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Many times I am asked how the process of buying real estate in the Bahamas works. Often our foreign home buyers (who love the idea of having a tropical home in the islands) are concerned about the process and the security of the investment. I will discuss the Bahamas Investment Safety and Security at another time. Below I have outlined the rough steps and a very rough estimate of the time it takes for each one. I have to qualify all of this by saying the estimates of the length of time it takes vary widely. How quickly a sale will close in the Bahamas is dependent on many many factors, some of which are beyond the parties control. For instance I have seen a financing application take 6 months for approval. I have seen title and requisition process take as long at 6 months due to continuing questions arising from the history of the chain of title.
On the other hand, I have seen instances where the whole process moved like clockwork and the new homeowner had the keys and were enjoying a cocktail on the back porch in less than 7 weeks from the time of first offer. For things to move this quickly under the bright Bahama sun (which seems to slow everyone and everything down to the speed of warm molasses) is not a common occurrence and it is imperative to have patience when dealing with a real estate transaction in the Bahamas.
There is a major factor which can influence the speed of a real estate transaction here, and that is whether a bank is involved providing financing for the purchase and/or if a bank is releasing and existing mortgage on the property being sold. This is partly a result of the Bahamas banking environment being dominated by 3 major Canadian institutions. The final approvals of any major decisions the lending institution has to make is not made here in the Bahamas, it is made offshore somewhere.
That said, the lender won’t commit to financing a purchase until they have a copy of a formal purchase agreement in hand. We commonly insert a 21 day financing clause in purchase agreements which allows the buyer 3 weeks to formalize their loan and get a commitment letter. 3 weeks may seem like a good length of time, but I would suggest working on getting as much of the paperwork as possible into the loan rep, before making an offer. They will take 2-3 weeks just make a decision, so if they are waiting on something from you like a reference or utility bill that will hold the hole process up. I would ask 3 times for the complete list of all the documents they will need from you just to be sure that all the bases are covered. In my experience they always come back a week later and say they need one more thing, and often that happens more than once.
With the 21 day financing clause inserted into a formal “purchase and sales agreement”, if you don’t get the loan secured you can get your deposit back and everyone can walk their separate ways. The vendor is often weary of entering into an agreement which is dependent on a bank partly due to the time off the market with no guarantee of a sale and partly due to a bit of expense in hiring a lawyer to prepare a purchase agreement and work with the purchaser’s attorney on the deposit etc. Title investigations typically don’t start until after the financing commitment letter is in hand. Once the title is approved, they we move to conveyance drafting and approval and then the mortgage would be drawn down.
Time to close a cash sale (no mortgage involved) is 60-90 days. Time to close with a bank mortgage will be 90-150 days. So keep in mind you won’t be able to take possession of the home for some months while waiting on the lender to do their thing. Some people will purchase a home in cash and then leverage the cash back out with a mortgage after the purchase as it allows them to take possession of the home sooner.
- First step is to get the ball rolling with the bank and get a nod. (about a 1week)
- Second we put in the offer to purchase, negotiate and hopefully reach agreement in principle (1-2 weeks)
- Third you retain an attorney top represent you in the transaction, put up a deposit with the seller’s attorney’s ‘Escrow Account’ and the purchase agreement is executed by both parties. (1-3 weeks, this begins the real process of purchase, get appraisal, all paperwork to bank, references, etc.)
- Forth, you put in the formal application for financing, provide the bank with a copy of the executed purchase agreement and go through the motions with them. (3-5 weeks) (If Necessary, no bank financing involved, it would skip straight to the title search)
- If the buyer is getting a permit from the Foreign Investments Board, the application gets put in right away and approval of the permit can take 2 weeks up to 3 months.
- Then, once the mortgage is approved and you have a commitment letter in hand. Your attorney begins title search. (3-5 weeks)
- Once title is approved the vendors attorney drafts a conveyance, it gets approved and the vendor executes (2-3 weeks)
- Then the bank gets a copy of the conveyance and begins to draw down funds. (2-6 weeks)
- Once the funds are disbursed, the sale closes and you can take possession. (you get the keys).
So, the long and short of it – it could take as little at 6 weeks to close a purchase or it could take as long as 6 months and it all depends on the seller, the buyer, the attorney’s involved, the government for the permits and often most importantly the lender. So make sure to have the right people involved who are attentive, motivated and on the ball to see the sale happen.
I recently had a sale occur where the buyer’s attorney lost the purchase agreement after the purchaser had signed it and neglected to send it to the seller’s attorney for 3 months. So while we all thought the sale was proceeding, it hadn’t even started. Stay in touch with your lawyer and keep them moving things forward.
Lastly, having an experienced and motivated real estate broker or agent on your team can have a very positive effect on ensuring the least amount of frustration and delay. HG Christie is one company with a strong team of professional sales staff who know the ins and outs of Buying and Selling homes, land and development property around the Bahamas. Feel free to comment and tell us your story in buying or selling real estate below. I hope you enjoy this post and find it somewhat useful.
Check out this great write up on Realtor.com if you are buying, selling, re-financing, settling an estate, investing or even considering building.
I just have to share this amazing opportunity for a little investment. Drastic Price Reduction! Affordable Investment. It won’t last long and the area is beautiful. 8 miles of stunning sandy beach nearby, Abaco/Bahama Parrots stop by every morning to say hello. Utilities ready for connection. These lots regularly sell for $15k to $20k, leaving the lucky owner with instant equity.
If you have any young children, buy it now and save it as a college tuition investment fund. The cost of tuition always goes but historically the prices of real estate have risen at the same rate. In the USA, currently the average cost of college tuition is $10,000 per year according to collegedata.com. Assuming the area of Bahama Palm Shores grows and the value of the land in the area rises over the next 13 years, if you have a 4 year old child, and they head off to college at the age of 17 this investment could cover the cost of 2-3 years tuition. This could be your ‘ace in the hole’. Call today.
http://www.hgchristie.com/property-details/abaco/vacant-land/AS11377/
Southworth Development LLC has joined the investors who see value in the island of Abaco. a recent announcement in local news was made recently. see the ZNS video on youtube:
In other news, the sipsip is that the buyer for Treasure Cay walked away, so nothing will be changing there. Shame, the hotel and commercial areas really need a major facelift and a nice 20-30 room boutique hotel on that beach would be a wonderful addition to the Island.
https://www.youtube.com/watch?v=Ci3GlzuYFbw
Happy Holiday, Happy Christmas, Happy Hanukah, Happy… well you know what I mean.
Heres to making a better effort to write updates move regularly in 2015.
HG Christie has finally launched a new website portal that allows you to view listings by area and see their exact location and pricing. It is kind of interesting and somewhat eye opening, if for instance one zooms into Marsh Harbour or Treasure Cay and views how many properties are currently for sale in a specific area. There are few little kinks to work out but overall a great tool. Check it out here:
http://hgchristiebahamasrealestate.bs
All I can say it is has been an extremely busy 2014 so far in the real estate business. I have not been able to make myself sit down and write up an update to this blog. Every week, Every day has been non-stop trying to keep up with the demand. Demand for appraisal work and for sales work and often juggling both can be tricky. Both disciplines have specific time frames to work with. Buyers and sellers want immediate responses and while clients looking for appraisals are always on a limited time budget.
Speaking of Appraisal work – there has definitely been an uptick in appraisals services volume which indicates that a) credit is become more available and mortgages are become easier to obtain and b) consumers of real estate and loans are expressing more confidence in the economy. Typically you would not borrow money if your financial future was looking poor right? I will mention that the commercial banks in the Bahamas have severely clamped down on appraisal standards and lending requirements here. In the past a simple cost/replacement calculation would have sufficed to justify a value estimate however now every local bank is requiring that at least 2 comparable sales are included in the analysis and used to justify the final number reported. In some ways this is a good thing for our market, it is a maturation of the lending and mortgage business here partly as a result of the implementation of the Bahamas MLS. On the other hand it means value estimates are generally lower than they were in the past and less subject to the ‘interpretation’ of the appraiser. In any event higher reporting standards will benefit everyone in the long run.
How is the Abaco Real Estate market doing these days?
Well I’ve pulled up some sales activity numbers from the MLS which give a pretty good snap shot of the past year. Everyone is aware that the South Florida real estate market saw a strong bounce back and return to positive appreciation about 2 years back (2012). We expected it to happen in the Bahamas last year however while 2013 saw a little improvement, appreciation was stagnant. 2014 appears to be seeing a similar flat line in property values but that is a good thing, certainly better than a declining market. Steady markets are good, they are reliable, predictable and safe. Excessive appreciation is often a bad thing leading to a correction as we have all seen about 5 years back.
The past year of Abaco Real estate sales volume shows a huge uptick this year:
You can see at the end of 2013 there was a steady transaction rate of 2-6 which is reflective of the whole of 2013 and typical or 2012 also. You will notice that as of February, there was a marked improvement in sales volume. You will also note the modest increase in sales of properties over $1M.
Interesting to note – In a previous post I wrote about the busiest month of the year for sales activity, and April is typically one of the best for real estate both in the Bahamas and in the United States. But for some reason this past year, April saw a huge drop. I will have to look into what happened in April this year.
Additionally, August is typically one of the slowest months of the year for sales, but this year is looks like it is one of best of the year.
All in all, I have strong confidence that the market in Abaco is back on track and we will see some good but steady growth this coming year.
That confidence is supported by several factors at play that will return Abaco and the Cays back to a strong yet sustainable growth level.
Treasure Cay is supposed to have a new managing partner coming on to take over and rejuvenate the community. The area sorely needs some new energy to revitalize and upgrade. It is a shame because the community has such tremendous potential but is being held back in my opinion.
Winding Bay, The Abaco Club is set to have new management and ownership coming October. The Abaco Club has been struggling to realize its full potential for the past couple of years and property owners have seen the value of their investment erode away substantially. With the pending take over by Southworth, out of New England the area should see a substantial upgrade and corresponding improvement in property value. I have confidence they will be the right fit and benefit all of Abaco.
The new Marsh Harbour International Airport (MHH) has been operational for some time now and is an immense benefit to the island and offers a clean, efficient and air conditioned space for travelling to and fro. Now we just need direct service from Atlanta by Delta or even perhaps direct service to New York. It is a beautiful building and gone of the days of sloshing through mud to get to your car or taxi.
The Hope Town Inn & Marina has been open for over a year and they have seen tremendous approval by the market. The marina is always very busy, and the rooms are on constant turnover. The property is attractive, convenient and becoming a staple of the Hope Town scene.
Great Guana Cay maybe seeing some big things coming on stream soon, but more to come on that later.
Unfortunately Green Turtle Cay is still struggling a little in terms of visitors, but this is proving to be a positive aspect for the second home owner market. Folks are finding the quiet and peace away from the busy tourist action the ideal spot for a quaint second home. The old New Plymouth Inn is ready for new life and would be a wonderful retirement project for the right person. It has lots of history and character and would be a ton of fun to return to it’s glory days.
Lastly, my 2 cents – A house painted white seems to have serious trouble selling in the Bahamas. I suppose it is the only colour to paint a house in certain parts of Greece but it does not seem to work here. Anecdotally, there are several bargain homes on the market in Abaco that have been sitting for a good long while and I attribute it to the colour of the house – white. Similarly unpainted cedar siding seems to be equally difficult to sell.
Happy back to school and International Literacy Month, And Coastal Cleanup Month!
Why does a home or lot not sell? In almost all cases it was not priced right. If a home is priced properly and attractively it will always find a buyer if the marketing is handled properly. However if the price is not appropriate no amount of marketing and splash will make a difference to getting it sold. Despite the existence of the phrase “Selling ice to the Eskimos” the reality is much, much different. The Eskimos would buy the ice if it were priced right. i.e. it is more sensible to buy it rather than spend the time to go and get it.
This goes for real estate too. To sell a house it must be attractively priced to make it a good opportunity. There is not point hoping and praying for a Lottery winner to come along and want to pay you twice the value of your home. You don’t help yourself or your real estate agent by having this ‘pie in the sky’ attitude. Most folks with money to spend are not silly with it. In fact, most of the high end clients I’ve dealt with were much more conscious of the value of a dollar than the low end client’s I have worked with. The demand more value for money and more ‘value added content’.
In Bahamas Real Estate I see many, many sellers who are very unrealistic in their expectations. I recently heard a truism – “You don’t sell real estate unless you have to.” And if you have to sell, be realistic, put on your buyers shoes and take a walk around your home or lot. What would you do if you were buying? It is hard to put aside prejudices and truly be empathetic but it is a worthwhile exercise.
Similarly – don’t try to by real estate that the seller doesn’t want to sell. Unless you are truly prepared to pay a heavy premium over market value. I’ve had a client recently who didn’t want to buy anything that was for sale, he wanted to buy homes that the seller wasn’t interested in selling and then was offended when the unwilling seller stated their price…
In any event, what does it look like in the real estate market in the Bahamas?
Over the past few years, the Bahamas MLS has provided the ability to get a real picture of the market that we didn’t have before. There is now a window into the workings and functioning of market here and what it is revealing is telling.
For instance, over the past years it is quite astounding how many properties simply never sell at all. This is shown by the number of expired listings which essentially are Unsold or Market Rejected. Basically overpriced and no one was willing to consider it. The history of expired listings on the MLS is below:
2013 – 668 expired listings (skewed because many are still active this year)
2012 – 1,017 expired
2011 – 1,038 expired
2010 – 1,063 expired
And as of right now there are currently 2,013 properties for sale being actively marketed around the Bahamas.
Whats New in Abaco? (Above photo: start of the GAFFW Triathlon in Treasure Cay at Sunrise)
It has been a long time since my last post and I’ve been chastising myself for weeks. But the reason for it is the tangible uptick in the real estate business here. Sales activity is looking up in terms of volume although prices are generally staying level. In the wider picture though, requests for appraisal services has improved dramatically over the previous year, vacation rental and boat bookings are generally stronger than 2013 and overall the economy in Abaco looks to be doing much better. I would almost hazard to say that the things are starting to look quite rosy here.
Anecdotally, there has been a few properties that have sold in the past 6 months at full asking price after having 2 or more serious persons interested. I haven’t seen that happen in years. As I have written before the condo market dam has broken and sales volume is gaining serious ground. There is great value to be found in the condo market right now so it just makes sense. A recent sale in Hope Town set a new price record for a single family estate on the cay – “Oasis” was acquired for $5.5M at the beginning of this year setting the bar for residential real estate on the cay.
Interest in Treasure Cay has risen since the recent announcement (i.e.“leak”) into the papers about a serious potential for sale of the remaining development holdings as well as the marina and resort components. Nothing is certain but the party from Vancouver has been in due diligence since 2013 and things maybe looking positive for a sale. If this happens the market there should improve significantly. I’ve been saying for a long time that the community needs some fresh energy at the helm. The restaurants and hotel are looking run down, the Spinnaker Restaurant hasn’t been altered (not even the drapes) since the 1980’s – time for some sprucing up?
In other recent news around the island, the new airport is promised to be commissioned and open this month, April. So we all wait with baited breath on that one. A company called IJet charters was trying to start a seaplane service that would deliver you straight to Hope Town, bypassing the MHH airport and the taxi and ferry rides. A great idea and was well received by many residents, homeowners and visitors, however it seems there is a bit of opposition from the government side. The hurdle will have to be overcome. I can’t stress how important a service like this would be for Green Turtle Cay. Ever since regular flights have pretty much ceased into Treasure Cay Airport, it has become a major trek for residents and visitors to get to GTC. One must fly to Marsh Harbour Airport, then take a 40 minute car ride (or $85 taxi fare) to the GTC ferry dock and then ferry over. Basically this adds $85 and almost an hour to the travel time to get to GTC. Not good.
But if there was seaplane service that dropped your right to the Green Turtle Cay Club, how great would that be? And GTC’s economic outlook all of a sudden looks worlds brighter.
Government is pushing ahead and building a shipping port in North Abaco, basically in the middle of nowhere and to the complete bewilderment of everyone…
Lastly, the GAFFW (swim, run, tri, fun) was another great success in its third year. Tomorrow marks the end of the sailing season in Abaco, being the Homer Lowe regatta for Opti’s and Sunfish. After this, the Hope Town Sailing Club which hosts the races will be losing most of its membership (winter birds/second home owners) until they return in Novemberish. On the other hand everyone is looking forward the summertime Regatta Time In Abaco with the corresponding ‘Fiddle Cay Stranded Naked Party’.
Almost forgot – Alburys Ferry service started offering a new service taking passengers to Lubbers Quarters (finally) and between HT and MOW and HT and Guana Cay. I hope it catches on. And so the gears slowly turn and Abaco slowly develops and slowly becomes bigger and better. The big question is do we want it to? Or do we want it to stay the secret paradise that it is?
^^ My ‘selfie’ after the triathlon relay I took part in, filling in as runner and got my time under a 10 minute mile.
New listing above, Casa Bella, Treasure Cay is a dream beach home.
Lately there has been nonstop discussion among Bahamians and foreign owners of homes in the Bahamas about the impending doom of the implantation of Value Added Tax (VAT) in the Bahamas. The current government stance is a roll out in July of this year 2014. In all likelihood given the track record (using the Marsh Harbour airport as an example) the introduction will happen in 2016 or 2017. But, by all account it is coming, just a matter of when.
The typical discussions surround the cost of food or medicines, which are very important items to consider of course, we can’t live without them. We also cannot live without somewhere to live in.
Currently the rough average cost to build a home in the Bahamas hovers around $150 Per Square Foot or living space. Porches, patios, garages generally cost anywhere between $30 to $90 per square foot. This rough numbers are estimates for a very simple home, 4 walls, 3 bedrooms 2 bathrooms, tile floors nothing fancy. Take my advice if you ask a Bahamian contractor to incorporate a bay window or some new roofing material he hasn’t seen before, you can double the cost to build instantly. In most cases, going with a design outside of the simple box will cost you plenty to build here.
There is a looking question that no one is really discussing yet – that is “How with VAT affect home values in the Bahamas?” and “How will VAT affect the cost of construction in the Bahamas?”
Well, if we look at an example of a typical 3bed/2 bath, 1,600 sq.ft. nice but simple home built in the Bahamas for $150 per square foot, with a total cost of $240,000. That should include all permitting and plans, but typically won’t cover utility connections or landscaping. We are talking nothing fancy, all off the shelf average fixtures and appliances, no marble, no granite, no travertine, no fancy glass showers or claw foot tubs. Getting off topic here.
So let’s start with a cost to build a home in the Bahamas at $240,000.
Currently, we pay import duties on all goods imported into the country so the cost of materials is generally quite high in comparison to the United States. Volumes are low in comparison and shipping costs are high. At the moment, in my estimation approximately 60% of the $240,000 cost to build is paying for materials.
So $140,000 in materials, and $100,000 in labour to build a $240,000 home. (These numbers are for example only, not exact)
According to the government communications, the cost of goods in the country will rise only 5%, however the private sector is saying the end result will be more like 12.5% post VAT. Using the private sector estimate the cost of materials to build our home will rise to $156,800. Not the end of the world just yet.
Under the current tax structure of the Bahamas, there is no tax payable on the services provided by electricians, plumbers, tile layers, carpenters, contractors, architects, surveyors, Quantity surveyors, masons, etc. This is a very big elephant that is discussed but no one has grasped the implications yet.
The moment VAT is implemented, the cost of the services and labour to build a home is going to rise 15% over night. A large new tax where there was not tax before. What is the net result?
The $100,000 labour and services component of building a new home in the Bahamas just went up 15% to $115,000. This is a simplification as VAT has a tax on tax effect compounding the cost to end consumers which ultimately means these estimations are very much on the conservative side. The reality remains to be seen.
Now our $240,000 home will cost you $271,800. Additional $21,000 Post VAT. Do you think the construction will sector will weather this change in the economy well?
I would advise anyone who had plans to build a home, in the near future, you do it now, and hope to finish before VAT is implemented. I also expect that the market for existing homes will strengthen while the market for vacant land which is already weak will become even softer.
The cost to buy a home will rise somewhat also – VAT will be collected on the services of lawyers and realtors and home inspectors and appraisers. Closing costs are expected to rise about a percentage point post VAT in my estimation.
Family Island Development Encouragement Act Ending
It looks like the development and construction incentive for the lesser developed island is ended and may not be renewed. This serves to put home building back on equal footing for all the islands of the Bahamas. over the past couple of years it has cost about 30% less to build on the southern islands than the islands of Abaco, Eleuthera, Grand Bahama and Bimini.
