Owner Financing in the Dominican Republic with Reliable Realty Assistance
CURRENT PROPERTY LISTINGS FROM RELIABLE REALTY WITH DIRECT SELLER/ OWNER FINANCING:
1) THE BEACH At City Place, Downtown Punta Cana - brand new 1 bedroom- $159,000
2) Rosa Hermosa - furnished 2 bedroom 3rd level, $169,000 - SOLD
3) Palm Suites furnished 2 (possible 3) bedroom penthouse, 3rd & 4th level, $219,000 SOLD
NEW CONSTRUCTION - DEVELOPER FINANCING DURING THE CONSTRUCTION
1) Resort-like condo community, with commercial area and private beach-club. 1 Bedrooms starting at $183,000 of 667 sq. ft. to 995 sq. ft. Financing during the term of the construction 2-3 years maximum
2) Resort-like condo community - with a private beach-club, 2 Bedrooms starting at from $210,500, 893 sq. ft. to 1233 sq. ft. Financing during the term of the construction 2-3 years maximum
3) Attractive 2 bedroom in the beach-town starting at $195,271 - Financing during the term of the construction (2 years max)
4) Spacious 1-bedroom in the beach-town, starting at $156,700 of 925 sq. ft. Developer financing for up to 8 years (must be pre-qualified)
5) Spacious 2 bedroom in the beach-town, starting at $209,500, 1233 sq. ft. Financing up to 8 years
*Prices will continue to go up as inventory diminishes. Other New Construction Developments offer financing during the term of the construction period only (2- 3 years is typical).
Q & A's - OWNER FINANCING PROCESS IN THE DOMINICAN REPUBLIC – Summarized*
We all know about mortgages, or third-party financing where a bank or other lending entity provides a loan to be paid back over time; However, when a BUYER cannot get financing through a lender, sometimes a SELLER will consider providing financing directly to the BUYER (like a land contract, or lease to purchase).
Bank loans are very challenging to achieve by a foreigner hoping to purchase in the Dominican Republic. And nearly impossible if the foreign purchaser does not reside in the Dominican Republic and/or cannot show enough proof of income, assets, or does not have a healthy credit score. Additionally, Bank loans in the Dominican Republic are much higher. Currently (as of June 2024) the annual interest rates are between 10.5% -13.5% for a 20-year loan. These loans are also Adjustable or Variable. Rates are set by the Dominican Republic’s Central Bank, which will fluctuate based on the U.S. dollar and economy. Meaning, even if you can secure a bank loan here, your APR could cause a default should your economic situation change.
Owner Financing or Seller financing here operates very similar to a bank mortgage in North American (Canada and the U.S), however, these loans are offered for a much shorter term. The BUYER pays the SELLER a pre-determined down-payment amount, then additional payments are paid, with a smaller interest amount, closer to the current rates in the U.S. An Amortization schedule becomes part of a sales contract, confirmed the agreed monthly payment.
Banks in the U.S. do not provide loans for property purchase in another country. This is due to jurisdictions, should a buyer default on a loan, it is difficult for a bank in another country to take possession of a property located in the Dominican Republic.
The best options for N. Americans who need additional funding, is to secure a home equity loan from their existing U.S. or Canadian property to leverage towards a property purchase in the Dominican Republic.
Common Owner Financing terms here are; a cash downpayment of 40% - 50% down, for 4-6 years, at 6%-8% interest. This amount of time is attractive to those Baby Boomers or Gen X age groups who plan to receive their pensions, SS, or IRA, 401K investments (Americans), or RRSP, CCP or OAS (Canadians) … 4-6 years could be the perfect amount of time for these, or other assets to be freed up; and/ or for current debts or loans to be paid off.
Q. When is Owner Financing most often used?
- When the BUYER is having problems qualifying for a bank loan here (i.e. is a foreigner who does not reside in the DR full-time). Or someone who has already used their home equity loan or does not have enough equity built up: Owner Financing offers the BUYER another option. A BUYER might even have an easier time negotiating the home price, interest rate, or other details with the homeowner rather than through a traditional a bank, or other lender. In most cases the SELLER will not require a credit report but may require "Proof of Funds" for the 40 - 60% downpayment before formulating a legal Finance Contract.
- During low season, or during a Flat Market
- When there is high inventory here; especially several like-kind properties in the same area (neighborhood) and within similar price ranges.
- New Construction competition is nearby- offered at early bird pricing with builders financing offered during the construction period. This situation means resale SELLERS will also be competing with the age of their property.
- When the SELLER is motivated to sell, and needs cash soon
- Once SELLERS decide to offer owner financing, they immediately have access to a whole new group of potential BUYERS with a substantial amount of "cash in hand" for a downpayment. Prospective BUYERS who may have been discouraged in the past at the prospect of purchasing a dream vacation home here.
Q. How Does Owner Financing Work? It works exactly how it sounds– the property owner or SELLER provides financing to a BUYER in the form of a loan (holds the note).
A. The basic process usually starts with the BUYER and SELLER agree to the terms of a sale. These terms are then expressed in a written Purchase Offer which must be signed by both parties before a legal Promise of Sale contract and a legal Finance Contract are created by an Attorney.
This Purchase Offer will outline the details of the loan, to include the downpayment amount, the interest rate, the term of the loan, the monthly payment amount, late fee or other default penalties, as well as other terms and conditions of the sale (called contingencies). These terms are carried forward from an agreed Purchase Offer to the sales and finance contracts.
- Closing a property sale can be quicker with seller financing. Since the loan doesn’t have to go through various financial institution departments associated with a lending institution or bank protocols, a BUYER can take possession of their new property much faster. Bank loans here can take 4-7 months. Most SELLERS will not wait this long to be fully funded.
- The overall costs associated with selling the property can be lower. Without having to pay various bank fees or appraisal costs, Also, depending on the down payment amount required for the property, the agreed selling price may be more negotiable.
- Easier approval process. If a BUYER is financially capable of making the monthly payments, yet is still turned down by a bank, Owner Financing provides them with an alternative financing option.
Disadvantages?
- Most Sellers will not finance more than 4-6 years, as often the Sellers may already be retired. This may mean a higher amortized monthly payment that a prospective buyer can afford based on their other monthly payment obligations.
- With nearly 100 successful Owner Financed Sales through our Agency, via our agencies trusted legal Attorney’s referrals, all other concerns or disadvantages are eliminated.
Q. What happens with the Title in the SELLERS names?
A. Good Question: Like a bank loan, the title would be transferred to the new PURCHASERS name(s), however, like a bank, the title would reflect there is a loan on this property, so the PURCHASERS cannot resell the property until the mortgage is paid in full. The SELLERS would additionally hold a title (different color), indicating they cannot sell this property to others. Once the property is “Paid in Full”, an Attorney will show the pay-off proof, and will submit the appropriate documentation to the Register of Deeds for a new title to be issued to the purchasers (now fully rightful owners) with no mortgage.
Q. What are the Pros and Cons of Owner Financing for SELLERS?
A. For SELLERS, Owner Financing has the following advantages:
- It’s a great opportunity for a gain on investment through interest paid. It’s possible that the SELLER will earn more by financing the home to a BUYER when calculating the interest made.
- No lost time as the property sits unsold, especially during a flat market, and as the property continues to age, while ownership costs continue.
- It’s a great opportunity for a gain on investment through rental income achieved. The BUYERS (Borrowers) are able to secure and retain rental income in exchange for the agreement to pay all ongoing cost of ownership after a sales closing. These terms are expressed in the Sale and Finance Contracts.
- A great opportunity for supplemental monthly income, which so many of our baby-booming retirees, or later Gen X Sellers need. In case of death the inheritance laws in the Dominican Republic guarantee the property would automatically go to the OWNERS heirs. Mention of this property should be added to an ESTATE WILL, within your country, especially if you have no heirs and desire this property to go to another person or persons you name.
- The property owner can sell the home “as is”. The SELLER can avoid repair and maintenance costs that can be passed to the BUYER (upon agreement).
- Our FULL-SERVICE AGENCY does provide inspections by request, and depending on the offer or “as is” condition accepted, we can assist with all repairs, upgrades, renovations, furnishings, etc. These costs are more affordable here, as labor costs are lower here.
- The property may sell faster. Owner Financing means more prospective purchasers will have an opportunity to purchase sooner, than later. meaning, the property will more than likely sell faster than it would without Owner Financing offerings available.
Disadvantages? Owner Financing through our Agency, and with the assistance of our trusted legal Attorney’s, removes most all concerns or disadvantages:
Whether you are a BUYER or SELLER, Owner Financing is a very safe and a very viable option for buying or selling a property here in the Dominican Republic, and under the sound laws and jurisdictions of the Dominican Republic.
Q. How do I know if Attorneys in the DR are Ethical and looking after my (our) Best Interests?
A. All real estate contracts: Promise of Sale, Finance contracts, and the final, or Definitive Contracts, must be done by a legal firm, through an Attorney here (there is no Association of Realtors here… so there are no standardized and legal templates like in the U.S. or Canada). However, not all Attorneys are created equal. Some may not speak, read or write English, may not be from the East Coast area or, they may not specialize in Real Estate law and Real Estate Sales and Finance contracts.
Since our very first Owner Financed sale in 2010 we assisted in selling countless properties with Owner Financing. We continue to have 100% closing success, with ZERO defaults or lawsuits because we are particular about working with the most ethical Attorneys, who understand the changing Real Estate laws here, YET who also understand North American ways and concerns. We plan to maintain this record, so we are additionally very careful in selecting the BUYERS and SELLERS we choose to work with. All properties we sold with Owner Financing, once the payment term was met. All liens were removed from the titles, with new titles issued, with absolutely no problems.
Q. Yes, I am Interested in the FULL Owner Financing Overview, now what?
A. This is just a summary. If you are a Prospective Buyer, please “Contact Us”. We will ask you a few questions, and upon approval, you will be registered with our Agency so we can both feel more confident in our transparent relationship and ongoing communications. We can then provide you with even deeper advice and insights in determining IF Owner Financing is right for you.
If you are an existing property owner (SELLER), and your property is already Exclusively listed with Reliable Realty SRL, or you plan to list your property Exclusively with Reliable Realty SRL, please “Contact Us”.
NOTE: Due to the crazy late 2021 - 2024 selling market, many of our property listings with OWNER FINANCING have SOLD.
Thank you for your trust in our FULL-SERVICE REAL ESTATE AGENCY!