When all of the conditions of buying and selling have been met and the terms of the purchase contract have been concluded, both parties can now move towards the final and most anticipated stage of any property transaction — the closing.
Just like anywhere in the world, property transactions in the Cayman Islands involve certain expenditures over and above the purchase price, which both buyers and sellers have to prepare for.
Closing costs are additional payments due at the closing of a real estate transaction which reflect expenses incurred on top of the property’s purchase price. These may include legal fees, commissions, mortgage fees, taxes, processing fees, among others.
Being a tax-neutral territory, there are no recurring income, property, corporate, inheritance, capital gains, or gift taxes in the Cayman Islands. There is also no need for title insurance as the government itself guarantees absolute right of ownership for each parcel of land.
However, there are some closing costs that both buyers and sellers need to be aware of from the onset of a property transaction and to make provisions for in their final budget.
What are included in Cayman closing costs?
Stamp Duty: A one-time stamp duty is paid by the buyer on all transfers of Cayman Islands real estate property. At present, the stamp duty rate on all three Cayman Islands is 7.5% on the purchase price or the market value of the property, whichever is higher, as determined by the Lands and Survey Department, and is usually paid to the government within 45 days after the transaction is closed.
Attorney’s Fee: Whether you are the buyer or the seller, a property transaction is bound by legalities throughout the entire process. From preparing an offer to purchase to reviewing the contract conditions, registering the property and handling the property conveyance, it is always recommended to work with a local attorney who is familiar with Cayman real estate transactions.
More often than not, as there is no need for either principal to be present, property closings in Cayman are usually carried out between the buyer’s and seller’s respective attorneys. At present, attorney’s fees range from 0.5% to 1% of the purchase price.
Home Valuation or Property Appraisal Fee: When purchasing Cayman real estate through bank financing, the buyer is normally required to have the property value assessed by a certified valuation surveyor. This is important in obtaining a mortgage because the bank will not sign off on a loan that exceeds the property’s fair market value.
There are several independent registered and chartered valuation surveyors available on island who are qualified to conduct a property inspection and produce a valuation report. An appraisal can cost anywhere from CI $500 to CI $1,000, or even more, depending on the property type, size, location and other factors.
Realtor’s Fee: For a seamless and stress-free property transaction, it is important for both buyers and sellers to work with a reputable company like ERA Cayman to take care of the nitty-gritty details and to ensure that their interests are protected by qualified real estate professionals from start to finish.
Real estate commissions are paid for by the seller at closing. These charges are usually paid to the listing broker, who in turn splits the commission with the agent who brings in the buyer. In the Cayman Islands, CIREBA sets the commission rates charged to the sellers by its members, which can range from 5% to 7% of the total listing price.
Other Fees: When a mortgage is approved, it is common for the lending bank to charge a commitment fee of 1% on the loan amount. Upon closing, another 1% is charged to register the mortgage to with the government.
What are the buyer’s obligations?
For a cash purchase, the buyer is expected to shoulder the stamp duty, the valuation fee (optional), and attorney’s fees.
On the other hand, for a mortgage purchase, the buyer pays for the stamp duty, the valuation fee (required by the bank), the attorney’s fee, as well as the bank and registration fees.
Generally, the buyer should make provisions for 10 to 12% above the purchase price to cover all the closing costs mentioned above.
Before closing the transaction, ask your realtor about any additional costs, such as insurance or strata fees, that need to be factored into your budget.
Work with an experienced team
Our experienced and knowledgeable ERA Cayman brokers and agents will be more than happy to advise you on all the costs and obligations involved through all the stages of property transactions in the Cayman Islands.
Moreover, as CIREBA members, Team ERA has access to a wide network of real estate attorneys and property valuation firms that can assist with your real estate transaction and whose services are indispensable during the buying and selling processes.
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