Buying Real Estate in Costa Rica

Daniela Quiros,  Thursday, 14 November 2013

 

This article is part of a series of 8 articles about buying property in Costa Rica. The other articles in the series cover the following topics:


“Buy real estate in areas where the path exists and buy more real estate where there is no path, but you can create your own.”
-David Waronker, American real estate investor

Americans fancied the inconspicuous but precious land of Costa Rica as a perfect place to retire some 20 years ago, followed by Canadians. Europeans started discovering this country somewhat later due to geographical location. Many a tourists coming here on vacation eventually make the decision to buy a home and stay for good, or invest in real estate and become a player of the thriving Costa Rican real estate game. Despite the among foreigners, there still is a vast market of opportunities to explore, your own paths to create. In fact, Costa Rican Caribbean region is not as largely populated as the Pacific Coast, and it is a major tourism area in a country deriving its profits from tourism.

Foreigners have equal rights when buying property in Costa Rica as locals, or the Ticos as they call themselves. Owning property in Costa Rica comprises the same notions as owning property in the U.S., Canada and Europe. Of course, there are certain details peculiar to the local market, laws and customs. 95% of Costa Rican beach front line, or the Maritime Zone, is regulated by special laws that do limit foreigners in property rights. Real estate in the Maritime Zone is the state property and can be only bought as concession property for a limited period of time, say 20 years. Foreign citizens that have not resided within Costa Rica during 5 years prior to purchase of a concession property cannot be the major proprietor if a concession property in Costa Rica. In such cases, foreigners either deal with a local partner, or apply for residency. Or, buy property outside the 200 meters from the beach front line. Other properties in Costa Rica can be purchased and owned by foreigners without any restrictions.

The question is a tough one, though. It is rather difficult for a foreigner to get a mortgage in Costa Rica. Until a couple of years ago, during 2007-2009 real estate boom in Costa Rica, local banks would give you a mortgage on very mild conditions. However, banking system here largely depends on and looks up to the Big Brother economy, even though world economic crisis affected Costa Rica in a very moderate way, especially if compared to Europe.

There are a few banks that will lend money on real estate purchase to foreigners. These loans may not cover the entire purchase price, though, and the application process is a lengthy one. Financial institutions prefer low risk investments these days and make you go through all the red tape. If you can boast of a perfect credit history, it will certainly be a benefit in your application process. There are a number of details you need to take into account if your property purchase will include a mortgage. For more information on mortgages in Costa Rica, refer to the corresponding article.

“Q: Why did God invent lawyers?
A: So that real estate agents would have someone to look down on.”

Costa Rica loves lawyers and makes you hire a lawyer every time you need to interact with the state, especially if you are a foreigner. A lawyer is an unavoidable part in a real estate purchase. Lawyers are normally also public notaries and have the right to register deeds. Moreover, your lawyer will look up the property’s status in the National Registry to determine whether the property has any debt, liens, unpaid taxes and other impediments that can affect the purchase. It is the lawyer who will advise you which of the two most common methods of real estate purchase is the best in your particular case: an acquisition as an individual owner, or an acquisition through a new corporation, or transferring shares of an existing corporation. These and other intricacies may significantly influence the negotiation process.

Likewise, it is your lawyer who must register your property ownership in the National Registry. Then, there is the drafting, signing and registering, the mortgage clause or amendment drafting and registering, paying all the fees and taxes prior to registering your property rights. Every country has its bureaucratic circles, and you want to make sure your investment is secure. All things considered; you do need a lawyer before you begin negotiations with the seller.

, on the other hand, will ease the transition from your foreign mentality to the local culture, introducing you to the peculiarities of areas and neighborhoods, advantages and flaws, traditions and attitudes. In addition, a fancy real estate agent may help you get a mortgage, provided he knows the right people. Costa Rica offers ways of handling business based on personal connections and acquaintances. We discuss the basics of finding a good real estate agent or agency in a dedicated article.

can be outlined in a simplified summary, encompassing basic documents, , fees, stamps, taxes and even step-by-step guide. We have done so to give you an insight of what to get prepared for when you decide to buy real estate in Costa Rica. Nonetheless, every purchase is unique and requires professional assistance to comply with laws and bureaucratic procedures.

Conditionally, the buying procedure consists of six major stages:

#1 Investigating the legal status of the property in National Registry. It may be wise to check on the property’s status even before you enter negotiation with the seller. Defining liens, debts, restrictions and status of the property in question will help your lawyer advise on the optimum scenario for the purchase.

#2 Negotiating with the seller. While it is possible to negotiate on the price without third parties, such as lawyer and real estate agent, it is important you document your intentions, and maybe create an escrow as a guarantee that the seller will not be dealing with other buyers.

#3 Drafting and signing the pre-sale agreement.

#4 Due Diligence is the period prior to the closing during which both the buyer, the lawyer, and/or the real estate agent work on assessing the property in detail: ownership type (free simple title, concession property), soil tests, surveys, plot map and the like.

#5 The Closing must be registered by the Notary Public. This includes drafting, revising and signing of the deed by both parties.

#6 Declaring your proprietary rights. At last, your lawyer takes the deed with all paid fees and transfer tax to the National Registry to declare that the property in question has a new owner from now on.

Costa Rican National Registry operates on a ‘first to come, first in right’ basis, which means if a seller would want to attempt at fraud and sell one property to two buyers, the first one to come to National Registry with the deed and receipts of paid fees and taxes will be considered the owner. Meanwhile, the second buyer will face the odds of suing the seller for fraud. As a result, it is important the deed is duly registered with National Registry right after the closing.

Costa Rica offers a moderate , with the transfer tax of 1.5%. Considering the transfer tax, legal fees and assessments, as well as registration stamps and procedures, overall cost of the deal may amount to about 4% of the purchase value. Property owners pay a 0.25% of the declared property value in property tax.

In the final analysis, Costa Rican property is a lucrative investment with a wide perspective. Losses do happen when investors feel too omnipotent to neglect local laws and traditions, and prefer to do it their way. Nevertheless, if you do your homework with due diligence and get prepared for the investment of a lifetime, Costa Rica will welcome you with gorgeous beaches, vibrant wildlife, buzzing cities and an exceptional lifestyle free from pollution, genetically modified products and militaristic attitudes.


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98254089 Several years ago, Costa Rican banks, both state and private, offered foreign buyers mortgage loans on lucrative conditions. However, the world economic crisis and especially the U.S. home bubbles significantly altered the situation. One thing you should know when considering Costa Rica is that its economy largely depends on the Big Brother’s financial health. Currently, only several banks offer mortgage options to non-resident foreigners. There are no mortgage brokers, and a real estate  
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