Costa Rica Investment Guidelines | The Buying Process
What should you expect when buying Costa Rica property? The buying process in Costa Rica is quite easy and straightforward as long as you have a good real estate agent who can ensure that you are protected with a comprehensive purchase contract, a reputable attorney, a safe 3rd party escrow account, qualified home inspectors and more. There is no Multiple Listing Service (MLS) nor real estate licensing requirements in Costa Rica and therefore it’s important to work with a seasoned agent who knows the market extensively and has experience in the process.
Once you find a property that you are interested in making an offer on, we will draft a formal purchase agreement that you will sign and will be presented to the Seller via the Seller’s agent. Often times the Seller will offer a counter offer and we will go back and forth until we hopefully come to an agreement. The purchase agreement will detail the deposit amount, length of closing, who will pay the closing costs (see the section on Closing Costs), if there will be a home inspection, the inventory that is included as well as other legal details.
The contract will also mandate that all utilities, property taxes, HOA fees (if applicable) and all other operational expenses are paid through the closing date. The length of closing is completely negotiable between the Buyer and Seller but once the attorney has completed the due diligence and given green light to move forward then the closing can take place rather quickly. However, it is very typical to structure a contract for a 30-day closing. Purchase prices are almost always negotiated in US dollars.
Costa Rica Property Purchasing Guidelines
Once the Buyer and Seller have signed acceptance of a purchase agreement then then we will do the following.
1. You will need to hire an attorney to begin performing the due diligence on the property to ensure that the title can be transferred without any issue. Normally the attorney is allotted with 10 – 15 days in order to carry out this process during with time any deposit would be fully refundable until the termination of this period. The attorney should provide you with a detailed report of all their findings and recommendations and we can refer an excellent English Speaking attorney to you who specializes in real estate transactions.
2. We would begin the process of opening an escrow account with a 3rd party company where all monies will be held until the closing and distributed by the escrow agent per the signed instructions of the Buyer and Seller. We recommend the company Secure Title Costa Rica with whom we have done countless transactions and they will provide account information in order to make a national or international wire transfer. Due to money laundering regulations, the escrow company will require that you furnish financial information in order to prove the source of funds that most likely will include 2 years tax returns and 3 months bank statements.
Below are the reasons why we use escrow services.
a. Protects the buyer – The alternative to using an escrow account would be to pay a deposit directly to the Seller or to your attorney. It is never a good idea to pay a deposit to a Seller especially prior to the due diligence being completed. Deals can fall apart even at the closing table and trying to get a deposit back could take years in court. Depositing with an attorney has its risks because normally their accounts aren’t regulated. Most attorneys won’t have insurance on their accounts either. Secure title has a $5 million dollar insurance policy for errors and omissions.
b. Protects the seller – most sellers will feel more confident with funds being held with a non-biased 3rd party rather than with the buyer’s attorney. There have been cases where the buyer decides to back out once funds are non-refundable and their attorney simply gives them their money back leaving the Seller in a position where they would have to sue the buyer to obtain that deposit. It is the escrow company’s job to hold or distribute the funds according to the purchase agreement.
c. Closings are easier – without funds in escrow closings can take hours requiring everyone to go to the bank and wire funds while simultaneously signing the transfer deed or share transfer. With funds in escrow, once the transfer deed is signed then the escrow agent can immediately
3. If the due diligence process yields positive results, then we can move toward the closing by depositing the remaining purchase funds with the escrow company.
4. A final closing statement will need to be signed by both the Purchaser and Seller that will detail all the wire distributions at the closing.
5. The transfer deed will be signed by the Purchaser and Seller or by their representative to whom they granted a special power of attorney and the wire transfers will be immediately executed.
6. Once the transfer deed has been signed by both parties, the property will have legally been transferred. However, the attorney will need to file the deed with the National Registry and within 7-10 days the new ownership will be updated within their system.