Home and Land Prices in Chile

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Real Estate Values in Chile and Inspection

So, how do you determine the value of the house? Well in most locations, you could send in an inspector or appraiser. We often do both for our clients that are considering an existing structure.

First, we send in our appraiser to give the point by point evaluation as you would find anywhere in the World as a baseline. Our inspector actually works part-time doing appraisals for banks in Chile and European companies.

Chile Real Estate Tip 2:
Be careful with the word "Engineer" in Chile. There are many professional degrees that use the word Engineer in Spanish. For example, forestry engineer, information engineer, and so on. You want to hire a construction engineer.

We then send in our engineer to inspect the overall structure and evaluate the cost of fixing the problems of the house. Just because a house is only worth say 40 million pesos, does not mean that for another say 5 million pesos you could not have a 60 million peso house. It simply might be something the sellers are unwilling to invest in fixing prior to the sale, and thus is a good point to negotiate in to the price. A 5 million pesos repair might translate in to a 10 million pesos discount on the sale price.

This is another thing to consider. Often when people sell houses in Chile they will not invest anything more in to the house other than a new paint job or trimming the hedge. In other countries, people will often do major remodels just to get more money on the market. Exactly because a run down house or a brand new house will have about the same asking price on it, sellers will not view it as worth the effort or the money to remodel. That said, they will move on price if you point out the problems with the house; just do not over do it. Chileans are easily embarrassed and if you are too pushy the negotiation will be over before it starts. The seller will simply shutdown.

Bank Value in Chile

So what do banks do in Chile? Banks do send aprasars in Chile before issuing loans. The problem is in addition to all the problems mentioned above, the banks are for the most part trying to protect their money and will likely appraise buildings at far below the market rates to insure that they can easily recover their money on a mortgage in the event of a loan default.

Insurance value in Chile

How to insurance companies appraise houses in Chile? Well, similar the way banks are trying to protect their money. That said, this is likely a good rule of thumb in determining the value of house in Chile. What would be the replacement value should say the house burn to the ground to build it stick for stick? If the owner is asking 40 million pesos, the land is worth 10 million pesos, and the building could be built again for 20 million what are you willing to pay? This is the key. What are YOU willing to pay?

International vs Chilean Real Estate Prices.

So what is the real value of any give house in Chile? The simple answer is what is it worth to you? I do not mean to confuse the reader. I am very serious. You can use these cultural quirks to your advantage to search almost any area in Chile for that undervalued diamond. You are not locked in to some book somewhere that says in area X prices are between such and such, and you must pay that price.

WHY IS THE CHILEAN REAL ESTATE MARKET LIKE THIS?

This leads us to the very critical explanation of why sellers will so radically and irrationally price their properties differently in Chile. This covers both existing buildings and raw land. What sellers in Chile fail to understand is that their property when a foreigner considers it for purchase is competing in a Global WORLD WIDE real estate market.

By this I mean that as the buyer you have many choices. First, you could choose from anywhere in the World to live. Many of our clients could buy real estate, or already own real estate in other countries. At the very least, a foreigner will own some real estate in their home country.

Second, you could buy real estate anywhere in Chile. Often our clients are at the same time considering purchases in multiple regions of Chile. They are perhaps comparing the property they are looking at in the mountains of Futaleufu, against the view from a property in Chiloe they looked at the day before.

The sellers simply do not understand this. They often have very limited travel experience even inside Chile. They do not understand that as a foreigner you do not appreciate that a piece of property is near a particularly important Chilean resort town, or that you are valuing the property based on a view of mountain and not the great pasture land. They most certainly will not understand your concept of what a great house should look like, or how it should be built.

So, contrary to popular belief, often the Chilean selling property is just as inexperienced as the foreigner that just landed in Chile about the complexities of how the real estate industry works in Chile. In many way the foreigner is a greater advantage as they have extensive experience buying and selling real estate. The Chilean most likely has only bought or sold one or two properties in their life. The foreigner knows they need to hire attorneys and other professional help to assist in a purchase and has the resources to do it. The Chilean seller will often not even list their property with a real estate agent to avoid paying a commission on the sale.

The good news though. If you like a location, a detailed search will probably find you the price you want to pay. If all else fails, you can almost always build the house you want for less money. So, on some level the chaotic of the Chilean real estate market is to the advantage of the buyer. It simply creates more choices, and that can be confusing.

The number one advice we give all of our clients is take your time.

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