Frequently Asked Questions

 

Can I purchase a home in the Dominican Republic as a foreigner?

Foreigners who wish to purchase real estate property in the Dominican Republic have no restrictions whatsoever. All of us have the exact same obligations and rights when buying a property as the citizens of the Dominican Republic. The only thing that a potential foreign buyer needs to have is a valid passport.


What costs and taxes should I expect in a real estate transaction?

Taxes & fees:

  • Around 2 to 3% fee for transferring the ownership of the purchased property.

  • Around 1% for the legal fees.

PS: The Broker's commission is paid by the sellers.


What are the transfer taxes when buying a property?

The property transfer tax is the tax buyers to the government to transfer the property under their names.

In the Dominican Republic, the property transfer tax is equal to 3% of the assessed value of that property. That value is not the purchase price, but by the value registered at the Internal Revenue Office. Usually, it is lower than the actual market value of the property.

For the buyers who are purchasing with the help of a mortgage loan from a local bank, they will pay the transfer tax on the value of the purchased property. As this final purchase price is know by the bank and sent to the “Internal Revenue Office”.

Buyers who are purchasing a property under a company’s name should know that the due transfer tax is 2% of that company’s capital.

These are the general principles, they are different for each transaction. That is why it is important to consult with a local notary / attorney to make sure you choose the best options tomorrow and for the future when you decide to sell the property. You can request the services of our recommended legal advisor at this email info@realestatelasterrenas.com


What are the legal fees when buying a property in DR?

In general the legal fees are around 1% of the amount of the transaction. This is the fee for the service provided by the legal office you’ve chosen, it includes the due diligence, meetings, drafting of contracts. Basically, all the steps to transfer the "Certificate of ownership" in the name(s) of the new owner(s).

On top of that 1%, add 18% of vat-tax for obtention and legalization of the required documents during the transaction.

Here is an example with a US$300,000 transaction: 1% = US$3,000 + 18% = US$540 bringing the total legal fees at US$3,540.

The buyer(s) pay(s) for transfer and legal fees. All of the other fees are payable by the seller(s).

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Are there yearly property taxes in Dominican Republic?

The Annual Property Tax is locally known as “IPI”. It is an annual tax applied on the total amount of the real estate value of a property registered by natural persons or trusts.

Who is subject to the payment of this tax?

• Individuals and trusts (the one who holds the title to the property).

For the all the properties (all homes and urban lots) owned by individuals which values are registered below US$150,000 (approximately), these are exempted from annual property taxes.

Rates

Individuals: a rate of 1% is applied on the surplus value of RD$7,438,197 (or US$147,387 as of June 2019) of the property. Meaning that a property worth US$200,000 will be taxed on 52,613 at 1%, so US$526 annually.

Trusts: 1% on the value of the real estate property. There are with no exceptions.

PS: This tax is paid in two half-yearly installments, with the deadline for payment of the first installment on March 11 and the second on September 11 of each year. You should also know that the amount of tax assets which are paid by the company can apply as a credit to it revenues.

Exemptions

They are exempt from the payment of this tax:

  • The building (and the land on which it is built) belonging to people over 65 years of age, provided that this is the only property of its owner in the Dominican Republic.

  • Pensioners and rentiers from a foreign source (50%).

  • Rural land.

  • Properties of agricultural use located on rural land.

  • All properties that can fall under the IPI tax, which total value is equal to or less than (RD$7,438,197 / US$147,387).


What is the buying process for real estate in the Dominican Republic?

The procedure when purchasing a property in the Dominican Republic is similar to Canada, Europe, and the United States. First of all, you need find the right home for your budget and project. Our real estate agency and its 5 agents are more than happy to guide you in that process.

1 - Make a formal offer

Once you decide to move on a particular property, the first step is to send a formal offer to the sellers summing up the main conditions of under which you propose to purchase the property including details like, the price, the payment terms, and more if necessary. All can already be expressed in that first formal document.

When the sellers are presented with the offer, through the intermediary of a real estate agency, they will decide either, to accept that proposal, or send you a counter offer with terms closer to their requirements.

This delicate process will vary from transactions to transactions that is why is it preferred to discuss with you real estate agent and come up with the best possible offer. Negotiation is an art!

In some transactions, the buyers will deposit of 1% of the proposed value to show their commitment and good faith to purchase that property. If the offer is accepted, this 1% becomes a part of the final payment. And in case that the offer is not accepted, this earnest deposit will be returned to the buyers.

2 - Sign the Promise of Sale

The next step is signing a "Promise of Sale" (aka "Promise of Purchase”). It is a legally binding document that needs to be signed in front of a Notary public.

All the terms of the transaction are established in that document; it will include the full names of both parties, references establishing identities (such as valid passports, driver’s license), a clause in case of default from either parties, a legal description of the property, the final purchase price, the payment terms, the date on which the property is delivered, the exact date of the closing, and most importantly the requirement of the selling party to sign the Deed of Sale once the final payment has been made.

When signing the “Promise of Sale, there is required deposit to be paid by the buyers. It is usually around 10%. It is placed in the Escrow account of the legal office doing the transaction. This way, the property is reserved for you and it’s taken off the market, so you don’t have to worry that someone else will purchase it, at least legally.

3 - Sign the Deed of Sale

The last step for both parties to finalize the transaction is the "Deed of Sale”. It is also a legally binding document that needs to be endorsed by a Notary public. The "Deed of Sale" allows the transfer of the property from the sellers to the buyers.

Expect to close within 30-60 days. It is the time it will take the legal office to request and verify all the documents necessary for the transfer of property to you. This period can be longer, it will on the agreement found between both parties.

All funds (amount agreed between parties in the "Promise of Sale") from the buyers need to be in Escrow 3 days before the closing. The buyers and the sellers will sign all the necessary documents on the decided closing date.

The sale will be recorded with the Register of Titles by your legal representative. Expect to find the property under your name (or company name) in a month.


How do I make sure that the property I am purchasing is safe to buy?

Basically, you can make sure a property is safe to purchase thanks to 2 intermediaries. A real estate agency and a legal office. When and if you live in the Dominican Republic and personally know the sellers, you could not deem necessary to use the services of a local real estate agency.

That being said, the fastest way to make sure that the property for sale is safe to buy is to seek the advice of a good local real estate agency. They will take the preliminary steps to ensure that the property is in order. A professional will also make sure that surveys and titles are up to date and correct.

The best way to make sure that the purchase of the property runs smoothly is to secure services of a reliable legal representative. The real estate agency will advise you a legal office which will take care of the due diligence.

They will require all of the documents from the sellers or their attorney, including a copy of the seller’s identification card or a copy of his/her passport, copy of the Certificate of Title, copy of the tax payment receipts which are issued by the Internal Revenue Office, and a copy of the original survey or plot plan from the property.

In case the sellers originally bought the property as a condominium or the sellers are a corporation, additional documents will be requested.


What is a “Deslinde" and why can’t I buy a property without it?

A “Deslinde” is a title of ownership or “Certificate of title" defining the borders of a property and its rightful owners. And no you cannot buy rightfully a property without a clear “Deslinde”.

It also certifies that the property was surveyed (with GPS points) and that all of its boundaries and lines were defined from the original title. During that process, anyone can claim ownership of that delimited area. A bleu “Deslinde” means that all is in order. That document is issued right after the property get approved, it is cleared.

Thanks to the recent updates to the Dominican Republic's Property Registry Law, all real estate sales and purchases must have a clear "Certificate of Title" to be recorded at the Property Registry.

Before this law was passed by the Dominican Republic government, it was not guaranteed that the seller owns the property free and clear. Properties could be sold and bought before prior to this law, but the whole responsibility of having a Clear Title Certificate was left to the buyers.

This new Law requires that the property needs to have a clear "Certificate of title" before the sale. It is up to the legal representative of the buyers to see if the property they are planning to purchase has a clear "Certificate of Title".

Dominican Republic’s Property Registry Law makes it clear that a property purchase cannot be complete and recorded at the Property Registry without having a “Deslinde” together with a clear “Certificate of Title”.


Do I need a real estate agency?

The truth is that everyone from a cab driver to a guy who works in beachfront bar will try to present himself/herself as the right person for the job. The one knows somebody who owns that lot or that house that is super affordable. However, it is very important to choose a well-established real estate agency when buying a property in the Dominican Republic.

In one sentence, working with professionals will get you more security, less headaches, more insights, more options and in the end a better price.


What are the market prices?

When you are about to purchase a property, at home or abroad, one of the first question that comes to your mind is “Is the asking price the right price for that property?”.

To arrive close to the real market value of your future investment, and when we take out the emotional value, there are several points to take in consideration; The state of the property, the features, the amenities and the location. Of course, the weight of each of these factors will vary if we estimate a virgin piece of land or a built villa.

Here will discuss the market prices of 3 types of properties. The market price of land only, the price of construction for those who desire to buy a land and build their house on top of it and finally the price of built properties such as condos or villas. This section was updated in 2019.

Land Prices

The real market price of a given lot will depend mainly on two factors, its location and the fact that it is or isn’t in a gated community.

Location wise, in Las Terrenas, beachfront land will usually be priced from US$250 to US$500 (or more) per square meters (m²). For square feet, just divide that price by 10 approximately, so here it would be US$25 to US$50 per ft². Larger land (of more than 10,000 ) located in less residential areas will go for sale around US$250 per m² and smaller beachfront land (less than 10,000 m²) will be priced closer to the US$500 mark. If the land is located inside a gated community, it will add a premium.

For the lots which are located close to the beach (in our terms, less than 10’ walking), they will usually be prized from US$100 to US$250 per m² (or US$10 to US$25 per ft²). Also, if the said lot is a second line lot (steps from the beach), if it offers ocean view and if it is in a gated community, it will be pricier.

Finally, the lots further from the beach, usually located up in the hills surrounding Las Terrenas, the prices per square meters will be under US$100. If the lot is close to town, offers ocean view and / or is situated in a gated community it will have more value.

Building Prices

Building prices are based on the materials costs, the labour costs and the fees of the architect. Here, we will not talk about the extra options and features but only about the basic components of a house. The main materials used to build a house are; cement and / or concrete for the basis, the walls and ceilings, and wood or plastic for the doors and windows.

For the interior of your house, you can expect to pay anywhere from US$650 to a US$1,000 per square meters. For the terraces from US$500 to US$750 and for the pool around US$750 per square meters.

These prices will vary according to 2 factors, your architect and builder as well as the materials you are going to use.

If for your floors you decide to use ceramic tiles imported from Italy it will increase the price per surface compared to finishing them with polished cement. Same goes for the wood you choose for your doors, the more precious the more expensive.

The price mentioned are based on local building techniques and materials as a frame of reference. Other costs to consider, obtention of permits, preparation of the land, facilities such as sceptic tank, water tank, landscaping, covered parking, etc.

We know it is difficult and sensitive to find the right person to build your home, so if you need the services of reliable and professional local architects, we will be happy to guide you.

Built Prices: To arrive

Finally, Another good trick to know if you are about to pay the right price, is to find comparable properties. Same size, location, features, etc. All together, these points will hopefully help you have a better understanding of the sales prices and make the right decision.


How to choose the right real estate agency?

Here are a few criteria we believe are important for buyers considering to purchase in the DR.

It is best that real estate agency has a long experience of carrying out real estate transactions. This will give you access to wider range of properties on the markets, more leverage for negotiating and a higher likelihood that you acquire the property under good conditions.

It is also best that they have a proper office.

A good agency should have multilingual employees. This is very important, as the cooperation between the parties, buyers and sellers, needs to be clear and fluent.

Transparency. This will help the purchasing process to runs smoothly

Franchise agencies with a good reputation may not the best option when purchasing a property abroad. Most of these agencies just care about the profit and have agents who don’t have local connections. It’s always a better option to choose a local professional agency with local ties to ensure that the purchase runs smoothly.

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How does it work if want to buy a land and build a house?

Similar to buying a house or condo, once you have found the right land. You’ll make an offer through your local real estate agent. When the initial terms (price and timing) are agreed upon, you’ll use the services of a legal office to do a due diligence of that property, draft a "Promise of sale" and "Deed of sale”. If all is in order you will sign the “Deed of sale”. From the time of that final signature, it will take approximately one month to transfer the title of ownership to your name.

In the case, you want to build a house on that land you can with the help of a local architect office. You can ask your real estate to recommend reputable architects. Here are the mains steps that will occur:

Sum up and share your requirements and vision to one (or several) architects asking for initial quotations. It is good to request quotes from at least 2 different architects. Once you’ve reviewed the quotes and decided on who will build your house, you’ll sign a binding contract outlying the agreed terms, responsibilities and eventual penalties in case on non compliance.

All this process with the architect can be done while purchasing the land. Once the "Deed of sale” is signed (and during the transfer of the title) the architect will send the final floor plans and specifications of your future house to the corresponding authorities. You’ll be asked to cover these costs in order to obtain the permit of construction.

This process takes about 3 months. And we wait. Once authorized to build, the construction can start, not before. At that time you’ll be asked to pay an agreed % of the total costs of construction. Usually around 30% of the total costs. The remaining payments will often be spread into 2 to 4 additional payments until the completion of the construction. You won’t (and never should) have to pay the next installments until every part of the previous payment is delivered as agreed.

Here is more information about building a home in Las Terrenas.


How does building density works?

Each provinces dictate its own rules and limits in terms of how much can be built, where and how. In Las Terrenas, Samana, for example, they are different building zones. Each of these zones has its specific limits and requirements.

The most important ones being the building density which is the number of bedrooms one can build per hectare.

Here is an example with you owning a 2,000 Sqm lot:

In that specific zone, the building density is 30 bedrooms per hectare (or 10,000 Sqm or 2.47 Acres). 2,000 Sqm is a fifth of a hectare. So 30 bedrooms / 5 = 6. You’ll be authorized up to 6 bedrooms, no more. That being said, you can build as many rooms as you want within the other building parameters set.

Below you can find the map with the building density per zone. The area includes: from El Catey to Playa el Valle, Coson to El Portillo and Playa Las Ballenas to el Portillo. The following maps are from the Ministry of Tourism Dominican Republic, April 26, 2012.


Do I need a realtor when purchasing pre-construction projects?

It is totally up to you. The large projects usually have their own sales team in place to promote and facilitate the transaction.

However, using a realtor who will represent you when purchasing pre-construction projects has its own advantages. Firstly, the loyalty of a sales representative lies with the builder since he or she is working for that person. In case you hire an independent realtor, you can expect from this person to look out for your interest.

This person also knows most of the ongoing projects and can guide you towards better alternatives if you desire. This person will know what questions are important to ask. Remember that your personal realtor will always negotiate in your best interest the final condition of the purchase such as, a better price, more favorable payment terms, including the furnitures, and other modifications if desired.

The realtor also provides you update on the progress of the pre-construction projects. In the end, by using a realtor you will increase the chances of making the right decision and being happy about it.

Here are the ongoing pre-construction projects in Las Terrenas.


What is the law Confotur?

The CONFOTUR Law seeks to populate the least served tourist areas of the Dominican Republic and to promote the protection of the environment in these areas. The benefits granted by this legislation may be given to all natural or legal persons domiciled in the country that willing, to promote or invest capital in tourism related infrastructure, such as Real Estate. Those who are fell under CONFOTUR Law are exempt from 100% of Transfer and Property Tax.

* Exempt of 3% Transfer Tax for the transferring the title certificate to a buyer's name at Internal Revenue (DGII).

* Exempt of Property Tax represents 1% of the exceeding value of RD$ 7,438,197.00 (about US$148,000.00), each taxpayer pays on a yearly basis. Properties and developments under CONFOTUR are exempt of this 1% property tax for up to 10-15 years.

The CONFOTUR Law also offers other exemptions for significant hotels, as well as the medium-big Real Estate developers and investors such as condos.

* Exempt from 100% of the National and Municipal taxes for the constitution of companies, for capital increase of already constituted companies, National taxes and Municipalities by transfer on real estate rights, by sales, swaps, contributions in nature and any other form of transfer on rights real estate, of the Tax on Sumptuary and Solar Unbuilt Housing (IVSS). This also includes as the fees for the preparation of the plans, of the studies, consultancies and supervision and the construction of the works to be executed in the tourism project in question, the latter being an exemption applicable to contractors responsible for the execution of the works.

* Exempt from100% of import taxes and other taxes such as fees, duties, surcharges, including the Tax on Transfers of Industrialized Goods and Services (ITBIS), which are applicable on machinery, equipment, materials and movable property that are necessary for the construction and for the first equipment and commissioning of the tourist facility from which about.

* Once a project is approved by CONFOTUR Law and granted all the above-listed benefits, investors are able to deduct their investments from their net taxable income.

Discover all the projects benefiting from Confotur in Las Terrenas.


Are buyers covered by inheritance laws?

There are no restrictions whatsoever on foreigners being able to inherit ownership of a property in the Dominican Republic.

Foreigners who are residing in the Dominican Republic and the citizens of the Dominican Republic will be happy to hear that the recent tax-law ruling lowered the inheritance tax to just 3% of the government’s assessed value of the property.

For those beneficiaries who are not currently living in the Dominican Republic, the inheritance tax is 4.5%. A minimum portion of the inheritance will have to be transferred to direct heirs, regardless of the existence of a will in a different country.


What is the actual process for obtaining Dominican Residency?

In case an individual wants to obtain Dominican residency, this person needs to apply for a "Residence Visa" at a Dominican consulate in his/hers country of origin. The applicant also needs to present a birth certificate, bank references, marriage certificate, and a police report. All of the mentioned documents must be apostilled and translated in Spanish by an official translator.

Apostilles are there to authenticate the signatures and seals of officials on documents including notaries, birth certificates, court orders, and other documents that are issued by a public authority. By doing this, they will be recognized in all countries that are a part of the Hague Convention.

PS: It is recommended that the applicant contacts the Dominican consulate in his/her country to schedule an appointment and ask if some additional documents are required.

After all the documents are approved, the consulate will put a stamp of the "Residence Visa" in the passport of the applicant. The "Residence Visa" is valid for one year. Keep in mind that the time to process the visa can take from a couple of days to a month. It really all depends on the consulate.

As soon as the applicant obtains the visa, the consulate will immediately return all of the mentioned documents. The next step for the applicant is to take all these documents and papers to an attorney in the Dominican Republic.

The applicant will have to head out to Santo Domingo for a brief medical exam and go once again so he or she could pick up the residency card. Since the residency card is valid for a year, the applicant needs to renew the residency every year for the next 5 years.

All applicants should be aware of the fact that the cost of a professional attorney who will handle the first residency process will be around $1,200. Luckily, renewals cost less.

Here, you’ll find a complete article about the residency process for the Dominican Republic.


How to get financing with a local bank?

They main banks in the DR are; Banco Popular, Banco del Progreso and BHD. But these financial institutions usually lend future buyers at very high interest rates (10% and above) and in their local currency.

Some banks do lend US dollars but the rates are still higher than the ones offered by our preferred financial partner, Scotia Bank.

We work with them for two main reasons:

Firstly, their mortgage loans to purchase a vacation home are quickly available to US / Canada / English and Dominican citizens. Time is a very important factor in a real estate transaction.

Secondly, they offer the best interest rates than any other national banks we’ve been in touch with.

To take the example The first thing to do when looking to buy a property in the DR (with a loan) is to verify if you can actually apply for a loan. It will makes things move faster if you are decided on a specific property and also help your negotiation with the seller.

The documents required by Scotia Bank are the following:

  • Copy of your passport plus other identification

  • Two last tax returns

  • A bank reference from your main bank

For other foreigners, loans are also available with a few additional documents required. All these documents can be send via email.

The bank will usually lend you up 70% of the value of the property, if you meet their criteria, and less if you wish so… Meaning that a down payment of at least 30% of the value of the property will be necessary from your side. The value of the property taken into account is the lowest amount between either the estimated value or the agreed buying price of that property. The estimated value is the value given by an “Assessor” who will estimate the property according to a set of criteria such as lot size, built size, built year, location, number of bedrooms, materials used, etc.

By experience, this value is usually close to the selling price.

Most national banks have higher interest rate than our home country. It is usually at 7 to 10% and sometimes even greater, but Scotia Bank offers a preferential between 5 and 6% (Dec. 2019) for a period up to 25 years.

2 criteria must be met in order for you to get the loan; you must be pre-approved and the property you want to purchase must be mortgageable.Once the bank notifies you that you pre-qualify for a mortgage loan (this verification takes 1 to 2 weeks) you will be given access to an online form available in English which you must fill in.

At this point, there is a high probability that you will qualify for the loan.

Once the terms are satisfying for both parties, you’ll have to be in the Dominican Republic to sign the actual contract for the loan in person. You might be able to discuss with the bank to send someone with a power of attorney to sign in your name.


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