Thanks to the strengthening housing market and economy of the United States, everybody is now more confident to buy real estate properties in the mainland and abroad, with Costa Rica seeing most of the sales. However, you have to understand that buying real estate is more than just finding a new place you can call home as it can do wonders to secure your financial future, so it is imperative that you know all the legal processes and procedures you need to follow when buying a property especially if you are doing it in a foreign country like Costa Rica.
As an expert in the real estate market, I highly suggest that you contact a professional real estate agent who will help you locate and buy your dream house with as little hassle as possible. Before you arrive in Costa Rica it is best that you do an online search for properties you may be interested in and let your agent know about the list, including the date and time of your arrival, that way the real estate agent you are working with can contact the property owners and make appointments for you to have access to the said properties. Having a list of search criteria or a list of properties you would want to view will help you utilize your time and enable you to have fun in the beach, join eco-tours or do other fun adventures.
Once you have visited all the properties in your initial list, the next step is to narrow down that list and re-visit the properties that caught your fancy. During this time, you and your agent should get all the necessary information that can help you decide on which property you really want to buy, and finally make an offer.
When making an offer to buy a property, it is not uncommon to make an informal offer using a Letter of Intent or LOI. A LOI is a non-binding contract but it can help you assess the motive of the seller, begin negotiations and outline the terms and conditions of the property sale. Once an agreement has been reached between you (the buyer) and the seller, a formal and binding Option to Buy and Sell Agreement will be created and due diligence will be performed wherein all necessary investigations into the property, title and corporation are done.
To ensure that the deposit and final balance payment are delivered on time, an escrow account with either Stewart Title or Chicago Title should be established. This will ensure that both parties, the buyer and the seller, are fully compensated and all terms and conditions are met before money is released. Take note though that all escrow service companies will require that you submit the following:
- Two forms of identification that are valid and issue by a government entity.
- The Escrow Agreement is duly executed by both the buyer and the seller.
- KYC or Know Your Customer form is executed by the Depositor.
- A copy of utility bill that is not more than 3-months old showing the buyer’s current physical address.
- Proof of income supporting the transaction amount (Could be Tax Returns, W2 Form, IRA, CPA Letter and Final and Closing Purchase Agreement that will be completed 5-10 days before the closing to ensure that everything is in order.
When it comes to closing costs, the government collects 2.5 per cent tax on all real estate transactions and notary fee is 1 to 1.25 per cent of the properties declared value.
If you are interested in getting financing for your real estate purchase, you should be informed that it is not an easy process in Costa Rica. It will take a lot of your time processing the request plus the interest rates on real estate loans are around 8 to 15 per cent each year. The good news is, you can always make an arrangement with the property seller to carry a mortgage on the property as it is a common option here in Costa Rica.
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