In Colombia a mortgage is held only on real estate. This means that you can only hold a mortgage for assets like apartments, offices, land, estates, buildings, houses etc. In Colombia, like in most countries, if someone doesn’t make payments to their mortgage, their property could soon find itself going through the foreclosure process. So how can foreigners get involved in the process to be able to buy foreclosed properties in Colombia? How can you get your hands on that dream farm or beach house without having to pay full price? We’ll let’s explore the foreclosure and auction process in more detail.
As I mentioned previously, mortgages can only be held on real estate. However, auctions are an entirely different world. Within the foreclosure process, properties are not the only asset that can be auctioned. Other types of items such as vehicles, machinery and so on may also be subject to auction.
Where to find land (or estates) that have been seized?
In Colombia, property that has been seized in an foreclosure process can be found in local newspapers that are responsible for publishing these types of judicial communications, called judicial edicts, however there are also internet pages that publish properties for auction.
One important point to mention, is that these initial negotiations are done directly with the court and not with any individual.
Then who sells foreclosed properties in Colombia?
The responsibility for auctioning or selling these types of properties falls exclusively on the court for the jurisdiction where the foreclosure process was carried out. This is why the negotiation is always handled directly with the court and deposits are made to the court’s accounts and not in any individual’s accounts.
How late must someone be with payments before the bank can enforce foreclosure?
It is important to clarify that in Colombia mortgages are not provided exclusively by banks. Individuals can also lend money under a mortgage and request its foreclosure. At the end of the day it really depends on the contractual provisions established with the creditor in terms of the debtor’s default. In some cases, a contract might stipulate that only one payment needs to be missed in order to start the foreclosure process. However most contracts provide more “breathing room” for a late payments, and missing a payment for a month or two will generally only result in a late payment penalty (fee).
What is the foreclosure process like?
Buying foreclosed properties in Colombia works a little bit different than in other places around the world. However, before answering this question, it’s important to clarify a few details first.
The first is that foreclosures are not an autonomous judicial process but rather the result of an administrative process in the understanding that the auction will take place after completing the administrative process where the “order to pay” is made.
Article 431 of the code of civil procedure states that “If the obligation concerns a liquid amount of money, its payment shall be ordered within five (5) days, with interest starting from when they were made payable until the debt was cancelled. In the case of obligations agreed in foreign currency, the payment must be made in Colombian legal currency at the rate in force at the time of payment, the judge shall issue the executive order in the agreed currency. ”
Once this stage has been completed, the auction stage of Article 448 et seq. of the code of civil procedure begins. During this stage, there will be an indication of the date on which the auction is to be made. After this step, the publication of the auction will be published on Sunday in a newspaper with broad circulation. After this step, interested parties can submit their bids. After this step there will be an auction hearing where a winner will be declared. The final step involves the payment for the remaining balance and delivery of the property.
As you can see, it’s a multi-step process.
How do I sign up to buy foreclosed properties in Colombia?
Buying foreclosed properties through auction in Colombia is a little unique with regards to the auction and bidding process. Article 451 of the code of civil procedures states that in order to participate in the auction, the sum equivalent to 40% of the cost of the appraisal must be deposited at the court’s orders, which is to say that in order to participate in the judicial auction, the aforementioned value must be deposited into a court account. If this is not done you cannot participate in the auction. The payment must be completed prior to the hearing.
How much is the minimum value for which a property can be sold?
The minimum value by which real estate can be sold for is generally 70% of the value of the appraisal, the latter is equivalent to the cadastral appraisal increased by 50%. The cadastral valuation being a value established by the municipal entity to collect taxes that is normally less than the commercial value, which is why the value is 50% of that amount. However, in some cases this valuation may be higher due to conditions related to the judicial process. Similarly, in some cases, the value of the auction may be lower in the case that the assets have been hard to sell.
When can I make the bid for the auction?
Again, buying foreclosed properties or foreclosed land in Colombia is a little different than in other countries, because bids are made blindly. Bids don’t happen in an auction room where people are passionately trying to outbid each other. Instead, your offer must be made in a closed envelope on the date set for the auction hearing.
The only case where your offer can be improved is in the event of a tie.
Also, it should be mentioned, that if you’re the type that likes to be first in line, you can also file the envelope with the offer 5 days before the auction.
For foreigners interested in buying foreclosed land (or estates), what is the buying process?
In the case of foreigners wanting to invest in foreclosed properties up for grabs at public auctions, the procedure is the same. Nothing prohibits foreigners from having property in Colombia. In fact many people from Canada, the United States, as well as many other European, Asian and Latin American countries participate in these auctions.
When is the remaining value to be paid?
Within 5 days following the auction hearing the remainder must be paid. In the event that this payment is not made it will be punishable by the loss of 20% of the value of the appraisal, which means half of the value that it sold for.
What else should be paid?
In addition to the remaining value, an auction tax equal to 3% of the value for which the asset was sold must also be paid within 5 days of the auction hearing.
How long does the entire auction process last?
From the time of publication to the point where the property is turned over takes approximately 35 business days. However conditions may occur within the process which can either speed it up a little or slow it down a little.
Are there advantages of buying real estate in auction?
Obviously, the biggest advantage to buying judicially auctioned real estate in Colombia is that this property (including land) can be obtained for a much lower cost. Secondly, and equally important after this process is completed they property will be once again “in good standing”. This means the property will have all of its debts cleared.
Want to get involved in buying foreclosed properties in Colombia?
If you’d like to own land in Colombia, be sure to get in contact with us today. We have land scouts on the ground searching for the best Colombian land deals. Not only does Tycoon.to help with sourcing the best land deals, but we also offer owner financing allowing you to pay a small down payment and then reasonable monthly payments. We’ll hold your hand through the entire land purchase process, so get in touch with us today!