Ecuador banking – wire transfers

It happens all too often.  Quietly, almost “off the radar.” Smart, well-prepared real estate buyer enters the Ecuador market.  They’ve done their homework.  They know where they want to live.  The type of property they want to buy. Reasonable $/sf or $/m2 that such a purchase entails. They’ve interviewed several real estate professionals and have settled on who they will work with to find that hidden gem.  They might even have an attorney team already in place.  The moment of truth arrives and they are ready to buy.  What could possibly go wrong then?  Plenty!  Ecuador banking, especially wire transfers can challenge even the most patient.

One of the hidden issues in Ecuador real estate transactions is the matter of moving purchase funds from Point A to Point B.  In order to buy, the seller needs to receive funds.  In order for that to happen, the money somehow has to travel from your funding account to the seller’s receiving account.  The easiest way is an electronic bank wire transfer.  Unfortunately, “easy” isn’t always what it is cracked up to be.

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First, a little background history, because it is extremely germane to the current discussion.      If we could take a time machine back to the day, really drifting away only a scant 10 years, when few expats were buying real estate in Ecuador, we would find that Ecuadorean to Ecuadorean transactions were a relative breeze.  Good chance the parties already knew each other or, at least, their families did.  The sanctity of a handshake was paramount.  The likelihood that either side, except for a major commercial real estate transaction, would even deploy an attorney was highly improbable.

The process was fast and efficient.  Price and terms were agreed.  A handshake was made.  The two parties would promptly converge upon an impartial Notario.  Documents of ownership and good standing would be procured by the Seller, with the contract subsequently drafted by the Notario, and the joint parties would sign.  Money would likely be cut from a local Ecuadorean bank to a receiving Ecuadorean bank…and, presto!  Deal is done.  Likely total time 7-14 days, total.

Enter the expats.  Many with a very different way of conducting real estate transactions.  While culturally understood by all, it does not mean that the Ecuadoreans are to abandon their own cultural beliefs overnight.  One bastion of that Ecuadorean cultural belief remains heavily ingrained – real estate transactions close promptly with little obstruction or delay.  If an expat needs a certain process, fine.  However, it is up to that expat to resolve the process promptly or the Seller takes that deal elsewhere.

I have seen utterly well-prepared buyers fail on that last point frequently.  The moment of truth arrives and they have to produce purchasing funds, but wait!  The funds are locked in stocks which need to be liquidated in a difficult market.  The funds are locked in hard assets, like country of origin real estate, and they have to be liquidated over time.  Maybe it is as “simple” as the funds are locked in a retirement account and the proper procedure for their disbursal is required.  Great!  Just don’t expect the Ecuadorean Seller to exercise “Waiting on Godot” patience.  Not going to happen.

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The best advice I can offer is that if you know, or even remotely believe, that you will be purchasing real estate in Ecuador, then please have the funds ready in an account, which will require little more than a phone call or email, with ID and security code to launch the transfer.  Until your purchase funds aren’t in this “liquid” state, don’t even bother to look at real estate. Good chance you will wind up disappointed.  This is especially true for any USA resident or USA bank account holder, where the art of delaying any kind of external funds transfer has evolved into the strata of a masterpiece of inefficiencies. Your financial institution might say, “But it will be only an additional week…”, but the Ecuadorean seller will hear, “It is going to take a lifetime.”

Even if you have already taken the previous precautions, more can still go wrong.  One client of mine did it all perfectly correct.  Funds were a hair-trigger away from being sent, with just one catch.  A major USA bank decided that the only way they could execute the bank wire transfer order was for the client to present themselves, personally, at the local bank branch.  Just one problem, the buyer was already residing in Ecuador.  A “slight” inconvenience to say the least.  Deal got done and the wire sent, but only after the client, in their most polite, but firm, tone reminded the bank that the funds belonged to the client and that if a wire transfer wan’t confirmed in 24 hours, they would be pulling their funds in 48 hours.  It was a substantial account.  The threat worked, but might not for everyone.

Here are a few simple steps you can remember to make this process less painful for you and reduce your risk of losing the “perfect deal” on a technicality:

1)  Prior to beginning your “boots on the ground” real estate search, determine a budget. Give yourself a little breathing room for an exceptional deal, to cover closing costs (estimated 6%, conservative), legal fees, professional fees (if you hire a Buyer’s Broker) and to compensate for bank wire transfer fees.  Then take that sum and, if possible, add  a 10% cushion.

2)  When you have that dollar amount in place, carefully outline exactly where the funds will come from.

3)  Once outlined, immediately begin the process of liquidating the funds and collecting them in one central, unified account.

4)  Be patient, until all the funds are collected.

5)  Once the funds are collected, reach a clear understanding with your financial institution that you intend to make a real estate purchase in Ecuador and that you will need these funds wire transferred promptly at your instruction.  Ask the financial institution exactly what you have to do, before leaving for Ecuador, in order to make this a flawless and realistic possibility.  Usually, this will require you to leave a standing “Bank Instruction Card” (other names used), which requires your signature and an ID/security code on file.

6)  Finished, right? Not so fast.  Ask to speak to the highest ranking bank official at your frequently used bank branch.  Make sure they also understand what you are doing and how you’ve been instructed, not just some bank clerk or mid-level manager.  Ask for a confirmation from the financial institution executive, on letterhead, confirming the understanding.  Also, make sure they take personal responsibility for having employees at all levels of the process understand your instructions.  You will be surprised to find how many transfers are mucked up by clerks afraid to make a mistake, in today’s even more highly regulated banking industry, where apparently everyone is considered a rogue drug dealer, until proven innocent.

7)  Then, and only then, place boots on the ground and begin your Ecuadorean adventure and real estate search.

Will this assure you of a seamless transaction? Not by a long-shot, but the odds will at least begin to favor you.  Without such detailed precautions, your dream purchase could readily turn into your nightmare regret, all because fund transfers took 3 days longer than the Ecuadorean Seller was willing to wait.  It happens all the time.  Don’t let it happen to you.

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