Purchasing Property in Costa Rica is Straight Forward
Congratulations on deciding to buy real estate in Costa Rica. When buying a property in Costa Rica, the purchasing process is quite straightforward as long as you have an experienced real estate agent who can ensure that you are protected with a comprehensive purchase contract, a reputable attorney, a safe 3rd party escrow account, and qualified home inspectors, and more. There is no Multiple Listing Service (MLS) nor real estate licensing requirements in Costa Rica. Therefore it’s essential to work with a reputable agent who knows the market extensively and has experience.
Purchase Agreement
Once you find a property you are interested in making an offer, we will draft a formal purchase agreement in English and U.S. dollars. This will be a signed agreement which will then be presented to the Seller via the Seller’s agent. Often, the Seller will counteroffer, and we will go back and forth until we hope we can agree.
The purchase agreement will detail the deposit amount, length of closing, who will pay the closing costs (more information about closing costs) if there will be a home inspection, the inventory included in the purchase, and other legal details. The contract will also mandate that all utilities, property taxes, HOA fees (if applicable), and other operational expenses are paid through the closing date.
The length of closing is negotiable between the Buyer and Seller and will be noted in the offer. However, it is typical to structure a contract for a 40-day closing but can be completed earlier or later if necessary.
Due Diligence and Setting Up Escrow
Once the Buyer and Seller have agreed and signed the purchase agreement, I will send you a Congratulatory email with a timeline of what will happen over the course of the transaction and include a detailed timeline so we stay the course. In my email, I will include your lawyer and escrow agent, who will reach out to you directly so that you can begin setting up your escrow account, and your lawyer will begin the due diligence on the property. I can refer an excellent English Speaking attorney in this area to you specializing in real estate transactions and who I've worked with on many transactions.
1. Due Diligence on the property is done to ensure that the title can be transferred without any issue. Usually, the attorney is allotted 10–15 days to carry out this process. During the Due Diligence period, if you need to walk away from the transaction, you will be refunded your deposit minus some escrow costs. Your attorney should provide you with a detailed report of all their property findings for you to keep on file.
2. The escrow account is where all monies will be held until the closing and distributed by the escrow agent per the signed instructions of the Buyer and Seller at closing. We recommend the company Sfera with whom we have done countless transactions, and they will provide account information to make a national or international wire transfer.
Due to money laundering regulations, the escrow company will require that you furnish financial information to prove the source of funds that most likely will include two years of tax returns and three months of bank statements. I have a list of all documentation required and can share it with you at any time.
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 your attorney. It is never a good idea to pay a deposit to a Seller, especially before the due diligence is 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 usually, their accounts aren’t regulated. Most attorneys won’t have insurance on their accounts either.
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 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 Smoother – 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, we can move toward the closing by depositing the remaining purchase funds with the escrow company five days before closing. The escrow company needs to verify all your documents and funds before closing due to Government laws.
4. A final closing statement will need to be signed by both the Purchaser and Seller to detail all the wire distributions at the closing. The Escrow Agent will prepare this.
5. The transfer deed will be signed by the Purchaser and Seller or their representative to whom they granted a special power of attorney. The wire transfers will be immediately executed.
6. Once both parties have signed the transfer deed, 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 owner will be updated within their system. It is important to follow up after closing to be sure that the deed has been transferred. I can also assist you in setting up an account with the National Registro to view your property online.