|The Bahamas Investor Magazine
January 1, 2009
January 1, 2009
For many people it is a life-long dream. For others it is a shrewd investment. But for whatever reason, buying property in The Bahamas has never been easier. With all the expertise at hand to help transactions go smoothly and the whole spectrum of homes and condos to choose from, many investors are looking to the archipelago as a place to build for the future.
Ideal for a second home for North Americans, The Bahamas has hundreds of habitable islands that offer a veritable slice of sun, sea and sand. With increased globalization and international communications, the process by which property can be obtained is relatively painless and can be done remotely using local professionals for expert guidance and financing.
Step by step
Once a foreign investor makes the decision to purchase real estate in The Bahamas, they can obtain US dollar financing through one of the local banks to assist with purchasing the property.
The first step in the process is to complete a loan application, which would enable the bank to prequalify the client for the amount of funding needed and advise them of financing options available. Prequalification for a loan is highly recommended prior to making any commitment, as it will confirm to the client whether they are able to afford the property they wish to purchase.
Should the client wish to proceed with the application, they would need to provide supporting documentation in order to get a formal approval of their loan request. The documentation required would normally include proof of income (ie employment letters and income tax returns), bank references, credit report, purchase/sales agreement, evidence of deposit paid, and a property appraisal. It is strongly advised that clients review their sales agreement in detail with an attorney prior to making any formal commitment. Most financial institutions can provide the client with a list of local attorneys that can assist in that regard.
Once the loan has been approved, a formal offer for financing is issued to the client that outlines the terms and conditions of the loan approval, eg interest rate, term, monthly payments etc. If the client agrees to the terms and conditions and accepts the bank’s offer for financing, it will then be necessary to have a local law firm complete the necessary legal and mortgage documentation.
Collateral for the mortgage would include a First Registered Legal Mortgage over the real estate being purchased, which would be stamped to secure the full amount of the loan. Clear title to the real estate would need to be confirmed by the attorney. Additional collateral would normally include comprehensive homeowner’s insurance coverage and life insurance.
For an international investor, the legal process will also involve obtaining certain approvals from government entities such as the Central Bank and the Investment Board. This can be the most challenging part of the transaction for foreign investors; however, their legal counsel and/or real estate agent can guide them through the process.
The property purchase will also involve closing costs that are in addition to the purchase price. They traditionally consist primarily of legal fees, government stamp tax, recording fees, bank commitment fee and, in some cases, real estate commissions.
These fees are calculated on the dollar value of the transaction, and may fluctuate according to the type of sale which can either be “net” or “gross.” In the case of a “net” sale, the purchase price of the property would be net to the vendor, which means that the purchaser would be responsible for all costs involved with the transaction, including the stamp tax, legal fees and real estate commission. If a property is being sold “gross,” the stamp tax would be split between the vendor and purchaser, and each would be responsible for their own legal fees. Real estate commission in this instance would normally be paid by the vendor.
Once the attorney has completed all of the legal work and obtained the necessary government approvals and the client has met all conditions of the loan approval, the bank would then be in a position to drawdown the loan and close on the purchase of the property.
Born and raised in Nassau, Tiffany Simms-O’Brien attended high school at St Augustine’s College in The Bahamas and later Barry University in Miami, Florida, obtaining a BA degree in management. Simms-O’Brien has held various positions with both RBC and RBC FINCO over the past 13 years. She is currently manager, executive banking at RBC Commercial Financial Services.