Title Insurance in Brazil - A Must For All Real Estate and Land Investors

Despite detailed checks undertaken by the large majority of legal professionals in Brazil - occasions do happen where buyers may end up liable for previous issues with the property or land. Examples include errors committed by clerks at the Cartorio de Registro de Imoveis, forgery, survey omissions, fraud, title flaws, hidden / undisclosed liens and encumbrances.

The risk is also magnified with cross-border transactions as foreigners are less likely to be familiar with local laws and customs and unfortunately are often seen as easy victims by unscrupulous sellers. Added to this is the fact that both Brazilian buyers and lenders rely on an opinion letter from the lawyer with regards to the security of the asset and there are occasions where issues with the title only appear post completion.

*** WHY IT IS HIGHLY RECOMMENDED TO TO TAKE TITLE INSURANCE WHEN BUYING REAL ESTATE OR LAND IN BRAZIL - SOME EXAMPLES OF INVESTMENTS GONE WRONG ***

The worst case scenario is for investors to face a complete loss of their property to a third party who has a superior claim. Although the Brazilian economy has made incredible strides over the past few years, the legal and land registration systems have lagged behind and continue to create uncertainty for investors. This is particularly true in less developed regions of the country, such as the Amazon and the Northeast, where many foreign investors currently focusing. For example, over 500 European investors lost their investment capital in a luxury resort near Natal. The developers had plans for 30,000 homes, a marina, golf course, sports centre, spa, heliport, shopping centre and a plastic surgery clinic - all on an idyllic beach and around a lagoon. However, nothing was ever built and none of the investors' funds ever reached the project (the developer was subsequently jailed and many complex lawsuits have yet to reach court).

In rural areas, land grabbers have an 'investment' strategy called grilagem, from the Portuguese word for 'cricket'. People have been known to falsify a deed and then store it in a box full of crickets to make the paper seem older and authentic. In addition to fraud, title issues can arise when mistakes are made in transferring property. For example, an American investor in the North East of Brazil lost a significant amount of cash due to the discovery illegitimate children of the deceased seller claiming possession of the land and property. There have also been occasions where buyers have become liable for post completion environmental violations. In less developed regions, the boundaries between properties can be based on physical objects that can move or disappear. Squatters such as the Landless Workers Movement (Movimento dos Trabalhadores Rurais Sem Terra, MST) could obtain possession rights over land even if they do not appear in any registry.

*** ENSURING YOUR INTEREST IN BRAZILIAN PROPERTY AND LAND IS PROTECTED ***

Although a Brazilian lawyer or cartorio could theoretically be liable for a mistake, investors that have chosen to take legal action against them have been faced with a lengthy and costly process (for which the outcome has usually been unfavourable). The lawyer will identify such risks when researching the property's title and ownership but it is ultimately down to the investor to decide whether or not to accept the risks of unforeseen circumstances to avoid the possibility of substantial loss or damages. An investor would also need to prove negligence in order to win a lawsuit, which is no easy matter for a foreigner up against well-connected local lawyers. Even if the investor wins the lawsuit, the Brazilian courts can easily delay the date of judgment for decades.

*** IN CONCLUSION... ***

It is generally recommended, therefore, to obtain title insurance as a means to protect your legal risks and ensure a clean title (it can be obtained relatively cheaply). You will find that most policies are fully underwritten to protect against any losses as well as the cost of litigation to defend against title claims; defects; encumbrances and compliance problems (such as zoning, codes and permits). Such policies also have the added benefit of simplifying the legal requirements and due diligence processes undertaken by lawyers, lenders and credit rating agencies.

Make sure that you are obtaining the policy from a reputable company and you read through all terms and conditions prior to signing. Note that there are also several cross-border title policies which are designed to be used by foreign investors. Some Brazilian real estate and land investors also choose to send the policy to a separate lawyer for added security.

Ceara, Brazil For Real Estate and Land Investors

Situated in the north east of Brazil; as well as being well known for its extensive coastlines (extending for 356 miles), mountains and valleys; Ceara state has been an area of strong economic growth - particularly around it's capital, Forteleza (where an increasing amount of European and American investors own property and land). The region is bordered to the east by Rio Grande do Norte and Paraiba states; to the south by Pernambuco state and to the west by Piaui.

Early Portuguese colonisation occurred in 1604 and, despite two unsuccessful invasions by the Netherlands, was formerly inaugurated as a state in 1799 (previously being a dependent of Pernambuco). The state was vehemently involved in the fight for Brazilian independence in the 19th century and it was the one of the first regions to abolish slavery. It was the reign of Dom Pedro II that significant advances were made in the states infrastructural development - including the Baturité train line from Fortaleza to Senador Pompeu and the Sobral line from the port of Camocim to Ipu - as well as basic sanitation and gas supplies.

The rivers of the area are relatively small compared to other states - with the largest being the Jaguaribe that runs through the state in a north eastern direction. For this reason (combined with a longer dry season), the soils are also not as fertile as compared to other parts of Brazil - with the exceptions of municipalities located in the southern regions such as Salitre, Araripe, Santa do Cariri, Crato and Nova Olinda. However, due to an historical track record of droughts, the dams that have been constructed througout the region (including the Castanhão and the Orós) have enabled Ceara to optimise its agricultural growth capabilities. Today the region is a strong producer of cashews, rubber, carnahuba wax, caju wine, cotton, coffee, mandioca, handicrafts and tropical fruits as well having rapidly growing cattle raising and oil industries.

Tourism clearly also plays an important part of the areas economy, with over half a million people visiting annually - a charateristic that continues to rise due to infrastructural improvements to support the rising numbers (Fortaleza was selected as one of the cities to host matches of the 2014 World Cup which looks set to further boost visitor levels). The states eco-tourism industry is also developing - particularly amongst the rainforests and waterfalls located in Araripe, Ibiapaba, Meruoca and Guaramiranga. Other prime tourist visiting areas include the Canoa Quebrada, the Morro Branco, the Praia Do Futuro and Jeriocoacoare as well as its secluded beaches and wide open spaces throughout, popular for adventure sports enthusiasts.

The region is home to several higher education establishments including the Federal University of Ceara (Universidade Federal do Ceara, UFC); the State University of Ceara (Universidade Estadual do Ceara, UECE); the University of Fortaleza (Universidade de Fortaleza, UNIFOR); the University of Acaraú Valley (Universidade do Vale do Acaraú, UVA); and the Regional University of Cariri (Universidade Regional do Cariri, URCA). Health services are above average, particularly close to Fortaleza city which has some nationally reputable hospitals.

Speculation in Real Estate and Its Negative Aspects

Speculation (or speculative investment) is an investment made with expectations of considerable appreciation in the prices of some asset (e.g. real estate property, stocks, etc). Speculative investment is a norm in booming real estate markets, though we can't really differentiate between a speculative investment and a standard investment, as both of them looks quite similar on paper. It is actually the risk level and more importantly the investor's thought pattern, which helps us in differentiating between both of them. Speculations are more like a gamble in which investor's intuition plays a significant role.

Real Estate speculation can be a result of rumors, guesswork, or just the gut feeling of investors ... when they sense some abnormal hikes in prices or demand in near future, they'll buy and try to take advantage of this anticipated appreciation in prices by reserving some homes, offices or land to turn a profit in future. The most recent example of this speculative investment was witnessed in Dubai real estate market, where the huge difference in demand and supply provoked speculative investments, which in turn raised the property prices quite abnormally.

Advantages and Disadvantages:
Speculations are not based on sound analysis; therefore the investment decision that is based on mere assumptions can turn out to be rather destructive, both for investors and also for the overall economy. However, speculation also contributes into the economy in a positive way. For example, speculators absorb the risk and supply the market with much needed capital; these investors gamble with their money and inject liquidity into the financial market, whereas the more watchful investors are holding their money. The biggest criticism made on speculative investment is that these investors add no value to the market or the product itself. These investments are merely buying and flipping, just for the sake of making quick profits, giving an abnormal boost to property prices that may cause a "real estate bubble", inevitably followed by a crash.

As a real estate investor, you will be tempted by many speculative investment opportunities. However, you need to play it safe when putting your money on some property, located at an undeveloped area or land. Speculative investment made in haste is dicey. Remember, if it goes wrong, you'll be losing a considerable amount. Therefore, you need to back your guesswork by doing some research and at least basic analysis. Another thing to remember, speculative investments in real estate markets are best in the earliest stages of real estate boom, as the market is less likely to crash at this stage.

Real Estate and the Recession

Considering the fact that it was real estate that started the ball rolling toward economic disaster in the first place, it's rather ironic that it is in real estate that investors really have the opportunity to capitalize on economic recession and turn what could be a potentially devastating economic downturn into a major opportunity for profit. Why? Because real estate is one of the major assets whose value is plummeting in the face of a never ending stream of foreclosures and bankruptcies, and it is real estate whose value is guaranteed to go up when the recession is over.

Think about it. Will there ever come a time when real estate isn't a desperately needed asset? Absolutely not! People are always going to need places to live and places to work, and because of that there will always be a need for real estate. That's why a huge percentage of entrepreneurs are jumping on board the real estate bandwagon to grow wealth and increase their net worth. It's one of the only markets out there that's guaranteed to never become obsolete!

A major contributor to the current economic crises and the fact that major players like Freddie Mac and Fannie Mae are going under is the huge number of people defaulting on their mortgages. When the concept of interest only loans and other special programs designed to help those individuals who otherwise would never qualify for any type of mortgage purchase a home first came out everyone thought it was a great idea-and in many ways it was. It placed the power to purchase property in the hands of people who otherwise wouldn't have the ability to do it, and it sent banks into raptures as more and more people came to them for assistance in buying or refinancing their first home.

Then reality struck. The bottom line is that many of these homeowners weren't able to get a mortgage in the first place because they didn't have the means to repay it, and while for some people the programs worked like they were supposed to (interest only loans for first time homebuyers still trying to find their niche in the workplace, for example, who later became responsible citizens and were able to shoulder the increased burden of their mortgage payment when the time came to begin making payments on the principle) others just found themselves going farther and farther into debt.

Skip ahead six months to a year, and suddenly a huge percentage of these homeowners are defaulting on their loans. Banks are foreclosing left and right, and they're struggling to get rid of these properties as quickly as possible to get them off their records. Each property goes to a foreclosure auction, where it sells for less than it would have outright at fair market value, and the bank barely reclaims its investment.

Fast forward a little farther, and suddenly huge quantities of people are out of jobs as the economy continues to slide. You have a huge pool of homeowners whose income, once strong and steady courtesy of major manufacturers and/or the United States government, is now no longer sufficient to meet their financial obligations. They can't pay their mortgages that they took out when their resources were more than sufficient to meet their needs, and the bank has to foreclose on those properties as well.

The real estate market is plunged into chaos, property values are falling rapidly in an attempt to stem the tide of destruction sweeping from coast to coast, and clever investors are rubbing their hands together in glee.

During an economic recession homebuyers simply aren't buying homes. They're pumping their money into other things. This inspires desperate homeowners to put their homes on the market for far less than they're actually worth in an attempt to make a sale that will be adequate to allow them to pay off the bank and be free of the mortgage default hanging over their head.

Enter the real estate investor. They soothingly placate the homeowner, assuring them that of course they're there to put everything to right. They contact the bank to let them know that they will be purchasing the property so that the bank can halt any legal foreclosure proceedings they may have initiated, and then they pay the happy homeowner and send them on their way, holding the deed to the property.

This process is repeated over and over again every day during an economic recession, particularly once that recession has begun to have a positive (or negative, depending on how you want to look at it) effect on the value of the housing market. It's not at all unusual for a clever investor to find a homeowner who has built up some equity in their home and who will gladly sell it for a fraction of the cost it would go for on the open market.

In dollars and cents, it means that it's not at all unheard of for an investor to purchase a $350,000 home for under $200,000 during an economic recession. The value of the property has fallen so far and the homeowner is so far behind on their financial obligations that they are willing to let the property go for a song just to dodge the stigma of bankruptcy or foreclosure that would otherwise be lingering over their heads.

After the investor has the property in his hands he has a choice. He can either choose to turn right around and sell it to a rehabber or private homeowner. He can hold on to it, rehab it himself and rent it out (since affordable rental property will be highly in demand in the face of the rapidly failing housing market, with hundreds of families ousted from their homes and left to find another place to live), or simply sit and hold on to it.

As an investor during an economic recession it's vitally important that you understand the basic framework of a recession. THE RECESSION IS NOT GOING TO LAST FOREVER! Sooner or later the economy is going to start getting back to normal, and when it does the value on your investment is going to rise back up. That $200,000 home is suddenly going to sell for $350,000 again-more if it happens to be in an area that sees a tremendous boom as a result of the ending depression.

That means that if you can afford to do it, the best thing you can do at this point is play a waiting game. You know the value of your property is only going to rise, and if you rehab it while you're waiting you can watch the value rise even more. Let's take that $350,000 house and use it for an example again. Let's assume for a moment that the house is sitting on a lightly wooded lot with a big backyard an easy commute away from a major, booming industrial area.

Let's also assume that the industrial area saw a major boom as a result of the ending recession, and that because of that boom property values in the area were jerked back up. That house that was worth $350,000 and sold for $200,000 is suddenly worth $400,000; however, while they were waiting for the end of the recession the homeowner also took the opportunity to rehab the property, doing some landscaping, adding a pool and a spa room and installing all new plumbing and appliances.

Suddenly that property that the investor bought for $200,000 and invested $40,000 to fix up is worth over $500,000. Even with the additional $40,000 investment for the rehabilitation the real estate purchaser is going to walk away with a tidy $100,000 in their pocket-more than many executives make in two years, and all because they were clever enough to take advantage of an opportunity when one presented itself on the back of an economic recession.

If you're looking for a way to take advantage of the recession and you have the time and the money to do it, I strongly recommend real estate. The good thing about real estate is that if you know the ins and outs of the business you can enjoy a return from this career whether you choose to think in the short term or the long term-although, for the sake of this book, I'm going to encourage you to put at least a little bit of thought into the long term.

Remember, long term when you're talking about an economic recession isn't the same as when you're talking about the long term anywhere else. A recession usually lasts less than a year. A year's worth of stockpiling for a lifetime's worth of profit. Hmmm...

Hassle-Free House Hunting: Finding Real Estate And Other Properties Through Online Services

In the past, looking for a piece of property to rent or buy was often an extremely stressful experience. House hunters needed to spend hours, days or even months scouring local ads and newspaper notices before they can find a home that suits their preferences. They might also have enlisted the assistance of a real estate broker, but this meant added expenses - a particularly important consideration for buyers who are short on funds.

Selling property in the past was also riddled with many problems. Home sellers often advertised through papers and signs but this brought only a limited number of potential buyers, usually from fellow locals. They could have also worked with an agent to further increase the scope of advertising but this entailed further expenses as well. Thankfully, with the development of the Internet, property buyers and sellers today no longer have to endure the difficulties associated with real estate transactions in the past. Online listings with comprehensive search options can make the process easier, whether you're a buyer looking for real estate or a home seller putting a piece of property up for sale.

Online listings are particularly useful because of their broad coverage and accessibility. A seller who creates a listing for his property online can advertise his property to the billions of people who actively use the Internet. This means that an interested buyer can easily find out about the property, whether he's from a neighbouring city or from a far-off country overseas. This broad coverage is also beneficial for buyers, particularly those who are interested in buying or renting properties in other countries.

Besides offering maximum marketing coverage, online listings can also help shorten search times because of their advanced search functions. Many online real estate services offer filters for search queries, allowing buyers to sort search results according to area, property type, number of bedrooms and baths, parking space and price. This means that a buyer won't need to comb through thousands of listings just to find one that suits his or her preferences. By tweaking the search parameters, you will be presented with a manageable number of appropriate properties in just a few seconds.

The last benefit of online listings is that they help save money. For instance, a buyer looking to purchase a real estate property will not need to visit each and every available property in the area - a costly, stressful, and time-consuming task. High-resolution pictures and detailed descriptions in online listings can give buyers a sneak peek into a house, saving them from lengthy trips that may end in disappointment.

Lease Option Best for the Real Estate and Property Dealing

Lease purchase option is one of the best options for buyers and sellers who are dealing in real estate or property. This is actually the agreement between the buyer and seller in which the seller will wait and settle for the full payments until some fixed time. This is usually useful for the buyers who are not able to pay the fixed amount of money for the particular property at once.

Lease Option enables the buyer to pay the monthly installments for the property until the predetermined time and until the fixed amount of money is paid fully. The buyers who are in the stage of repairing their credits often find it difficult to get the required financial help from the banks. At this time lease agreement proves to be quite useful for them.

In this lease option and agreement buyer and sellers must abide to the rules and laws of their state government. This is an ideal way by which they can well deal in the property without the need of paying full amount. It is up to the sellers will that they want to get the down payment for their property. In most cases sellers always require to have it and it is beneficial for them that they should not ignore it.

Various countries and state have their own rules and laws which should be fully followed when you want the benefits of lease option. This should be always executed under the lawyer of real estate who deals in Rent to Own Homes, Lease Purchase, Lease Option, and lease purchase agreement, etc.

Lease option is today one of the most secured way of dealing in real estate and property. This keeps the risk away for both buyers and sellers. If you need to get the financial help when you are purchasing the property, lease option can be most beneficial for you.

Real Estate and the "Hot Tub Time Machine"

Recently my husband and I watched the hilarious new comedy recently out on video: Hot Tub Time Machine. The basic story line of the movie is classic "Back to the Future"; three guys who in the year 2010 are in their 40's go back to try and relive their youth by staying in the same ski resort that they vacationed at in 1986. After a night of wild partying which culminated in the hotel's hot tub, they wake up in 1986 and discover they have been given the unique opportunity to relive a weekend from their youth. Now that they know what the future brings, the question is do they chose to follow the path they know life will lead them, OR do they make a decision that will change their future.

The most classic "Hot Tub Time Machine" scenario in real estate situations that I have seen over the last five years in the Northern Virginia market is the owner who do not like the market conditions and instead of making the adjustment to get the house priced to market and sold, decides to put it on for rent for a few years in hopes the market will improve. Most market cycles are typically seven years in duration. So it isn't surprising that unless a property is held at least that long, it is not likely the market has had the time necessary to recover completely. Further, real property (and even land) is in a constant state of deterioration. Grass needs mowing, landscaping materials require trimming, gutters need to be cleaned, HVAC systems serviced, and on it goes. The rule of thumb that I tell home owners is to plan to spend 1-3% of the value of the property on the maintenance and updating of the property each year. So on a $1 million property, an owner should invest at least $10,000-$30,000 per year to keep it in marketable condition.

It has been my experience that even the best tenants do not care for a property the way the home owner would. Further there is the cost of commissions for the leasing agent and if there is a management company involved, that fee as well. Taxes and insurance has to be paid on the property. If there is the possibility of capital gains being realized on the sale of what had been an owner occupied property, one of the requirements is that it that the home has to have been lived in by the owners for 2 years of the most recent 5 years (always verify with a tax advisor to determine if this applies). The capital gains exclusion for home owners thus requires coordinating of when tenants move in and out and getting the home on the market and sold in the required timing.

Most significant however is the time, energy and lack of ability to truly move on is where I hear the most regret from people who have taken this approach. The time and energy to manage another property, usually from a distance, is huge. Not being able to utilize the capital invested in the equity portion as well as the outstanding debt on the property in many situations ties the home owner's hands from being able to truly settle in the new location.

The next time I have someone ask me if they should put their home on for rent for a few years and then try the market again, I'm going to share the story of real estate and the "Hot Tub Time Machine"! In the case of the movie, one of the guys realized the mistakes of his past and actually made a different decision then he had the first time around and his and everyone else's future was much better for it.