Ecuador Property Lesson

by | Jun 23, 2008 | Archives, Ecuador Real Estate

Ecuador property offers special opportunity but like any property market has its unique  features that anyone interested in getting good property deals has to know.

A reader attempting to buy some Ecuador property just sent this note:

“Gary, FYI.  The people at the Hacienda San Francisco tell me the asking price is
$650K, not the $200K you stated.”

Reading my reply may help you under stand the Ecuador real estate market better.

I have written numerous times that in Ecuador real estate is the basis of wealth.  This is a country that for centuries endured so many currency devaluations it dollarized in 2000.  The US dollar is now Ecuador’s currency but seven years of the greenback has not overcome hundreds of years of currency distrust.  Plus the dollar has not been strong.  Inflation is still strong in Ecuador.

Money has always been land…and buildings.

This means that there are normally only three times when Ecuadorians sell property.  When they need cash…when there are heirs…and when they place crazy prices on the property figuring…”If someone will pay this much, I’ll sell”.

This creates a really astonishing result at times. Two identical properties will have very different prices. One seller needs the money badly. The other does not.

Added to this is a typical Ecuadorian sales come-along. The owner offers a property at a low price until someone makes an offer.  Then they raise the price. This is especially prevalent if the seller thinks the buyer is a “rich” gringo. Gringos by the way are any non Ecuadorian.  Even the Chinese are considered gringos.

Sometimes even on our real estate tours, the owners tell us the property is one price, and when we get there with a group they raise the price dramatically.

This is one reason we suggest that delegates never make offers on a real estate tour.

The last price we were given for this hacienda on a real estate tour was $185,000.   The hacienda is empty every time we are there.  I suspect if one looked at the books they would find even $185,000 a hard price to support.

This happened when we bought our hotel, Meson de las Flores.  The owner raised the price 60% the minute we said yes to their original offer. The story was the original price was only for the building.   We also had to buy the business we were told.  We grabbed it anyway because for what we wanted the price was still a bargain.

This low price – high price game is just part of the way many Ecuadorians negotiate.

This lack of rationality is what makes Ecuador’s real estate market so interesting. It is so illogical that if one learns the market and is willing to be patient, one can spot distortions and do well if they are willing to negotiate.

For example, we rarely make an offer in person. We hire a local to make the offer for us.

We set our price. I know before I make an offer what the property is worth to me.

In a market with so few comparables and with so little organization, a property is generally worth what someone will pay for it versus how badly the seller needs the cash.  When a buyer finds a motivated buyer, knows what they can or are willing to pay, explains their logic, sticks to their price and is willing to walk away for awhile, they’ll get their deal.

This is not always the case. I watched the owner of one small hotel (that grosses about $15,000 a year) stick to totally insane price of a million dollars. He did not need the money.

Recently he had some set backs and I have observed this seller take a reality check.  Last i heard he had dropped his asking price to $475,000 (actually) almost

A lot of Ecuador real estate offers a wild and wooly game for those that find this fun…and have time and patience.  We have found over the years a way that works for us:  When you find a property, just look and make no comments.  Don’t even ask the price.  Then go away and think about all of its qualities and conditions and decide yourself THE PRICE THAT YOU WANT TO PAY.  Unless the owner is just fishing (and this is rare these days), hire a person to negotiate for you. Never go b back there and never comment.

And then HAVE PATIENCE.  Sit back and wait and don’t worry about the deal.  It might take a week, a month or a year…but keep in mind there is rarely any buying pressure on individual properties (not condos or developments) and just wait.  It’s kind of fun and most interesting to use this concept…and sooner or later, it usually works out…but again, we have a lot of patience.

I look forward to sharing this with you.



P.S. Here are what a couple of people have said about Ecuador real estate and our tours.

“Hello, Gary

“I have been a subscriber to your investment news letters starting in 1993.

“Without hesitation I can say your investment strategy for International Investing has been a success and rewarding.

“I salute you for your outspoken journalism and practical encouragement to the subscribers to improve their investments and financial standing by looking beyond there own home turf.

“My first encounter in person with you and Merri was when I attended your International Investment and Business made EZ seminar held in September 1996 in Ecuador in the cities of Quito and Guayaquil.

“This gave me the opportunity to see this beautiful country of Ecuador with its astounding bio-diversity, considerable historic and cultural legacy and a diverse array of its Indigenous groups.

“I look upon Ecuador as truly a microcosm of South America.

“Since then I have had the privilege of visiting Ecuador on two more occasions and on every trip I have experienced the warm and kind hospitality from its smiling and charming faces of its friendly people.

“I have also been a subscriber to your e-mail letters Ecuador Living and Investing and always look forward to your informative articles and encouragement provided for those interested in settling down or buy a second home abroad in Ecuador.

“I for one am intending to come to Cotacachi about mid to late August 2008, looking at the possibility of settling down in this beautiful Sierra country side. I shall end with best regards to you and Merri.”

Another wrote:

“Merri:  Just a short note to say how much I enjoyed the real estate tour in Cotacachi and to thank you and Gary and all the wonderful staff at El Meson for being so gracious and kind.

“Any time I think of Cotacachi and my stay at El Meson I get a sense of peace and tranquility that is hard to find here in the States.

“Hope to see all of you again but hopefully for a longer stay.”

Finally, this reader attended both the Coastal and Cotacachi tour:

“Thought to send along a little feedback on the trip so far.  I started with the Coastal RE tour.  I must say that John Papski is a real asset – he’s got the right outgoing attitude to dig up the good info locally and then deal with a diverse group of folk on the tour – very good. The RE tours are very good for really seeing the country, local areas, and just getting a good feeling for the general area.  John is ideal for the task and the research leading up to the tour.  Between Steve, John and Alberto, you have an excellent team.

“I put an offer on an unfinished house up the road from Jim’s house (no word yet apparently due to a fickle US owner).  Lots of potential there and the views from there are great.

“Now at day 2 of the Spanish course.  Meson is very nice and staff and service is excellent.  Consuelo has put aside raw milk for me (no boiling) that is quite good – the benefits of raw milk dairy are highly under-rated.  I’m looking forward to the highland RE tour and then the Shaman Mingo tour.”

See dates for our Autumn courses and tours:

Ecuador Coastal-Quito Real Estate Tour

Ecuador Super Thinking + Spanish Course

Ecuador Imbabura Real Estate Tour

International Investing and Business Made EZ North Carolina

Ecuador Ecuador Import Export Course

International Investing and Business Made EZ Ecuador

See discounts for attending more than one course.