Costa Rica Real Estate – Buying a property in Costa Rica does not need to be alarming, frightening or disconcerting since the process is very simple, transparent and much like the purchasing process in the United States.
Our previously published articles provided information on the things you need to consider during the pre-purchase stage; finding a reputable realtor and lawyer specializing in real estate purchase who will do due diligence on your behalf, provide accurate information, especially the legal requirements, and let you know of legal pitfalls you need to avoid. Now let us talk discuss the actual buying process your options, closing procedures and closing costs.
Direct Transfer – an individual acquires a property under his or her personal name.
Corporation – acquisition of the property is through a new corporation or existing corporation. This is the most common practice in Costa Rica because of the advantages it brings the buyer; it allows them to protect the property incognito and if the buyer purchases through a corporation that already owns the property then payment for government taxes and stamps are waved or need not be paid since transfer taxes and stamps are only paid if there is a change in the ownership of the property.
The norm and most common means of paying the initial deposit and balance for the purchase of property in Costa Rica is by wire transfer. It is a common practice that the monies are deposited to a government owned escrow account to protect the interest of both the seller and the buyer.
If you are wondering on whether you can borrow funds from a Costa Rican bank, currently it is difficult to loan money from local banks so most buyers who requires financing usually borrow from their home country’s bank.
- Buyer and Seller are both present – this is the most common type of closing procedure. This is done when both the buyer and seller are in Costa Rica, have decided and agreed to meet in a specified location and close the deal. Both parties would have their lawyers with them; the buyer’s lawyer to present the prepared transfer deed and the seller’s buyer to review the terms, conditions and specifications on the transfer deed. Once both parties have agreed and signed the transfer deed, the buyer would have to make a payment using a “manager’s check” drawn from the funds held in the escrow account. The public notary would then register the changes to the property ownership in the National Registry.
- Power of Attorney – if for any reason the buyer or seller needs to be away due to any reason, it is highly recommended that he or she grant a power of attorney to a trusted individual to take care of his or her interest and investment while he or she is away. It is imperative though that the principal be specific with the limitations of the agent when granting the power to avoid any unwanted repercussion. There are three Power of Attorney: Full Power of Attorney where the agent is given almost any authority on behalf of the principal; General Power of Attorney, used for granting the agent administrative rights and authority to the agent for business purposes; Special Power of Attorney is given to an agent to perform specific act on behalf of the principal and any action that is not specified by the principal is not considered legal.
- Outside of Costa Rica – closing on a property while outside of Costa Rica is not a common practice. However, in the event the buyer or seller cannot go to Costa Rica and did not leave a Power of Attorney, then they can have a Costa Rican public notary come to where they are and sign the transfer deed in the protocol book in the presence of the public notary. Any and all costs incurred to have the public notary perform this kind of assistance is shouldered by the individual requiring the service.
The cost for closing on a property in Costa Rica differs. The amount depends on how the purchase was made, through direct sale/transfer or by company. The standard cost for direct transfer is 4.2 per cent of the actual purchase price of the property including legal and notary services and land transfer taxes and government stamp fees. On the other hand, for properties held by a Costa Rican corporation with the property declared as an asset to the corporation, the closing cost is 1.25 per cent, which is the legal fee to change the board of the company, ownership of the shares and to register the changes in the National Registry.
Currently there is no established regulation or bylaw on who should shoulder the closing costs that is why it is critical that this issue is settled between the buyer and the seller during pre-sale to avoid misunderstanding.
Property Ownership Types
Is the Property Really for Sale?
What is the Maritime Zone?
Myths About Squatters
Construction, Architects & Engineers
Purchasing Under a Corporation
And so much more……..