The Ultimate Quick-Stop Guide to BVI Property Purchase
- November 25th, 2014
- in PROPERTY
BVI Property Forum
Some Significant FAQs about Buying and Selling Property in the British Virgin Islands
This forum will periodically address various issues associated with the acquisition and development of real estate assets in the BVI from a purchase perspective. Additionally, concerns and questions vendors or property owners in the BVI might have will be answered.
Direction will also be given to people that wish to rent or let properties in the BVI both for long term (yearly accommodation) to more short term (monthly or weekly rentals). Please contact [email protected] if you have questions that arise out of this forum and we will respond.
Current State of the Real Estate Market in the BVI
The BVI market has for many decades been a very stable real estate market. Over 70% of the land is owned by Belongers/Residents in the BVI and is in many cases simply not offered for sale as these people wish to develop the properties themselves, or deed to family members as they do not wish to become disenfranchised in their own lands.
This coupled with various restrictions on property purchase with a view to minimising speculation, particularly by off islanders, has resulted in a slowly appreciating market over decades with no huge appreciations or depreciations in value.
With the world downturn since 2008 until just recently, the interest by off islanders in acquiring resale properties or developing BVI land has been very minimal due to recessionary pressures. The market remained quite active however with local Belongers and Residents acquiring land in particular and building their own homes.
In general, resale homes were sold over this period at a much discounted price (30%-40% off the listing price in many instances ) or were not sold at all, resulting in a substantial build-up of inventories in the current market for homes that have already been built.
Nevertheless, the market for land has remained strong and has had firm demand particularly in Virgin Gorda and to a lesser extent in Tortola. This is also coupled with the fact that the 12% stamp duty that off islanders must pay to acquire a BVI property only needs to be paid on land that is bought versus on the full value of a resale home, resulting in substantial savings. Also, a custom built home will be exactly what a buyer wants in terms of space, newness and finishings, hence making this a particularly desirable option.
Over the last two years, many buyers have come from the US, Britain, and Europe in particular looking to acquire a winter vacation home or year round off shore residence. However, since a multitude of these buyers have only just started looking in the last year or two, many are indecisive about what island they wish to locate. This includes questions about whether they wish to locate to the BVI or another Caribbean island, what area in the BVI they wish to acquire a home in or if they wish to buy a resale home and remodel, or buy land and build.
All realtors have been very busy showing a lot of property but resultant sales, although much busier than the previous 5-6 years, is still quite small. Regardless, this realtor believes that many of these buyers will end up purchasing over the next few years so that is welcome news for sellers and the comeback of a reasonable sales market. Here are the answers to some very important questions involved in BVI property transactions:
Is there a multiple listing of all properties for sale in the BVI? And how do I as a buyer ensure I am aware of all properties for sale in the BVI?
The short answer is no, there is no multiple listing of all sale properties in the BVI. It is wise to use the internet via Google or by viewing websites associated with a variety of realtors in the BVI. Many of who are advertised in various media including the Virgin Islands Property and Yacht magazine. Each realtor will share some of the same properties for sale but usually each will have their own sales listings exclusive to themselves.
Should I renovate a property or just sell as is?
In my experience of some 30 years in real estate, most buyers want a property in good repair, structurally sound, and clean. To spend a lot of money refurbishing a property to your own taste before selling pre-empts the buyer from doing the same but they will do it with their own taste in fittings and furnishings anyway. The fact is, properties need to be in good shape, clean, painted, and presentable for show. Good realtors can also help ‘stage’ a house to its best advantage.
How do I determine a realistic value for my home or land for sale? What is the difference between a realtor valuation or bank appraisal of a property?
Realtors can be asked to submit their valuation of what they believe they can achieve in value for a home. It is wise to get a number of different realtors to submit their views, but supported by clear evidence of recent sales, etc. It is unfortunately a common practice with some realtors to overstate the value of a home in order to acquire an exclusive sales listing on the property. Getting a number of different quotes tends to mitigate this effect.
In addition, I feel it is wise to get a bank appraisal of the property to assess along with the realtor valuations. You do not need to use the sale value suggested by the bank appraisal nor disclose the appraisal to outsiders, but in the purchasing process the buyers are required by law to get a bank appraisal of the property to either submit with their Non-Belonger License application and/or as part of the process of actually transferring the property into the buyer’s name. If the appraisal is substantially lower than what the buyer has agreed to pay for the property, the buyer will no doubt question such a discrepancy and the seller and their realtors must be prepared to address this issue. Forewarned is forearmed.
In addition, the bank appraisal will cite recent property sales that have closed to help support their valuation with an assessment based on rental income as well as construction approach – effectively what it would cost to build the property with today’s materials and labour. The appraisal is an excellent source of data for both the buyer and seller.
What is the difference between an open or closed (exclusive) sales listing agreement for a seller? What are the advantages/disadvantages of both?
Closed or Exclusive Sales Listing
Gives the exclusive right to market, promote, show and sell the property listed to one realtor. The realtor representing the property is the only one allowed to list the property on their real estate website or promote with ads, articles, signage, etc. If another realtor wishes to show their buyer the property, they must make arrangements with the exclusive agent and split the sales commission, usually 50%/50%.
Open Sales Listing (somewhat like a Multiple Listing in North America)
Gives the right to whichever realtor the seller wishes to market, sell, show and put the property on their real estate website. In this case, the only realtor the seller pays is the realtor that finds the buyer. Hence providing a bit of competition to find the buyer first but also giving the realtors a chance to make a full versus split sales commission.
In today’s world of internet shopping, the widest exposure for a property would be to open list with a number of different realtors, allowing the buyer to find your property. Without this in my experience, many buyers simply are not aware your property is for sale if they are not working with or viewing your exclusive agent’s website or ads. In addition with an open listing, you are ‘hiring’ more realtors to promote your property, which, I believe improves your odds in getting a sale. Finally, every realtor has a chance to make full sales versus a split sales commission providing good incentive for each to find buyers for your home.
The flip side of this is that no realtor is likely to put extra marketing monies to promote an open listing, only to have some other agency sell it. So if one realtor is prepared to substantially spend monies to promote your home, it is only fair to give that agency an exclusive listing for a period of time.
Please contact [email protected] if you have questions that arise out of this article.