There could be many reasons for selling a property you own. Perhaps your current home no longer meets your needs and you are looking to either upgrade or downsize. Maybe you are relocating to another town or another country,  or could be that you have inherited a property that you wish to sell as a way to manage asset distribution. But regardless of your situation, planning ahead and getting all your paperwork organized can help you navigate through the listing process with a little more ease and lower the chances for last minute surprises. And while the simplicity or complexity surrounding each real estate sale depends on many variables, it is important we understand the importance of having clear proof of ownership and the ability to document any liens and encumbrances. Moreover, lack of valid paperwork can sometimes delay and even compromise the viability and success of the sale.

How do I prepare to sell my house or land?

Once you have made a decision to sell, some of the first things you will have to evaluate are the current state of the housing market, how to choose a real estate agent, and the condition of the home. And while each one of these subjects is deserving of their own blog post, today we are just going to focus mostly on what you will need as part of your document gathering. Remember, real estate law in Puerto Rico is based on the Spanish Civil Code which defines most of the process and legal requirements. The following list is based on the assumption that you have fee simple ownership and that there are no liens or encumbrances on the property. We will discuss other cases such as homes or land not recorded in the Registry of Property, or those obtained through forced inheritance, donation or division of property in a future post.

1. Choosing an Agent

One of the first and most important decisions you will have to make when selling your home is selecting a real estate agent.  Agents have “fiduciary” responsibility to their clients and are legally obligated to look out after your best interests while helping you navigate through all the required paperwork and procedural requirements. Once you find an agent to represent you, you will be asked to sign “Listing Agreement”. This contractual agreement serves as an employment contract between you, the Seller, and the agent, giving them the legal authority to act as your agent in the sale of your property.

2. Proof of Ownership

Start the planning process by collecting and verifying all the paperwork. Make sure all the documents are valid and up-to-date and take the necessary steps to rectify any discrepancies or potential issues that may affect the outcome of the sale. First and of the essence is to have the ability to show that you are the lawful owner of the property. For that you must present an original copy of the title or property deeds. It is important that these documents show that you are the title holder and that your name and personal information matches on all legal documents. Any minor discrepancy in this regard can potentially cause future delays, therefore, must be remedied immediately.  You can use a title search company such as Capital Title to run a title search to ensure your documents were correctly recorded.

3. Property taxes and CRIM certifications

You will be required to present a CRIM Certification and an account balance proof for closing. These documents provide information about the owner of record, data regarding the size of the property, details about any structures on the lot, assessed property values and status of your real estate tax account.  This is where a lot of gremlins lie.   A big issue often is whether the property has been assessed properly or if the sq meters of land matches the property registry and deed.  Puerto Rico Property Registry DOES NOT speak to the CRIM property tax authority systematically.  Data needs to be submitted and updated in each system separately.

:: Property Tax ::

Unpaid property taxes or inaccurate records can potentially affect a real estate sale. Generally, when a mortgage is involved, the financial institution sends the payment directly to CRIM from an “escrow” account funded by the payments you make as a mortgagor. If there is no mortgage, you will be responsible to process payment to CRIM on a semi-annual basis. Pending invoices will be sent to your mailing address so make sure to notify CRIM whenever you have a change of address.

:: CRIM Records ::

To obtain your CRIM certifications you can visit the regional office serving your area (or skip the lines and request copies of both certifications through CRIM’s online platform. Remember that CRIM records must be up-to-date and match all other legal documents, so double check that the information on the certificate is up-to-date and correct. As you review your CRIM certification keep in mind that CRIM values ​​are established in order to calculate property tax only, not market value. In fact, CRIM uses property values from over 60 years ago as part of their methodology to calculate real property taxes. In some cases it may be advantageous to request a proactive CRIM appraisal (despite the fact that this could take years to complete). Market value on the other hand, can be determined based on comparables of recently sold properties or by performing a comparative market analysis.

4. Pending debt certification and Cancellation of Mortgage

If you have a pending mortgage on the property you will be required to show your latest mortgage statement and Payoff Statement from your lender. Also, given that in Puerto Rico mortgage debt appears in the Registry of Property you will have to present evidence of Mortgage Cancellation as recorded by the Registry. A mortgage that has already been paid off but not reported to the Registry could be interpreted as still having pending liens. In fact, reporting the cancellation of any debt to the Registry of Property is mandatory. Sellers should consider ordering a title search to independently verify that all mortgage information has been properly recorded and documented by the Registry.

5. Surveys

In order to successfully record new real estate at the Registry of Property it must be accompanied, among other things, by a land survey issued by a certified surveyor and approved by the Permit and Management Office (OGPe). Make sure you have the most recent survey readily available as it may be required by the buyer prior to making an offer. The survey you offer must reflect current changes in lot size, any new construction or modifications to the current structure as to accurately describe the property size and boundaries of the home or land you are selling.

6. Appraisals

Although not required, a home appraisal is a useful tool to help you establish the sales price and better understand your position in the current market. Remember that when selling a home, the asking price is part of the sales strategy and is a critical factor to the success or shortcomings of negotiations with a potential buyer. Pricing your home right from the beginning puts you in the best position to attract serious buyers. Do not underestimate this important decision. While a qualified broker or real estate agent can give you a price opinion keep in mind that this is not the same as an appraisal from a licensed appraiser. If you decide to order an appraisal, be aware that the buyer in a financing deal will not use it because the lender will order another appraisal from their end.

7. Other documents

Other documents that you may want to have easily accessible are a list of any furniture or equipment included in the sale, copies of recent utility bills, maintenance records, a list of improvements and repairs, and maintenance balance or HOA statement.

8.  Capital Gains

You will also want to assess your capital gains situation with a sale and prepare documents and information for your CPA and financial advisor ahead of closing.

FINAL THOUGHTS

Finally, remember that all owners must be present the day of closing (or can have Power of Attorneys present) and must present a valid legal form of identification such as a passport or driver’s license. POA documents take a while to prepare as well as it may be several steps so this should be planned for in advance.