What’s one thing every home owner has in common? They all want to know how much their home is worth so when they sell it, they can get the price for their property. Investopedia has a great blog about home valuations here.
If you are from a developed country please keep in mind that the standards you have in Canada, USA, England, Australia, etc.. don’t necessarily apply everywhere throughout the Caribbean and Latin America. The majority of countries in the Caribbean and Latin America don’t have an MLS or a regulatory board when it comes to dealing with real estate agents. Think of the Wild Wild West, because that’s what it’s like in some of these countries when it comes to real estate.
So why did you decide to make this blog? Agents will call me and we will speak about a property and how to properly come up with a fair valuation. Sometimes the owner wants an exorbitant amount of money for a property that doesn’t warrant it. Because of greedy property owners, an absence of a regulatory real estate board, and solid data to back up market rate figures, this blog was created to help Buyers not get ripped off and maybe for even for Sellers to help properly price their property.
There is plenty of information out there on the internet when it comes to buying/selling property in developed countries and markets, but not much when it comes to buying/selling in under developed countries with no data collecting process or regulatory board.
What we have done is put together a checklist with some questions in order to help you negotiate and maybe even have a different perspective when it comes to buying property in the Caribbean and Latin America.
It’s Beachfront….and I want $1 Million US Dollars!
This is not applicable in countries that have a solid structure in place when it comes to construction regulations, a regulatory board for real estate agents, and data to provide solid market rate property prices.
You should use this when you think you are getting an inflated price provided by the seller or if you want to have a resource that can potentially show you a new way of valuating property in an unregulated environment.
We have listed these factors in order of importance (affecting the total price of the property).
1. Location. Near tourist options, restaurants, bars, the property is in a secure area, etc..
2. Living Space. How much of the property is REALLY livable? If the Home Owner wants to lump in the rooftop terrace as “livable” but it is missing what causes a space to be livable (bathroom, fan, enclosed room) then the rooftop terrace shouldn’t be classified as “livable”. Therefore the Sq. Footage shouldn’t be counted as livable which affects the price of the property in a downward manner.
3. Interior. How updated is the interior? Little to no renovation should lead to the market rate cost of the Sq. Footage. If there needs to be moderate to serious renovation then that should affect the price of the property in a downward manner.
4. Appliances. (Dependent On Market) Does the Buyer need to buy new appliances because the current ones are not functioning properly or will need to be changed soon? If so, then this affects the property price in a downward manner.
The refrigerator is fine, what are you talking about? Just plug it in!
5. Amenities. Does the property have any amenities? Do the amenities function and are in good condition? If so, then that factors into the price of the property. If the amenities need moderate to serious repair/updating then it would affect the price in a downward manner.
6. Exterior. Does the exterior of the house look presentable or does it need work? Little to no exterior renovation should lead to the market rate cost of the Sq. Footage. If there needs to be moderate to serious renovation then that should affect the price in a downward manner.
“Near Beach, Big Yard, Just Needs A Paint Job, $500,000 USD!”
7. Lot Size: 1) What does the lot size allow for? Do you have a big yard or does it allow you to park only your car? Allow space for a kiosk to sell ice cream, food, etc? With certain properties lot size matters more than other properties. If the lot size doesn’t allow for any expansion of the property or for any bit of commerce to take place (rent a parking spot or space for a kiosk vendor) then I would say the lot size doesn’t factor much into the cost of the property. If the lot allows for the parking of 3-5 cars, maybe a kiosk or allows for expansion of the property then that affects the price of the property in a positive manner.
2) Location of the property affects the price of the property in a positive manner. A property with the same lot size in an undesirable location affects the price in a negative manner.
No front or backyard. But hey, you get a sidewalk!
It’s important to only use comparable properties (properties with same amenities, lot size, bed/bath, location) given the “formula” above.
Remember, using standards in developed countries doesn’t cut it in the Caribbean and Latin America because those regions aren’t developed like other countries.
What is important is thinking outside the box (1st World Standards) and looking at the whole picture and the context of the picture as well is what needs to happens to get the most fair/legit price.
If you have any questions about purchasing Caribbean real estate or would like to speak with a Caribbean real estate agent then feel free to reach out to us!