the process of buying real estate in costa rica
Buying real estate is a transparent process, but it is still important to do your research prior to purchasing property. To help you with your due diligence, we've prepared a list of questions frequently asked. Of course, we always advise that you confirm any legal details regarding property registration, closing costs and taxes with your Costa Rican attorney.
How do I start the process?
The first thing to do is to determine the purpose of your purchase: investment, rental property, primary residence, etc. From the moment we know what the purpose of the purchase is, we can direct you to properties that meet your needs and budget. The price is usually negotiable, around 5%, but sometimes more. It is important to know that it is very difficult to borrow funds from a Costa Rican bank. In general, most buyers who require financing either borrow funds in their home country or find a property where the owner is willing to finance. Terms vary with the owner’s financing and can sometimes be negotiated. Several structures exist that allow for owner financing in a manner that protects both buyer and seller.
I love a property, where do I go from here?
Make an offer with your realtor. When the offer is accepted on a property, it is mandatory by law to have a notary to verify the transaction and be represented. The seller will be represented by his/her lawyer, and you with your lawyer.
Is there a Costa Rica MLS?
No. Currently, there is no nationally sanctioned Multiple Listing Service. Some local associations have supported and/or are recommending certain systems, but participation is not required and there is no one system supported by all the associations. Good agents will know the best deals in their market and will show you their own listings and those of other agencies that fit your parameters. We work with all legitimate agencies and agents. We represent you and our goal is to find you the perfect property.
How much are the closing costs?
The Buyer is usually expected to pay the 1.25% notarial fee as this work is mostly on the Buyer’s behalf. The mandatory taxes and fees to pay to transfer a property are 1.5% (share transfer) or 2.5% (property transfer), levied on the highest of the fiscal value of the property or the purchase price. This tax is usually shared equally between the buyer and seller, but it is subject to negotiation. The Escrow fees may be shared equally by the Buyer and Seller and are between 0.20% and 0.25% of the purchase price (with a minimum amount of a few hundred dollars per transaction). Closing costs are as follows:
- 25% for the notary to register the property in the National Property and perform closing duties.
- 5% in government stamps and fees if you do a share transfer (that is, you assume the shares of an already established corporation that holds/owns a property).
- 5% in government stamps and fees if you purchase a property in your own name or in the name of your own corporation.
- 25% in Escrow fees commonly apply if you’re going to use a third-party escrow such as Stewart Title.
Should I have my own attorney?
Yes. We strongly recommend that you have your own representation in any transaction.
Do I buy under my personal name?
Foreigners in Costa Rica can own property in their own names. Purchasing property through a new or existing company or corporation (Ltda or S.A.) is very popular. To buy a property, and even a car, we recommend that the transaction is carried out on behalf of a Costa Rican corporation owned by the buyer. It’s the notary who performs the opening of this company when purchasing a property or any other property of significant value. In this way, you are personally protected if there is a lawsuit of some sort. It is also a good way to save some taxes in your country. The cost is $800 to $1000 for the creation of the company.
How do I handle the transfer of money?
When you buy a property, you generally have 10-14 days to transfer a deposit of 10 % of the transaction amount to an Escrow account. Escrow services are available through recognized companies such as Stewart Titled Latin America (STLA). Escrow accounts must be registered with SUGEF (Superintendencia General de Entidades Financieras). SUGEF is Costa Rica’s financial system regulator and is responsible for safeguarding the stability of the country’s financial system.
As mentioned above, fees for escrow services are commonly split between the Buyer and Seller as the escrow is to protect the interestes of both parties. This account is opened in CR for you and the seller, in order to proceed with the transaction. The balance of the payment of the property (including transfer fees, and notary trust account) must be transferred no later than 5 days before taking possession. If you change your mind and no longer wish to purchase the property, the seller is entitled to keep the 10% deposit. If the seller changes his mind and no longer wants to sell the property, you will receive 100% refund of your deposit without charge.
How do I know if a property is titled?
All property in Costa Rica (whether titled or concession) should be registered in the Public Registry, known here simply as the Registro. Your attorney will be able to confirm that the title chain is in order and will determine if there are any restrictions, encumbrances, or lines. Avoiding the purchase of unregistered property is strongly advised.
