought a condo on a golf course our first visit out. This was not something we
planned, but after five years of renting, we found just the right place to put our stuff. Plus we
could get lending, and the math made sense. If we didnt end up liking it, we could rent it out
profitably.
The buying process was definitely different here. As a real estate agent in Nevada for six years,
Ive represented clients on 65 closed transactions, with an additional 14 personal transactions
over the years in Nevada and California. I only mention this so you understand Im no stranger to
the process.
That said, its a little wild west down here, so you need to be careful. Here are 14 things we
learned along the way that may help you if youre a mainlander contemplating a property
purchase on the island.

1. Puerto Rico has an MLS, but hardly anybody uses it.

Yes, theres an MLS, but the majority of local professionals advertise on Point2Homes.com,
which appears to be the most updated, comprehensive source for agent represented listings on
the island.
Be prepared, however, to see the same house listed by more than one agent at different prices,
bad data, no data, and way-out-of-date data. For example, that amazing beachfront condo you
found in Condado for the unbelievable price? Don't be surprised if it sold over a year ago.
Another good source of current homes for sale is Clasificados Online, aka the Craigslist of
Puerto Rico. Here youll find both agent-represented and for-sale-by-owner listings. Keep in
mind, though, if you go it alone and start calling people, basic conversational Spanish skills will
be useful as not everyone on the island speaks fluent English.
2. Commission structures are different, and this may affect what your agent shows you.
Stateside, commission paid by the seller often falls in the 5-6% range, and half commonly goes
to the cooperating broker/agent who brings the buyer. Brokers offer buyer agent compensation in
the MLS, which makes it easy for them to bring clients without having to negotiate payment.
This is why buyers agents are more common on the mainland.
In Puerto Rico, except for brokerages specializing in luxury properties, commission rates for
sellers run in the 2-4% range, and listing brokers often get all of it by working directly with
buyers who contact them. Buyer agents are far less common here because the car-dealership
business model prevails, which means, brokers acquire listings to attract people who will buy
their listings. So when you call an agent about a house, hell steer you to his listings, since
selling that inventory is how he gets paid. When he runs out of properties to show you, thats it,
hes done. You move on to the next property and talk to another agent. That's why its common to
work with several agents during the home buying process.
If you do happen to find a buyers agent, understand that because theres no MLS standard, each
commission split on each property has to be negotiated individually. That means your buyer
agent has to negotiate her paycheck on every house up front with the listing agent prior to
showing it, because she understandably doesnt want to waste time on a property if theres no
way shell get paid. So unless youve signed a buyer brokerage agreement where youre the one
paying the buyer agent commission at a pre-negotiated rate (a good idea) understand you may be
seeing a limited selection of homes based on whos willing to share their paycheck.
3. Its a miracle if you do find a good buyer agent because their job is 10x harder than on
the mainland.
Some agents do take on buyer clients, but you should know that in Puerto Rico, preparing a
simple property tour can be a truly epic affair. Theyll call other brokers to show advertised
properties and hear things like, oh, that property sold five months ago, the owner changed his

mind, sorry it cant be shown, its coming soon but not available yet And thats if they even
bother to call back. Apparently some local brokers dont pick up their phones or return calls.
So your future home choices in Puerto Rico may depend on which listing agents actually
respond, which have real sellers ready to sell, and who is open for business that day/week/year.
Since theres no MLS association making sure brokers behave by providing reliable, accurate
data, brokers tend to do whatever, resulting in lots of phantom inventory.
4. Comparable sales data is available, but from a different source.
The lack of widespread MLS participation on the island means that comprehensive, comparable
sales data is not available via this affiliation like it is on the mainland. There is, however, a thirdparty data service called TasaMax that bank lenders, mortgage brokers and real estate
professionals subscribe to that fulfills this need. So if you find a property that looks interesting
and want to make an offer, ask one of these professionals to run a comparable sales report for
you.
You can also subscribe to TasaMax as an individual, which is fantastic for those who like to dive
into the numbers and do their own research. Believe me, sellers here have no problem asking
crazy high prices for their beloved properties. You dont want to be the guy that overpays, not
knowing the market, so check comparable sales before making your move.
Also, square footages are approximate, so dont trust anybody on this issue, not even your
friendly, helpful agents. Bring your own tape measure and check it yourself, or better yet, get a
professional appraisal, even if youre paying all cash.
5. Verbal negotiations are done up front, and everybody uses their own purchase contract.
On the west coast where I come from, agents encourage buyers to make offers in writing, then
the parties negotiate from there. The contracts themselves are standardized within the MLS
system based on member input. This enables agent-members to become extremely familiar with
one local, customary contract. They dont need to create a new one every time or worry about a
bunch of unexpected gotchas, because all the agent-members simply customize the boilerplate
purchase agreement for their clients needs.
In Puerto Rico, everything is negotiated verbally before putting it in writing, which in a way is
more efficient. Each broker uses his own standard preferred contract, written to favor whichever
side he represents. So again, its buyer beware, especially if you are working directly with the
listing agent. Because while he may seem friendly and helpful, you must remember that his
fiduciary duty is only to the seller, with whom he signed the listing agreement.
6. Agreements are structured as option contracts, and deposits are bigger.
On the mainland, contracts between buyer and seller are typically structured as purchase
agreements. The buyer puts up a modest bit of earnest money, for example maybe 1-2%,
contingencies are defined, buyer and seller perform during the due diligence period, and if

everything goes according to contract, money changes hands, the deed is conveyed and title
recorded.
Here in Puerto Rico they commonly structure contracts as option agreements. Buyers put up
option money rather than earnest money, and the amount is much larger, traditionally 5%, which
I think is why people do so much verbal negotiation up front as nobody wants to put down that
kind of money with out being absolutely sure about terms.
Option money is deposited with the listing broker into a trust account, which was a little scary
for someone like me used to dealing with escrow companies (they aren't used here). But there is
a department of real estate on the island, and brokers are licensed here, so rest assured, there is
oversight.
7. You simply must have a lawyer, even if you have an agent on your side.
Again, its a bit loosey-goosey down here compared to the states. Given the lack of a
standardized MLS contract, and with everybody doing their own thing, the few hours in attorney
fees you pay to have someone contractually bound to look after your best interests is priceless.
In our case, we were representing ourselves, working directly with the listing agent. We had
verbally agreed on basic terms, she sent her contract (which clearly favored the seller), so we
ended up rewriting it based on what we knew from prior experience. After the initial back-andforth edits, we gave it to our attorney to review, who added some protection for us based on local
consumer law and made it contingent on appraisal, which we had not remembered to add
ourselves.
When the property appraised for 25% less than what we had offered, we were not bound to
continue. This one tiny paragraph many times over covered the few hundred dollars that we
spent for her time. It gave us the option to walk away and the leverage to negotiate a lower price,
which we ultimately did.
8. Mainland lenders don't lend here, despite what their websites may say.
One of the great things about buying in Puerto Rico versus other Latin American countries is that
you can get lending here, so you dont have to pay all cash. We liked this option because it freed
up money for other investments.
Shopping for a lender was bit of an adventure. I called all the Too-Big-to-Fails, my bank, a
bunch of Florida banks, and several well-known regional lenders. Even if their websites included
Puerto Rico in the list of states where they lend, we found it wasnt true. I could not find one that
still lent here, although several did pre-2009.
9. Local lending rates are much higher than on the mainland.
I kept hearing about how money is cheaper on the mainland and that it was best to get it there
and bring it here. We later learned that how people do this is to get a home-equity loan on their

residence in the US for under 4%, then move the cash here to buy. Since we didnt have another
residence or any other large line of credit upon which to draw, this wouldn't work for us, which
meant we had to go with local lenders.
In shopping around, we found rates here to be a good 1-1.75% higher here for conventional
loans. If youre getting a jumbo or have a business banking account relationship already set up,
you can do better, but for man-on-the-street types like us, 5.25% was good, with 5.5% as the
going rate in the summer of 2014.
10. Language barriers may limit your mortgage choices, and banks wont guarantee rates.
Even though English is an official language here, not everyone speaks it with any real mastery.
This is generally fine by us because we want to learn Spanish. But when it comes to borrowing
hundreds of thousands of dollars from a lending institution, we needed to understand all the
terms and conditions, payments and penalties, etc So a fluent, English-speaking loan officer
was a must for us.
We called six local lenders, bumbled through horrible phone systems, talked to some nice people
we could barely understand, and narrowed it down to three good choices based primarily on
language skills. Two had similar rates, so we bid one against another. We ended up choosing the
one who had been recommended, even though they were a tad more expensive, because we just
didnt know the other guy and wasnt sure if he could deliver.
In the states lenders will do a rate lock, so that if you sign up for 5% at the beginning of the
contract, they commit to locking it for 45 days so that you know when the deal is done youre not
paying a higher rate even if rates have gone up.
Here none of them would commit to rate lock, which meant we could be potentially sucked in by
5.25% and be paying 5.75% 45 days later at close. Ultimately that didnt happen, thank
goodness, but it could have, and it added a lot of uncertainty to the entire transaction, because
once you start down the purchase path with a lender, youre pretty much committed unless you
want to forfeit your 5% option.
11.You can get a home inspection, but properties sell as-is.
Properties generally sell as-is, where-is in Puerto Rico. You can ask for seller disclosures, and
theyre supposed to reveal what they know, but theres no standard, detailed form they have to
fill out like what you find back in the states, so its really about what they remember, what they
know and what they think to say.
Fortunately there are licensed home inspectors available, so definitely spend the money to hire
one and make your option agreement contingent on it. Although local buyers dont always ask
for repairs, mainlanders often do, so think of a dollar limit that makes sense, and ask for repairs
if youre worried about it. They may or may not agree, and you may or may not trust them to do
the repairs properly, but you can certainly ask.

12. There is no escrow company, everybody shows up at the closing table.

On the west coast we have escrow companies who handle all the details and paperwork of the
closing process. Buyers and sellers sign separately at their convenience and often never meet.
Here in Puerto Rico, you have to show up to close in person, unless you give others power of
attorney to do it for you. And it has to be a Puerto Rican power of attorney, because whatever
you set up in the states is not going to work. In our case, the hubby knew he wasnt going to able
to come back out for the closing, which ended up being almost two months later, and we werent
comfortable assigning all rights and responsibilities on our first overseas purchase to a
designated attorney. So prior to leaving Puerto Rico, we set up the power of attorney so that I
could sign everything for him, a quick and easy process through our lawyer that didnt cost much
at all.
Our particular home purchase was a bit of a zombie deal. There were surprises, lots of back-andforth, and the deal almost died on more than one occasion. Then it would come back to life. We
didnt even know if we were truly buying it until two weeks before we finally confirmed a
closing date with the bank and all parties, which meant I ended up paying rip-off, last-minute
summer airfare to get back out to the closing table. Just a potential added cost you may need to
factor in.
13. Closing will take hours, but if you're lucky you'll hear some interesting life stories.
Our closing took five hours at the bank offices. I met the seller who turned out to be a wonderful
professional woman who spoke perfect English. We chatted in the waiting area for at least half
an hour as we waited for the proceedings to begin. Various attorneys showed up, took care of
paperwork glitches, chatted and left. The two listing agents representing the seller came later,
chatted, told stories and hung out as bank representatives also came and went.
Finally, our loan processing agent took me into a conference room to sign a small mountain of
paperwork, though mercifully less than what we sign in the states. The deed stamp attorney came
and went. The loan officer, whom Id never met in person, came and introduced herself. The
mortgage division vice president came in and introduced herself as well. Everyone was
welcoming and thanked me for my business.
The loan processor patiently walked me through everything as I signed our lives away. Then,
when it all seemed said and done, he neatly stacked everything in two perfect piles and began
sharing stories... about his late wife, his grown kids, his new girlfriend, his vacation plans. It was
heartwarming and utterly charming. He went on for 25 minutes. As a mainlander I couldnt help
thinking there was this roomful of people out there, waiting to sign off on their part of this
transaction and get on with their day. But in Puerto Rico, when a deal is about to close, the world
can wait. I'm guessing it's an important part of their culture to connect like this at the end, and
frankly, I enjoyed it.
14. The walkthrough happens after closing, and the seller is your guide.

Where Im from, final property walkthroughs typically happen 1-3 days before closing. This
gives the buyer a chance to see the property one more time to ensure repairs have been done and
that the property is being delivered as promised.
Here it seems you buy the property first, then the seller takes you through and gives you the keys
right after closing. At least that was our experience. For me it was a little unnerving not being
able to check for issues prior to close. When I arrived at the property, the seller's husband was
clearing out the last few things with their housekeeper working frantically to finish up. Inevitably
there were little surprises, but it was also good to have them both personally take me through the
house to show me how it all works, with the ins and outs of maintenance highlighted along the
way.
We were fortunate that our sellers turned out to be such nice people willing to help with post-sale
questions. Weve since met them for dinner in San Juan, offloaded furniture to their family, and
count them among our new friends here on the island. Both listing agents were also helpful,
proactive and professional. Our attorney was fantastic. The banking team did a good job, we just
had to get used to how things are done here. Everything takes more time.
This was just our experience. Others who've moved here may have different stories to tell. The
important thing is to network, reach out and ask for help. If you need help selecting a real estate
professional on the island, please contact me. There are some stellar individuals here, you only
want the best.

Gabriel Marrero Sanchez

Senior Environmental Consultant
Nice article. I'm am a Puerto Rico natuve who moved to AL a year ago. Your article is almost
spot on. If anyone needs any extra info regarding the buying process, or needs a realtor,
inspector, attorney, appraiser, etc. Let me know. Its important to understand that attorneys in PR
are public notaries too, and the buying process requires you to have two attorneys, one for the
buyer and one for the seller. Financing is very tricky and banks are rates that vary by a couple %
points all the time. In PR nothing is final and there's always a way to work obstacles around. To
sum it up, a deal in PR is better made at a restaurant or bar than at negotiating table, and knowing
a lot of people is better than knowing one "good" guy.