Buying real estate in El Salvador is difficult. It’s a mess of a process. The legal infrastructure here is limited, the market isn’t well established and local cultural norms make it difficult to find and buy real estate. I’ve been going through the process trying to find a property in El Salvador and I haven’t even begun the actual purchasing part.
The purpose of this article isn’t to complain. It’s to lay out the challenges that buyers face when searching for property in El Salvador. Maybe another buyer will find this helpful to prepare themselves for the long process.
Most sellers don’t use an agent or listing service.
Salvadorans and generally are “do it yourself” (DIY) kinds of people. They don’t want to pay anyone for services that they absolutely don’t have to pay. While this might seem like it’s because people are cheap, it’s actually for a different reason.
Salvadorans tend to be less trusting towards other people. They prefer to do things themselves because they don’t want to get screwed over. And that makes sense, because there is very little legal infrastructure here and trust tends to run in short supply in El Salvador.
As an extension of distrust that the general population has, it’s important to mention lawsuits. Lawsuits are very expensive, resource-intensive and time-consuming for locals. Keep in mind, people here often don’t even trust lawyers. So, if someone hires a bad listing agent, they now have to run the risk of hiring a corrupt lawyer if the listing agent mishandles things. Also, a lawsuit will probably take 10 years because the court system works painfully slow.
Additionally, crime and scams are fairly common. So naturally, the risk-averse mindset of Salvadorans usually affects the real estate market to a large degree. Overall, locals don’t want to pay the extra price for any real estate listing services.
Real estate agents are seen as a service that’s used by the very elite sellers and buyers (read: deep pockets). Like any real estate market, you’ll have no problem finding an agent – the problem again is trust. It’s difficult to know if you can trust an real estate agent in El Salvador. El Salvador doesn’t have a real estate licensure process, which means that there’s no formal title of “Real Estate Agent” in El Salvador. Literally anyone can call themselves an agent.
Any property thats valued at less than $50,000 will probably not have a sellers agent. In other words, 80%+ of all property owners that want to sell their property much will just slap a sign on the front gate of the property and hope that someone calls them. People do things old-school here. El Salvador is a developing country. It’s still very undeveloped by most standards. That creates a lot of challenges for potential buyers.
There is no consistency in seller set prices.
Property sellers here usually just choose a price in their mind that matches whatever the property seller thinks is an achievable price. Note that I didn’t say “reasonable”. Most sellers completely ignore market prices because they don’t know normal market prices and they don’t want to deal with what “someone else thinks their property is worth”.
It’s a little odd. In fact, it leads to problems in the market. Sellers frequently ask for prices that are unreasonably high. In reality, nobody will pay their asking prices. You can see the thought process…”I’ll just raise the asking price considerably high and if someone takes it, great! And if not, I’ll just negotiate to a lower price.” That’s generally how they think, but there’s more too it, as I’ll explain in a moment.
I’ve seen dozens of properties for sale that are listed at 10x’s what they’re reasonably worth. For me, it’s cringeworthy. In the USA where I’m from, unreasonable is considered to be 10%+ over the market value. But here in El Salvador, local property owners will often hope that some rich European or American will come along and just buy their marked-up property. It doesn’t happen – people from developed countries are smart enough to research reasonable prices.
There’s a little more to this story. Land ownership in El Salvador has been passed down for generations. Land owners were considered to be nobility in El Salvador for the past 400 years. Land owners had the farms that grew the produce and products that were sold on the world market. Unfortunately for them, that’s not the case anymore. The times have changed. El Salvador’s main exports are too few to generate vast sums for the once-rich land owners. Now it’s the successful business owners and government administrators that are the upper class. The land owners still hold onto that pride. You can imagine that it’s probably a bitter pill for them to swallow.
This leads to a broken market.
All of the variables mentioned above result in a broken market. Searching for property is a pain in the ass. It’s really annoying for buyers. For me, I don’t want to negotiate with someone that seems to be already trying to screw me, even if that may not be the case. They might just be lazy, or maybe they’re extremely unmotivated to sell.
Quick note: the color of your skin, or having a foreign accent, will quickly result in paying a higher price. If you’re foreign, they’ll see dollar signs. Use a proxy – a friend or a lawyer, anyone else, so that you get a better price.
Another important thing to know is that your money is king. Most people here can’t afford to buy property – they often don’t even have bank accounts, never mind established bank credit. It’s too difficult for them to buy, which means that buyers are in a very good negotiating position. Sellers may be reluctant to lower their prices, but they know that buyers are rare, so they’ll negotiate down substantially.
In El Salvador’s market there’s fewer dollars chasing a large supply of available land for sale. Why? Because there’s less expensive land in safer nearby countries like Nicaragua and Panama. Most foreign buyers go to other countries. After all, El Salvador is dangerous relative to other nearby countries. However, therein exists an opportunity: Buyers that are willing to put in the leg-work have the upper hand. That brings me to my next point…
Buyers have to do so much leg-work and due dilligence.
Since sellers don’t want to use a listing service or (portal de casas en venta), this means that buyers need to do a lot of searching. Hard…manual…searching. While looking for properties, I’ve contacted about 30 different land owners from signs I’ve seen on the side of various roads. When driving down the road, I’ll see a sign, pull my car over for a moment grab a photo of the sign with my phone (much easier to save phone numbers), send a message to the property seller and maybe/hopefully get a response within a couple of days. Most often I don’t even get a response.
Also, usually I don’t even know if the sign represents the actual land that the sign is placed on. The dirt roads on properties often go miles/kilometers deep into these properties…it’s a complete guess to know where the piece of land for sale is actually located.
Land records have been maintained poorly.
Even if I have the luxury to find a suitable and reasonably-priced piece of land, I still need to research the property title. El Salvador has gone through a lot of economic and political transitions over the last 100 years, especially after their civil war in the 1980’s. And their government property registry database was only recently implemented. That means, in most cases, it’s a challenge to figure out the actual ownership of the property. Lawyers are needed for this. I might even hire more than one lawyer to double-check the documents.
Even if the property owner has physical property records in-hand, it still needs to be verified. As I previously mentioned, trust in itself is not sufficient in El Salvador, sometimes the owners themselves don’t know if someone else has a claim to their land, or if the National Registry has recorded the owner information properly.
Verifying property ownership requires submitting physical paper requests in person.
This is a real pain in the ass. There is no email address or online form to submit requests to local manicipalities. You literally have to go to the local registry office and submit a physical document (while praying the address was written down in proper format) in order to to submit a request to get property records. Imaging looking at 10 properties – this will likely take 3-4 days of time, just to submit paper requests.
Nothing happens quickly here. So give everything extra time.
Other advantages of being a buyer
All of these complications means opportunity. Property owners that are motivated to sell know that the buying process is a huge pain in the ass for a buyer. This means that they’ll be motivated even more to lower to price because they just want the problem (of selling their property) to go away. This makes the price more negotiable.
There is nothing more powerful than having cash to buy property. Property sellers have been known to post a price at $50K, lower it to $25K, then sell at $19K….ridiculous, right? We can’t imagine scenarios like that in developed countries. If you tried that in the USA, you’d be laughed out of the industry. Nobody would take you seriously. But that’s how things often work here. It’s a very inefficient market. So, if that’s how it works in El Salvador when there’s cash in hand, then so be it. If all of these sellers want to jack the price up, just to knock the price way back down, that’s ok with me. In the end, they can either accept or reject my offer.
In my opinion, this market needs more structure. And it will mature with time as the country grows and becomes more developed. El Salvador is still struggling to overcome decades of crime. It’s not pretty but there’s hints of improvements.
One challenge is the lack of information about the market in El Salvador. Lack of reliable information plus crime means a lot of distrust. Plus, Real Estate agents aren’t regulated here, which means people don’t trust them, nor should they for the most part.
Also, there are very blurred lines in the industry…developers are sometimes agents, sometimes they’re flippers and sometimes they’re wholesalers. Developers have very few permit requirements and building codes. Usually bribes are paid to make developer problems go away. It’s a free-for-all. This is good if you know how to negotiate and handle your business in a somewhat lawless country, but it’s terrible for anyone that’s accustomed to structure and legal recourse.
Anyway, these were just my musings. It’s been very interesting to learn about the real estate market in El Salvador. Currently I’m looking for land. I want to build a hostel for travelers and a home for my family. I’m willing to expand my search to neighboring countries, but my hands are full here.
Feel free to send me any questions. Living and building a life in El Salvador has been an incredible experience and I love every second.