Real Estate Series: Buying Property in Costa Rica

Buying property is an exciting endeavor, but it can also produce some anxiety as it usually entails spending a considerable amount of money and such feelings increase when you are entering the unknown: buying in a foreign country.

Whether you decide to keep the real estate as part of your assets or sell soon after, we can agree that this will always be an investment for the future. Nobody wants their investment to be put at risk yet, unfortunately, the Costa Rican legislation does not provide guarantees for this type of transaction.

But do not worry, we have streamlined the process with the minimum conditions we demand from our clients to ensure that their investment is not compromised. 

Get advice before you sign.

Always let your legal adviser review all documentation before signing anything. 

It is common to see “Letters of intent” (LOI) that are in fact contracts. A LOI should be no more than one or two pages long and should not be elaborate or go deep into details.

Poor contracts that leave buyers unattended and abusive contracts are more common than you think, so this easy first step can save you a lot of headaches. 

Purchase agreement (PSA).

Just like the LOI, it is strongly advised that an expert review this document before signing.

By keeping your legal representation separate from the seller (this includes the realtor trying to sell properties) you will make sure the document covers all your needs, and shields you from liability while keeping you protected.

Our main goal is to protect our clients from any issues arising during the process and always keeping their best interest at heart. 

Due diligence (DD).

When it comes to properties, we strongly recommend completing thea Due Diligence so that you can be sure that there are no liens, annotations nor hidden vices with the property. Our DD process includes items such as inspections and appraisals whenever required, survey reviews, title information of the real estate, evaluation of outstanding debts and liabilities, verification that taxes are up to date, verification of construction permit/zoning use among many other factors.

Depending on the preliminary findings of the DD, there might be additional steps to take. A correct DD will provide visibility on hidden vices, as well as issues that could be either easy or difficult to resolve.

The main goal of the DD is to provide all the information you need to make an informed decision, bringing into play the pros and cons of buying property. 

Escrow account.

The escrow account fills an important gap in the transaction process as it guarantees that the money will be held by a neutral third party until the deed of transfer is signed.

Details such as earnest deposits, deadlines and rules for the escrow are detailed in the PSA.

Due to Costa Rican bureaucracy, this is the only path to ensure the money is transferred upon the signature of the deed of transfer by the notary.

The escrow account along with the results of the DD provides you the possibility of taking a step back and recovering your money. Similarly, it ensures that the seller receives the full agreed upon amount once the process moves along. 

Filing deed with National Registry.

Once the deed is signed, the property will be yours. Our notary will then file it with the National Registry and the new title will be under your name in approximately two weeks or less. 

Final recommendations.

1. Keep your legal representation separate from the realtor (regardless of whom you choose as an attorney). The realtor will always strive for the commission, even though your interests and the thorough check of the property should come first.

2. Real Estate legislation is the same for all the Costa Rican territory. What you should look for is for a recognized professional that protects your interests and investment.

3. Do not, for any reason, proceed with the purchase before the Due Diligence is completed and all obligations from the seller have been fulfilled. We receive an overwhelming amount of help requests because the realtors and attorneys said that “X” and “Y” problems were going to be solved after the purchase, but were, in fact, never solved.

4. Do not wire any money without a clear contract that is sure to protect your best interests.

5. If you are not using an escrow, do not make any transfer of money before the deed of transfer is signed with a notary. Otherwise, you can lose the entire investment as well as any possibility to recover it.

Buying property should not be a reason for stress, it should be exactly the opposite. When you have found the property of your dreams, contact us so that we can provide tailored guidance on your investment. 

We will ensure you feel supported throughout the process from beginning to the end.