Expats' Corner July 31, 2024 - 6:08 pm

How to exit your preconstruction investment without penalty

Real estate agent has proposed terms and conditions to customers who sign house purchase agreements with insurance, Agreement to sign the purchase contract concept

When buying real estate in the Dominican Republic, specifically in preconstruction projects, situations may arise where you need or want to exit the investment. Maybe you’re unhappy with the developer and the construction progress, or you’ve had a financial emergency where you can no longer make the monthly or quarterly payments.

The bottom line is that “life” happens.

Developers typically have a 25% to 40% penalty if you decide to back out of the deal. Let’s say you’ve agreed to purchase a condo in preconstruction for $300K, and to date, you’ve paid $200K towards the condo. So, if you decide not to move forward, the developer will return the amount you’ve paid less than the agreed-upon penalty. In this case, you’d receive back between $120K to $150K of the $200K you’ve already paid—a loss of anywhere between $50,000 to $80,000.

No one wants to take a loss like that.

It’s essential to have a clause or contingency in your purchase contract that allows you to get out of the deal without penalty. We’d add a “selling forward option” or “third-party sales” clause to the contract. This clause gives the developer permission to sell your property to another party and gets you out of any penalties. Once the developer sells the property, you get your money back in full.

This is another reason why you should have a real estate attorney review and draft your purchase contracts when buying property in the Dominican Republic.

Standard developer purchase contracts are 4 to 5 pages, almost always in the developer’s favor. However, with a competent real estate attorney on your side looking out for your best interest, the final contract will be around 12 pages after review, edits, and additional clauses and contingencies.
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Maria Abreu is the CEO and Managing Attorney of Abreu & Associates, a law firm practicing exclusively in Dominican Republic Immigration and Nationality law. She is also the founder of Retire and Invest DR. This organization hosts conference events for foreigners interested in living, retiring, and investing in the DR. You can contact Maria at: mabreu@abreuimmigration.com.

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