Importance of Using a Great Lawyer ("Escribano") and the Fees
In the paid surveys that I conducted before purchasing here I found that many foreigners were cheated by their lawyers or realtors. One of the questions I asked foreigners that purchased here in Argentina was, "what mistakes did you make", "how were you cheated", "what would you do differently". A large percentage of them told me that they were incorrectly charged a phantom tax or fee by their realtor or lawyer.
The most common "scam tax" for foreigners is something called the "stamp tax" (impuesto de sello). The stamp tax is a legitimate tax that is 2.5% of the purchase price. However, the government WAIVES this tax on your first property purchase. Many lawyers charge this tax to foreigners that don't know the laws and are pocketing this 2.5% tax. Some aren't pocking the money but they honestly don't know the laws in detail. Before I purchased, I got conflicting information on this stamp tax. Some lawyers told me you had to pay it and some told me that I did not. I finally went to the tax office to ask them and they confirmed to me that it is waived on your first property purchase. Keep in mind the stamp tax is sometimes split 1.25% / 1.25% between the buyer and seller but you must request this when you make your offer if you already own more than one property. The sellers often times do not split it and ask you to pay for it as a condition of selling the property. I have paid it on some properties and on some I have split it. The important thing if you already own property in Buenos Aires, is you or your realtor make it part of the offer that you split it. If you forget, it's almost a certainty that they won't split it after the fact if you don't ask for it.
UPDATE - 1/18/06 ------- A new law was recently passed making all property purchases over 600,000 pesos (u$s 200,000) non-exempt for the waiving of the stamp tax on the first property purchase. As long as it's your first time purchase and the property is less than u$s 200,000 it is still waived. If the property purchase is over u$s 200,000, AFIP will assess a partial stamp tax.
UPDATE - 1/10/07 ----- A new law was recently passed lowering the amount above from 600,000 pesos to 360,000 pesos (aprx. u$s 116,000) So, any property that is under 360,000 pesos (U$S 116,000) will still be exempt for a first time purchase but if it is over that amount, you must pay 2.5% stamp tax on any amount over this limit.
It is ESSENTIAL to use an ethical attorney that knows and understands the laws. Keep in mind here in Argentina that every single real estate purchase must go through a special attorney called a "notario publico". Basically this notory public is a lawyer with a few more years training. They are specialized in dealing with real estate transactions. There are many lawyers here but I've found that many don't fully understand the laws or they do understand the laws but don't follow them.
Part of the reason that the title system is so stable here in Argentina is because every buy/sell goes through a notario publico and a centralized office that documents every single buy and sell. If there is a lien on the property, a skilled escribano will spot it.
When I decided to get serious about forming a consulting business and purchase significant amounts of real estate in Argentina, I interviewed many escribanos. One important thing I needed was that the lawyer could speak English almost fluently. Not only for me but for my future clients as well. It was essential that he could communicate with my clients. I found an excellent lawyer that was classy, had a great reputation, been in practice many years, respected by his peers, and was ethical.
These notario publicos aren't cheap here in Buenos Aires. The ones I interviewed that spoke fluent English charged between 2.5% up to 3% of the purchase price. It is not like in the USA or Europe. Here the deal can't get done without the escribano so it's very important that you use a skilled lawyer. There are many escribanos that might charge a lower fee but they will charge fantom fees or taxes. Built into that percentage that they charge is the title and document fees that we as Americans pay separately in the USA outlined on the title papers.
Many escribanos claim to have a lower fee of 1.5% but then add on other fees like registration fees with the government, filing fees, Power of Attorney document fees, translation fees, etc. We use the best attorneys in Buenos Aires that are totally fluent in English that have solid reputations (several are ex-presidents of the Notary Association in Buenos Aires). We don't make a commission from the legal fees. We use these lawyers because they are the best in their field. The Escribanos that we use include
I can't emphasize enough the importance of using a great lawyer (notario publico). It could be the single most important part of the buying process. I'm quite amazed by the problems that some of my clients have had. Many client have come to me after they have initiated the purchase process or after they have purchased. I have many times discovered that their attorney was incompetent or dishonest. Most of my clients can't speak Spanish and most attorneys here do not speak English. It always amazes me that someone would purchase property in a foreign country without being able to fully communicate with their attorney.
There are attorneys that may be cheaper but there is a price to pay for using a great attorney with a solid reputation that speaks perfect English. Would you go to Africa and buy a property with someone that could not speak English? Exactly. Don't make the same mistake here. Use an attorney that has a solid reputation that speaks English if you are not completely fluent in Spanish.
Another piece of important advice - stay focused at all times. Use common sense. Buying property in a foreign country can be exciting but do not make any decisions or act in a way that you wouldn't act in your own home country. Common sense should always prevail no matter where you are at. Always ask yourself if you would act in a similar fashion in the USA, UK, Asia or wherever you are from. Would you use an attorney that didn't speak English in the USA on an all cash deal? Don't let the fact that you are in a foreign country change your common sense. There is very little or no room for errors when you are dealing with financial transactions in Argentina that are paid 100% in cash.
I could spend hours telling story after story of people that have used bad lawyers that cheated them or that did not know or understand the laws. Remember that these lawyers do not get paid until you close on a property and hand over the cash to the seller so that many times motivates many unethical lawyers to push through on deals that should not go through. The same thing applies to many realtors here in Buenos Aires. The main reason why many selected their attorneys was because they tried saving a few hundred dollars on legal fees. Do not make the same mistake. Make sure you use an ethical and skilled attorney that you can fully communicate with.