Smart Buying
At Home Abroad
Vacation home prices are soaring, but you can still enjoy the comforts of a getaway retreat -- if you're up for some adventure. Discover three enticing locales where the price is right.
By Pat Mertz Esswein, Associate Editor
From Kiplinger's Personal Finance magazine, August 2005
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Honduras: Always an adventure
Sometimes the appeal of owning a house abroad lies in its exotic setting and the adventure of settling there. Patti Shook, 56, and her husband, Bert, 64, of Sonoma County, Cal., visited Honduras three years ago at the urging of a friend. Their first reaction? "We got here before everyone else did," says Patti. Honduras clearly wasn't set up to support tourism on a large scale, and that appealed to the Shooks. After touring the Bay Islands and parts of the mainland, they settled on the mainland's north coast.
Honduras's reputation as a third-world country and former banana republic has helped delay its discovery, Bert says. "I get strange inquiries from people about Honduras, like, 'Aren't they a bunch of Sandinistas down there?' " But he notes that the country has been a peaceful democracy for decades. The Shooks were also sold on the class 3 to class 5 river rafting on the Rio Cangrejal, and diving and snorkeling in the Caribbean. Honduras boasts the Mayan ruins of Copán, plus a 16th-century cathedral and churches in historic Comayagua.
Last spring the Shooks worked with real estate agent Kent Ownbey, an expatriate American and former banker, to locate and purchase just over an acre of property with 110 feet of oceanfront. It's about 15 miles east of La Ceiba, the nearest town. They paid $65,000; a similar lot with a 1,500-square-foot house would cost about $120,000. The couple will build a house on the property for less than the usual $35 to $40 per square foot because Bert is a retired general contractor and will do some of the work himself. The Shooks intend to live part-time in Honduras before Patti retires and may make it their primary residence afterward.
This is a country where you can hire a cook for about $100 a month. Give the cook taxi or bus fare and she will visit her favorite seafood stands to buy fresh lobster, conch, shrimp and fish. Bert Shook says the food is his favorite thing about Honduras. "It's delightful, whether at a truck stop or a small café in town." But you will have to make a few compromises. If you're not tapped into city water, your water source may be a dam on a mountain stream with distribution lines. In the rainy season, when mountain rivers become cloudy, a cistern built into a house's foundation will capture rainwater to be pumped inside. Ownbey drinks only bottled water, although he uses local water to shower and brush his teeth. And you may have to buy your own transformer to get electricity.
Buying basics. Foreign buyers who want to build a home within 25 miles of the Honduran coastline or borders (or on the Bay Islands) are confined to areas called designated tourism zones, where they may purchase no more than three-fourths of an acre of land. The Shooks got around that limit by forming a corporation with a silent partner -- their lawyer -- for about $350 so that their adult kids could build a vacation home someday.
Ownbey referred the Shooks to their lawyer, a necessary addition to a home-sale team (you can get referrals from www.honduranlaw.com). The couple found the process similar to that in the U.S., with one exception: Hondurans typically underprice property and, after you've placed an offer, up the ante. The Shooks ultimately paid $4,000 more than their accepted offer.
You can get a mortgage from a Honduran bank, but with interest rates at about 20%, you won't want to. The Shooks took out a home-equity line of credit against their house in California -- a popular strategy for many U.S. buyers. Although earnest money isn't always expected, the Shooks put down $500. Closing costs run at least 4% of the purchase price. Because foreigners can't open a bank account in Honduras unless they establish residency, the Shooks closed the deal by using a wire transfer to their lawyer. Another option is a bank cashier's check.
Ownbey recommends that you make ample use of sales-contract contingencies. Ask for a survey, proof of payment of taxes, and the source and reliability of electricity and water. (For other helpful tips, visit www.honduras-realestate.com.) Request that your lawyer provide an abstract (a historical summary of the property and its ownership) and title opinions, which you'll need to purchase title insurance (also available through your lawyer).
It should take about 30 days to get to closing. Ask your real estate agent for referrals to home insurers; $100,000 of insurance costs about $600 annually. The Shooks expect to pay about $140 a year in property taxes, even after their home is built. You'll probably want to hire a caretaker or property-management service to maintain and check on your property in your absence.
Getting there. The north coast has three international airports -- at San Pedro Sula, La Ceiba and Roatan (on the Bay Islands). San Pedro Sula provides your best bet for a direct flight -- two to three hours -- from Houston, New Orleans or Miami. You can rent a car for about $30 to $40 a day or, even better, hire a taxi for about $20 a day.
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