Normally in Ecuador you and the seller would write up the terms of the sale which would then be taken to a lawyer, stuffed with legalize, and finally put into an official contract called “La Promesa de Compraventa” or simply “La Promesa”. The Promesa de Compraventa would then be read out loud in front of a notary and if necessary translated for non Spanish-speaking persons. After the Promesa is read then you, the notary, and the seller would sign the Promesa and you would turn over your down payment money to the seller. Once you have done the due diligence on the title and the property and you have all the money at hand then you would sign the final purchase agreement or “Compraventa”. At this point you would pay the seller the total purchase price less the amount of the down payment which you gave already would have given them when you signed the Promesa.
That may seem like it might work fine but possession is 9/10ths of the law and placing your deposit in the hands of the seller can be risky. Suppose the results of the title check show a lien against the property, or suppose that the property is considerably smaller than the owner reported. What are you going to do? Get you deposit back? Ecuadorians tend to be land rich and cash poor. Even if they still have your deposit money does not mean that you are going to get it back. Would you like to navigate your way through the Ecuadorian legal system to get a judgment against the seller and hope to recuperate some of you losses?
Cuenca’s Best Properties has convinced a local law firm to offer escrow services to its clients. To lock in the purchase of a property and allow time for due diligence a deposit of 5-10% of the agreed upon purchase price will be held by the firm. Prior to receiving the deposit, a detailed Promesa de Compraventa with all the terms of the sale and contingencies will be signed. It will include a legally binding monetary penalty which the seller will have to pay if they back out of the deal. It will allow you to cancel the purchase and receive your deposit back if the listed stipulations are not met. Typical conditions involve things like having a clear title, repairs being done, verifying size of property, payment schedule, and anything else that you or the seller is concerned enough to put in the Promesa. The deposit will be turned over to the seller when you are satisfied that all the conditions have been met satisfactorily. If the conditions that pertain to the seller are not met satisfactorily before the deadline written into the Promesa, then you can request to have your entire deposit is returned.
There is a $200.00 fee for the Escrow service. This gives you the option to risk a mere 200 bucks rather than thousands of dollars of deposit money that you could be worrying about while you are trying to go to sleep at night.
Up until now most people’s best solution for dealing with the Ecuadorian custom of placing the down payment in the hands of the seller has been to trust that their verbal agreement will stand while they go out and start the verification process. They worry about another buyer showing up out of the blue and buying the place out from under them, as often does happen in this lively real estate market.