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Buying Real Estate in Costa Rica

Buying real estate is a fairly transparent process, but it is still important to do your research prior to purchasing property. To help you with your due diligence, we’ve prepared a list of questions frequently asked. Of course, we always advise that you confirm any legal details regarding property registration, closing costs and taxes with your Costa Rican attorney. Here’s what you should know about buying real estate in Costa Rica.

Can foreigners own property in Costa Rica?

Yes, all foreigners have the right to invest and purchase real estate in Costa Rica. The only exception is when applying for a maritime land zone (coastal zone) concession, which requires a certain percentage be owned by a national Costa Rican. Maritime land zone is defined as the 200m strip of land along the shoreline. The first 50m measured from the high tide is public and the remaining 150m is subject to the concession. Some beachfront property in Guanacaste is fully titled and some is concession. We will help guide you through the details should you choose a beachfront property.

How do I start the process?

The first thing to do is to determine the purpose of your purchase: investment, rental property, primary residence, etc. From the moment we know the purpose of the purchase, we can direct you to properties that meet your needs and budget. The price is usually a little negotiable, 2-5%, and sometimes we can negotiate more. Developer properties are usually non-negotiable. It is important to know that it is very difficult to borrow funds from a Costa Rican bank. In general, most buyers who require financing either borrow funds in their home country or find a property where the owner is willing to finance. Terms vary with owner financing and can sometimes be negotiated. Several structures exist that allow for owner financing in a manner that protects both buyer and seller. We do also have access to some private lending for bridge loans.

I love a property, where do I go from here?

Make an offer with your SUGEF registered real estate agent. When the offer is accepted on a property, it is mandatory by law to have a notary to verify the transaction and be represented. The seller will be represented by his/her lawyer, and you with your lawyer. We will introduce you to a trustworthy, english speaking lawyer who will help you from a legal perspective. Note: SUGEF (Superintendencia General de Entidades Financieras) is Costa Rica’s financial system regulator and is responsible for safeguarding the stability of the country’s financial system. All agents at Flamingo Beach Realty are SUGEF-registered.

Is there a Costa Rica MLS?

No. Currently, there is no nationally sanctioned Multiple Listing Service. Some local associations have supported and/or are recommending certain systems, but participation is not required and there is no one system supported by all the associations. It is difficult to search for properties in Costa Rica alone as much of what is posted on the internet is not accurate nor updated. Good agents will know the market and will know of the best deals and will show not only you their own listings but also those of other agencies that fit your parameters. We work with all legitimate agencies and agents. It is best if you find a real estate agent you are comfortable with that you only work exclusively with them. This way you will get the best attention and support possible. We represent you and our goal is to find you the perfect property for your needs..

How much are closing costs?

Although it can be negotiated, it is common that the Buyer pay for the closing costs which are approximately 4%, broken out as 1.25% notary (lawyer) fees, 2.4% government taxes and stamps and the escrow fee of 0.25%, or a flat fee based on the transaction amount ranging from $750-$3000

Closing costs in Costa Rica are based on the transactional structure and value, as well as certain technical rules established by the State. The most common structure is purchase of the property’s title. There are 2 major expenses when buying title property: notary fees and government registration costs. Minimum notary fees are set by a legal schedule issued by the Costa Rican government.

Please see the example below for a purchase valued at US$100,000.00

Tax stamps…………………………$1.00
Attorney Bar stamps………………$27.00
Municipal stamps…………………..$203.00
Archive stamps………………………$0.40
National Registry stamps…………..$507.11
Agraria stamps………………………$152.13

Total Stamps $890.15 + Transfer Taxes $1,521.33 = $2411.48

Notary / Legal Fees $1,305.82 + VAT = $1475,58

TOTAL = $3887.06

Should I have my own attorney?

Yes. We strongly recommend that you have your own representation in any transaction. We work with experienced real estate attorneys that speak English and Spanish. Their #1 job is to protect you and to do a full due diligence on the property, which means gathering as much information as possible about a property to make a smart, safe, and fully informed decision. We will be happy to connect you to a trustworthy attorney.

Do I buy under my personal name or a corporation?

Foreigners in Costa Rica can own property in their own names, however most buyers chose to purchase the property through a new or existing company or corporation (“Sociedad Anonima” or S.A. or “Sociedad de Responsabilidad Limitada” or SRL). It is best to discuss with your attorney which type would be best for you. The SRL structure is more simpler than the SA and does not have a board of directors, but is managed and operated by one or more managers who may or may not be stockholders.

Some of the reasons to do business through a corporation in Costa Rica are:

Separate Patrimony

– Costa Rican law considers corporations to be separate entities from their representatives, owners or stockholders. This provides personal liability protection (except in specific situations such as criminal cases or family disputes).

Operate your company remotely

– This is the biggest reason to purchase your property within a corporation – for convenience and flexibility. From a practical standpoint, foreign owners who do not reside in the country can assign proxies to make corporate decisions, execute agreements, purchase or close transactions. For example: you can assign a proxy to change the utilities or municipal taxes into your corporation name without you having to spend a few days with a translator trying to figure out how to do this.

Estate planning

– A company is a great vehicle for estate planning and to secure your assets and belongings under one entity. It also facilitates probate and reduces procedures and costs.

To buy a property, and even a car, we recommend that the transaction is carried out on behalf of a Costa Rican corporation owned by the buyer. It’s the notary who performs the opening of this company when purchasing a property or any other property of significant value. In this way, you are personally protected if there is a lawsuit of some sort. It is also a good way to save some taxes in your country. The cost is $800 to $1000 for the creation of the company.

How do I handle the transfer of money?

When you buy a property, you generally have 10-14 days to transfer a deposit of 10 % of the transaction amount in an Escrow account. The Escrow Agent is an independent third party (regulated by SUGEF if operating in Costa Rica) with whom one party deposits an asset of any kind (normally cash) that is subject to specific terms and conditions before being delivered to the other party.

You will be required to complete a Know Your Client (KYC) form, sign an Escrow Agreement and provide documentation and proof on who you are and how you have access to the funds that you will be using to make the purchase.

This Escrow account is designed to protect both the seller and the buyer and is needed to proceed with the transaction. The balance of the payment of the property (including transfer fees, and notary trust account) must be transferred no later than 3 days before taking possession. Your deposit is protected during the due diligence time, but if you change your mind after the due diligence date and no longer wish to purchase the property, the seller is entitled to keep the 10% deposit.

How do I know if a property is titled?

All property in Costa Rica (whether titled or concession) should be registered in the Public Registry, known here simply as the Registro. Your attorney will be able to confirm that the title chain is in order and will determine if there are any restrictions, encumbrances or liens. Avoiding the purchase of unregistered property is strongly advised.

What legal documents are involved in buying real estate in Costa Rica?

If you are buying or selling property in Costa Rica you will likely see the following documents in the course of your real estate transaction.

Purchase And Sale Agreement (PSA) – This is the offer contract whereby the Seller and the Buyer agree to sell or buy one or more assets. It specifies terms and conditions within a specific time period. A complete and well drafted PSA sets the foundation for a secure and smooth transaction. We have worked with our attorneys to make sure that our PSA is very complete. In there you will find: names and IDs of buyers and sellers, agents and lawyer contacts, property details, purchase price, deposit amount and date, escrow agency, due diligence date and list of due diligence items that must be completed, and closing date.

Escrow Agreement: A contract defining the terms and conditions under which the buyer deposits an asset (usually cash) with an independent third party known as an Escrow Agent who in turn, and subject to specific terms and conditions, delivers it to the seller.

Due Diligence Report: Due diligence is a process where the buyer, through a law firm, and for a specific time period prior to making the final decision to close on a property, systematically researches and verifies the legitimacy and accuracy of the title, as well as any possible contingencies that could cloud it. There is always a check list of 15-20 items that will be checked by the attorney. Eg: utility availability, contract numbers, proof of taxes payments, blueprints, permits, HOA bylaws and meeting notes, inventory, etc.
: During the Due Diligence period is where you have the opportunity to conduct an inspection and do a topography study (to mark the lot limits, and check to make sure the buildings are built within the property limits and follow rules / regulations). We work with qualified property inspectors and topographers that will give you a written report on their findings.

Purchase and Sale Deed: This is a legal document prepared and authorized by a public notary whereby the seller agrees to sell irrevocably to the buyer one or more assets under specific terms and conditions. For the purchase of real estate in Costa Rica, the purchase and sale deed must be incorporated in the public notary’s protocol book and registered with the Public Registry of Costa Rica for it to be binding and enforceable against third parties. The purchase and sale deed is the main document to close the transaction and it should reflect all final terms agreed upon during all initial stages of the transaction.

When will the property be mine?

First the offer (Purchase & Sale Agreement) is presented, once an agreement has been reached, it is signed by both parties and you are officially under contract. During this time, the deposit is made and the due diligence (DD) is completed. Once DD has been completed and approved and the property is clean and clear, you will transfer the final balance into the escrow account and your attorney may proceed to closing. Once the purchase and sale deed has been signed, the property is officially yours. You can get the keys and start enjoying your dream property in Paradise!

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