Many deals in Nicaragua fall during the due diligence process as a result of technicalities, legal and otherwise. While these are often fixable, the time delay can mean a lost sale.
The solution is to be prepared.
Preparedness not only serves your buyer, who does not want to wait for you to get organized, preparation also serves you.
Here’s a 2 step preparedness process to follow:
Step 1: The Sales Contract
A successful negotiation results in the drafting of a Sales Contract. You need to be ready to send this to the buyer for approval and signature.
To get you started we’ve added a basic example in the Sellers Learning Center. But before you download a copy please note that we are not your attorney. This means we can’t give you specific advice about the legalities of your property for sale in Nicaragua or advise you on what should be in the contract for your specific situation. If you have any doubts about this step we suggest you hire a lawyer. (Contact us for an introduction.)
In addition to setting out the legal description of the property, purchase price, deposit amount and confirmation of how the closing costs will be allocated, a Sales Contract typically includes the conditions of purchase that have emerged from the negotiation.
These will vary from sale to sale but here’s a list of typical clauses we’ve seen in Nicaragua property sales:
- A clause indicating that the deposit will be held by a third party in escrow and will only be released subject to confirmation of title, property tax payment to date, boundaries, absence of all liens and encumbrances.
- A clause indicating that the contract is assignable. This is particularly important if the buyer is using funds from a self-directed retirement fund (e.g. Traditional, Simple, SEP or Roth IRA) for the purchase. It also adds flexibility if the buyer decides to buy via a corporation or with a partner.
- A clause that allows time for the buyer’s lawyer to conduct due diligence. The buyer may also wish to add time for other professionals to conduct their checks. Most buyers will want to make the deposit contingent on these checks.
- A clause indicating that the seller will have all utility costs and home owner association fees paid up to date.
- If you are selling an off-plan property, where progressive payments are made against a construction schedule, the contract will need to set out what will be completed at each payment phase. The buyer may also want the contract written so that a final payment is held back until the property is delivered in move in condition.
- If you are selling a condo or a unit in a duplex, triplex or apartment building, the buyer may include a clause that requires the existence of a strata title or Horizontal Property Regime (HPR).
- If selling in a real estate development there will usually be a clause making reference to the Codes Covenants and Restrictions (CC&Rs) and Home Owner Association (HOA) bylaws. All relevant documents should be included in an Appendix.
Step 2: Legal Preparation
Any liens, encumbrances, liabilities, boundary issues, annotations that the buyer’s lawyer finds during their due diligence property can easily kill the deal. Make sure your property is ready for sale.
The figure below identifies 6 pieces of information that you should have ready at the start of the process. You’ll have seen this before in the initial Sellers Report we sent you.
The core documents relate to legal and title aspects, but we’ve also listed other information to address concerns that international buyers often have. Do this right and your buyer will feel at ease, their attorney will give your property a glowing report and your closing will proceed smoothly.
This post doesn’t cover every aspect of legal preparedness that you may need to consider. For that you’ll need to contact your attorney. But it does cover key points that we’ve learned from buying and selling property in Nicaragua over the past decade.
Our goal is to help you become more prepared as a seller, avoid common pitfalls and enjoy the satisfaction of a job well done.
If you have any questions, please get in contact.