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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.
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!
Check them out if you are interested in Abaco Island what it is like to vacation or live here. Truly Paradise and I would live no other place in the world. Enjoy!
And support Friends of the Environment, proudly sponsored by HG Christie Ltd. Real Estate. Taking Place in Hope Town, Abaco. What better location for a scenic run/walk/scoot/jog/bounce?
