As a real estate attorney, and now as an agent, the most common question I am asked by an overseas buyer of residential real estate in Cayman is, not surprisingly, “How much is it going to cost me to complete my purchase ?” The purpose of this article is to explain what these costs are and how they are calculated.

 

A buyer’s costs include the attorney’s fee and closing disbursements. Traditionally Cayman real estate attorneys have calculated their legal fee as a percentage of the sale price of the property (eg: 1%) in return for which fee the buyer’s attorney will search title, prepare title requisitions, review the seller’s completion statement, request and review strata documents (if applicable), meet for closing and coordinate the receipt and disbursement of closing funds. So, for example, if the sale price for the property was CI$300,000, then the legal fee would equal US$3,000. However, these days most (if not all) attorneys take into account other factors in determining their fee, such as the urgency of the closing date, the level of skill and expertise required, whether the seller is represented by an attorney or agent, whether the property is freehold or leasehold, and so forth. The bottom line is that fees do vary from transaction to transaction and from attorney to attorney, so a prudent buyer will compare prices. It is important to bear in mind however that, as with any other service, the old adage “you only get what you pay for” definitely applies. Given that buying a home is one of the largest financial commitments most of us ever make, it surprises me how many people (usually first time buyers) rashly hire a particular attorney solely on the basis of a low quote, and then wonder why they did not get the service they expected and why their transaction did not complete on time.

 

As it is the seller that is responsible to pay the real estate commission due on sale you need not worry about that cost, unless you specifically hired an agent to find a property on your behalf and agreed to pay a finders fee. This latter arrangement is known as a “buyer broker” agreement and is still quite rare in Cayman. If the boundaries of the property have not been demarcated, you may wish to arrange for a survey. Responsibility for the payment of the Surveyor’s cost for the preparation of such survey is a matter of negotiation between the buyer and seller – often the parties equally share such cost. If you are obtaining a mortgage to finance your purchase, your Bank will charge you a commitment fee (usually about 1% of the principal amount of the loan) and retain its own attorney to prepare the mortgage, arrange the transfer of the mortgage funds and guarantee the legality of the Bank’s interest in the property securing the loan.

 

As noted above, there are also closing disbursements to consider. Such disbursements comprise both the attorney’s own expenses (such as long distance telephone, fax and courier costs) and Government fees for land registry searches and stamp duty. Let’s use a generic example to outline the disbursements you can expect to pay as a buyer. Assume that you are buying a condominium for CI$300,000 (excluding furniture, appliances and other chattels) and require mortgage financing in the amount of CI$200,000. Assuming that there are no title or other problems to sort out, the disbursement costs appearing on the attorney’s invoice will be roughly the following:

 

 

If you are a first time Caymanian buyer, and the purchase price for the land and premises is less than CI$200,000 (CI$50,000 for land only), you are entitled to apply to the Financial Secretary for waiver of stamp duty on the Transfer only. Make sure you advise the attorney at the outset that such waiver is required so the attorney can file the necessary application in plenty of time to ensure the waiver is available prior to closing. Otherwise, you will have to pay the stamp duty up front prior to registering your Transfer and then wait to receive a refund. Provided that you qualify and the Land Registrar is satisfied that the price reflects the true market value of the property, there should be no difficulty obtaining the waiver.

 

By providing the attorney with all information relating to your purchase at the outset, obtaining a fee estimate and staying in contact with the attorney during the period prior to closing, you will considerably reduce the stress involved with your purchase and avoid any unpleasant surprises on completion regarding costs.