Frequently Asked Questions About Bermuda's Real Estate Market

© Copyright 1998 - 2008, The Property Group Ltd.,

(revision July, 2005)

Agencies / Multiple Listings

Can I see everything that is available with just one agent?

The process of co-brokerage (a non-automated form of sharing listings among agencies) works well in Bermuda. If you have chosen one agent who satisfies your needs and with whom you are happy, she can work with all of the other agencies on the island to show you every property available which suits your requirements.

Is my agent working for me?

Unless you have specifically arranged otherwise by entering into a 'buyer agency' contract with your agent, you should assume that she is working, directly or indirectly, for the owners whose property she is showing you. She is however obligated not to misrepresent the facts regarding any property, insofar as she knows them.

What can overseas buyers buy?

Houses are defined as eligible for sale to non-Bermudians by virtue of their assessed annual rental value (or 'ARV') exceeding a limit stipulated by the Bermuda Government AND MAY ONLY BE PURCHASED BY AN OVERSEAS BUYER IF THEY ARE BEING SOLD BY A NON-BERMUDIAN OWNER. The minimum ARV to qualify a property for this market is $153,000. This value is periodically reevaluated by the Bermuda Government, along with an island wide assessment of ARV's (last done in 2005).

The License to Acquire Property (note: For Overseas Buyers)

The License to Acquire Property is required for non-Bermudians wishing to buy a home in Bermuda. The government charges a fee of 22% of the price of a house (or 15% if you are buying a condo) for this license, if it is granted. The review process is designed to determine that you are financially independent, and that you are not an 'undesirable' person. Personal and financial references will be required, and some research will be conducted. Your local property lawyer will coordinate the process for you.

The Process Of The Purchase, Itself:

Looking at the properties available:

If you are working with a single agent, make sure you are being shown both her own and other agencies' listings according to your specifications.

We find that it is difficult to fully take in more than about eight (8) houses or condominium complexes in a comfortable day of looking.

Try to give your agent comprehensive positive and negative feedback on every property she shows you... It will help to refine her sense of what you are looking for and your subtler preferences...

Touring Tips:

A. If you have been given a printout on each house, or a written list of the properties you'll be seeing, make notes on the ones you like.

B. After you have let the agent know your thoughts, try to wipe out of your mind entirely any property that is not of interest. It helps to 'save room' for the more interesting ones.

C. If you are not familiar with the island, it helps to plot locations on a map, too.

Negotiation:

Typically, negotiations will be conducted on your behalf by the agent with whom you are working. In complex situations, it may be helpful to set your wishes down in writing to ensure accuracy of communication.

Note: In Bermuda there is no normal 'spread' between asking and selling prices.

Note: Building Inspection

The standard 'boiler plate' wording for sales contracts in Bermuda always has a clause in it to the effect that the purchaser is presumed to have satisfied himself as to the condition of the building(s) on the property. If you wish to engage a building inspector prior to entering into a contract, you should specify this in your offer.

What happens when a price and terms have been agreed upon?

Immediately:

Try to ensure that the agreement as to price and most basic terms is documented in the form of a signed Offer Agreement. The agent with whom you are working can provide the necessary form or it can be done in a simple exchange of faxes. Typically, this agreement will be specified as being 'subject to contract'.

The Vendor may choose to have either his agent or lawyer draft a sales agreement. This should take no more than a day or two. Once the Vendor has agreed that the contract reflects the terms to which he has agreed, you will receive a copy. You will probably wish to have your lawyer review it before you sign. It will form the basis of his instructions for handling the actual conveyance.

Before closing:

You may have to use the time between signing a sales agreement and closing the deal to secure your financing, to secure a License to Acquire Property (if you are not Bermudian - your attorney will provide you with necessary forms and instructions), or you may wish to re-enter the house to measure for furnishings, etc. These things will be determined by your needs and wishes and your agreement with the Vendor.

Immediately before closing, you may need to arrange with the telephone company, electric utility, Watlington Waterworks, cable supplier, etc. to have these services switched over to your name.

If you have development plans, it can be arranged, by agreement with the Vendor, to have drawings done and submitted to the Department of Planning prior to the closing date, if you so wish.

At closing (and how long will that take?)

The shortest time in which closings normally take place (for Bermudian purchasers) is 28 days. If you are an overseas buyer, the length of time will be determined by how long it takes the Department of Immigration to process your application for a License to Acquire Property. This can range from 6 weeks to 6 months or more, but is typically in the vicinity of 3 months. Sales contracts usually specify that the closing take place within a set time from the date of the grant of the License.

Closing Costs

You may encounter prices listed as 'gross' or 'net'. The 'gross' price is the historical standard in Bermuda and implies that the vendor will pay the agents' commission plus half of the stamp duty and half of the conveyancing cost. The purchaser pays the other half of the stamp duty and conveyancing cost. Some vendors prefer to stipulate in their pricing that the purchaser pay the agent(s) and/or all of the stamp duty and conveyancing cost. These variations are referred to as 'net' (or sometimes 'net net').

Rule of Thumb: on a 'gross' price, you will overestimate your own costs if you add an additional 2.5% (plus the License Fee, if you are not Bermudian); on a 'net' price, 10% will comfortably overestimate added costs (plus the License Fee, if you are not Bermudian).

Commission

The standard sales commission in Bermuda is 5%. This is established by the Real Estate Division of the Bermuda Chamber of Commerce. This is normally paid by the Vendor, but the purchaser sometimes elects to assume this cost as part of the negotiating process.

Stamp Duty

Stamp Duties are charged on a sliding scale: 2.5% of the first $100,000; 3% of the next $400,000; 4% of the next $500,000; 5% of everything over $1,000,000 plus 6% of everything above $1.5 million. These are normally divided between Vendor and Purchaser, but the split may be negotiated.

Conveyancing and other misc. legal fees

Conveyancing costs are on a decreasing sliding-scale. By the time the price reaches $500,000, it amounts to less than 1% of the price; it's 0.7% on $1 million. The extra fees tend to run to the hundreds of dollars, so they don't add too much to the overall cost. These costs, when standard, are normally split, but the allocation can be negotiated. (If extra legal fees are incurred by either party for any reason, he will normally bear these himself).

License Fee - for overseas purchasers only:

Houses = 22%

Condos = 15%

Closing Costs Estimator

What institutions in Bermuda provide funds?

Mortgages may be provided by any of the following:-

A. The retail banks: Bank of Bermuda and Bank of N.T. Butterfield

B. Gibbons Deposit Company

C. Somers Mortgage and Finance

D. Bermuda Savings & Loan

E. and occasionally, we understand, by other financial institutions, such as insurance companies

F. some law firms' trust departments

G. Bermuda Housing Corporation (qualified Bermudians only)

Will they lend to overseas buyers?

Each institution has its own rules for determining eligibility. Some prefer to lend to prior depositors. But most will undertake to lend to overseas buyers as well as local.

What are the terms normally available?

Terms will range from 15 to 20 years, typically, with interest rates variable. Most mortgages provided in Bermuda are callable.

Development Potential

Can I do whatever I want by way of development?

Bermuda's Department of Planning ultimately determines what can and cannot be done by way of development, however their guidelines are set out in written form. You will not be denied permission to do anything which falls within these specifications, and with the right guidance may well be permitted to do projects which fall beyond that scope. It is highly recommended that you work with an architect who has a good track record at working with the Planning Department.

Can I subdivide?

The potential for subdivision will be governed by the zoning of the area. Non-Bermudians may not subdivide unless the portion subdivided is sold to a Bermudian and the portion retained has a qualifying ARV.

What zoning areas are there?

Residential properties are typically zoned either Residential 1 or Residential 2. Residential 1 is higher density than Residential 2. We have a copy of the complete guidelines in our office, if you would like more specifics.

Where are the guidelines set out?

The Bermuda Plan 1992 - Planning Statement is the book to which you should refer to find out the details of allowable site coverage, set backs, etc. for any given area. The Bermuda Plan - 1992 MAPS will show the 1992 proposed zoning for every part of the island. This is usually accurate (unless objections were successfully lodged.) We have copies in our office.

Taxes On Property

Land Tax

Bermuda's land taxes are relatively low by world standards. Payable twice a year, they are calculated annually on a sliding scale based on the ARV (government-assessed 'Annual Rental Value'), not the 'value' of the property.

Other

There are no other taxes on property

Other Property Ownership Costs

Utilities

Electricity is expensive in Bermuda. Count on spending $400/month or more without air conditioning and a pool.

Water

Every house has its own catchment area (roof) and cistern (usually below the house, itself) to supply all your needs. The smaller the cistern, the greater the likelihood that you will need to supplement that supply. This can by done through a well on the property (with a reverse osmosis system, if needed, to desalinate that supply), Watlington or government water (if you are in a location where it is available), or purchasing water from a supplier.

Building maintenance

Costs will vary with your preferences. Houses should be painted every 5 years or so (exterior) and roofs every 2-3 years, as needed. Contractors costs will generally run in the $20/hour to $35/hour range with 'overheads' added.

Building costs are reckoned to start at about $200 psf. Superior quality finishes can add significantly to this cost.

Grounds maintenance

A gardener will cost about $20/hour. There are numerous gardening contractors who will quote you for year-round maintenance.

Additional Frequently Asked Questions

What areas are most secure?

Bermuda's crime rate is low by any standard, with very petty burglaries seeming to be the most prevalent crime. Almost all of Bermuda is, therefore, relatively secure. The prime residential areas have a particularly low crime rate. These include, among others, Tuckers Town, Fairylands, Point Shares, Paget's south shore, Harbour Road, and many other sections of the island.

Do we have to pay a tax when we sell?

The vendor is typically responsible for paying 50% of the stamp duties on a conveyance. (See 'Closing Costs', above).

If we buy a house does it entitle us to Bermuda citizenship?

No; nor does extended residence on the island.

If we buy a house can we work here?

The granting of a work permit is entirely separate from the issue of home ownership.

What nationalities tend to buy in Bermuda?

Americans, English and Canadians figure most prominently among our guest residents, with other Europeans also well represented, as well as Australians, and to a lesser degree Asians.

What tax benefits do we have (in our home country) if we buy a house in Bermuda?

A tax specialist with expertise in your own country's laws will have to help you on this one.

If we rent a house does that give us the right to a residency permit?

The license that permits home ownership will give you the right to come and go freely. The right to reside for very extended periods must be separately granted by the Department of Immigration. There also exists a separate document called a 'residency permit', about which your Bermuda lawyer can tell you more.

FOR MORE INFORMATION ABOUT BERMUDA

See Bermuda Online - "116 web files about Bermuda for educators, consumers, travel agents, newcomers and visitors. Supported by The Royal Gazette, Bermuda's daily newspaper since 1828."

Frequently Asked Questions About Bermuda's Real Estate Market

© Copyright 1998 - 2008, The Property Group Ltd.,

(revision July, 2005)