How to Buy a House in Costa Rica

Congratulations!  If you are reading this article, you are considering a decision that thousands of folks just like you have already made – you’re moving to Costa Rica!  Of course there will be a handful of you that are considering a vacation home or other such residence in our beautiful country, but the rules of how to buy a house, condo or property in Costa Rica will pretty much be the same.

So what is the process of buying and paying for a house in Costa Rica?  There is a lot that goes into it, but I am going to try and break it down into a series of steps for you.  So whether you are buying or selling a house in Costa Rica, this article could help you.

Steps to How to Buy a House in Costa Rica

1. What can You Afford? Financing vs. Cash Sales
2. Find an Agent
3. Offer and Negotiation
4. Contracts
5. Closing on your Property in Costa Rica
6. Who needs to be Where for the Closing
7. How long does a Closing Take?

#1 What Can you Afford?  Financing vs. Cash Sales

I put this first on the list for many reasons.  First of all, the buying process in Costa Rica is likely very different from what you are used to.  I am from the US originally, so that is my only other reference. Feel free to add comments below with information on other countries as I am always curious! But for now, lets go over HOW you pay for a house or property in Costa Rica.

The NO Section

• there is NO BANK FINANCING for non-residents of Costa Rica.  no mortgage, no equity lines of credit, nada.
• Banks in the USA and Canada will NOT finance your home or property in Costa Rica
• Likely any other country you are from will also say NO to financing in a foreign country

Why?  Think about it.  As a foreigner you have no ties to this country.  If you walk away from your loan, it will cost too much money for a bank to go after you in whatever country you end up in. It is quite simply too difficult to process a foreclosure.  And if your home country offered you a loan in Costa Rica and you back out, how will they repossess a home overseas?

The YES Section

• Many Resorts DO offer financing on their condos to qualified Buyers.
• Some Developments DO offer limited financing, especially on new construction.  (usually in heavy expat areas though)
• OWNER FINANCING – some of this DOES exist and if it is something you require, this is one of the first things you should let your Agent know once you choose the areas you want. Please note though, I have found that these are usually on the more expensive homes.

And please know that even these kinds of financing will be very different, and sometimes difficult to get.  I would say 90% are 5- 10 year terms, sometimes with as much as 50% down.  Again, the big resorts offer more flexibility.  So if you are looking for a Resort property, or just want to get to Costa Rica any way you can with a limited amount of money to put down, a good Agent can negotiate on your behalf and knows where the best loans are!  Sometimes families ore young professionals who will be working remotely need this option and its not a bad one.  Resorts/condos tend to have great internet for remote working parents, they have pools, playgrounds, even babysitting!  Contact us here for trusted agents in the area of Costa Rica you want to be.

Side Note:  Sometimes people think that finding a ‘for sale by owner’ will save money.  But be warned.  Typically these are overpriced.  In most cases the owner already wants to make as much money as they can by skipping an agent, so you are NOT in good hands from the get go.  Check out this Article here.  Most Agents cover a large area or can help direct you to other trusted Agents to help you find the best deals. They know the market and the market values and will help guide you in your search and save you money.  If you are Selling a home, an Agent will help you get the best value from your home of property.  Folks at Blue Tierra will even work as a consultant on an FSBO sale for a Buyer to ensure you make a successful purchase at the correct value of the property.

So how DO people come up with money to purchase a home with Cash in Costa Rica?

• Sell everything they own and move with no strings attached.
• Cash in your 401ks, stocks, etc.  Talk to your personal accountant about the best ways to do this. Sometimes your home purchase in Costa Rica counts against taxes for things like 401ks, though I am not an accountant know little!
• Get a line of credit or a mortgage on a property already owned, and pay cash for a home here.
• Move to Costa Rica and live in a rental until you get your correct residency.  Then apply for a loan here.  BUT, the joke here is the only people the CR banks give money to are people that don’t really need it.  PLUS the process can take 8-18 months and more paperwork IN SPANISH than you could ever possibly imagine. SO now you are waiting more than 2 years to buy a home and you may not want the limitations of a rental while you wait.

With the above information, you should be able to figure out what your budget is to buy a home.  Decide what the MAX budget is, and then go down from there.  I always find that is easier.  Give yourself a cap amount and be realistic.

# 2 Find an Agent in the area you want to live

By taking trips, possibly a relocation or House Hunting Tour, and scouting out different parts of Costa Rica, you should have a good idea of where you want to live. Now its time to find a trusted Agent in that Area.

• If you have friends in Costa Rica, you can ask them.
• You can also call an Agent you like from an internet search and ask them questions to make sure they are legit.
• A good Agent will offer references as well.
• And while there is no mandatory licensing in Costa Rica, there is a license so that can help sometimes as well.
• Ask any prospective Agents if they verify their properties prior to listing.  When choosing between 2 agents in an area, this may be your deciding moment.  If they don’t even know what you are talking about, go with the one that does!  I will leave this as Homework (tarea) for you – find out what I am talking about! 😉

And I definitely suggest working with one trusted Agent or Agency.  They will be with you at all the showings, create your showing schedule, keep notes on what you like and don’t, and can make appointments to show other Agent’s listings as well.  If you are loyal to them, they will repay that 5 fold!  Most of the Agents know each other in an Area, and don’t like when someone contacts everyone since many of them have the same listings anyhow.

One other thing you may need to get used to is that Agents represent the Buyer AND the Seller in many Sales here.  Don’t be fooled by this.  It is the fiduciary duty of an Agent in the USA to represent the Seller of the listing, even if they bring a Buyer and represent both.  But here in Costa Rica, I find there is more of a communal sale.  It is in everyone’s best interest to put the best possible deal together for both parties, so Agents work much like an arbitrator, offering factual advice on both sides as needed. For more on choosing an agent and how that works, ask us to send you the video we are making now! Contact us.

#3 Offer and Negotiation

For more information on finding the right property for you, just give us a call (+1 – 506 – 6091 – 8714)   But as this article is based on how to BUY a property, or how to actually PURCHASE that property, lets move on.

Make on offer with your Agent’s help.  Sometimes this is done verbally, sometimes an Agent will write it out and possibly even involve an attorney.  Depends on how complicated the offer is.

Things to cover in your offer to buy a house in Costa Rica:

1. Sales price and purchase term.  Are you buying as is or performing a Housing Inspection?  Keep in mind most homes ehre are sold as is.  Is there an option to back out of sale in the event of a bad inspection or is the sale conditional on Financing, etc?  Does the sale including furniture and appliances? or the car or other machinery like a ride-on mower? Ask your agent to guide you.
2. Amount of Deposit.  Typically 5-10%.  Is deposit refundable for any reason?
3. How Deposit will be held and whether you will use an Escrow account for part or all of the the money*
4. Where will the Buyer send the money to the Seller?  Every sale works now with bank transfers.   But Costa Rica has stringent guidelines on money being transferred from another country into a CR bank.  Anything over 10,000USD needs to show proof of origin to ensure the money was earned legally.  This my mean the Buyer needs to supply tax returns, account statements, a written statement from your accountant, bank, etc.  So most Sellers, if they have an account outside Costa Rica, will opt to to have a Buyer transfer money to this account. * But if the seller requires you to transfer the money to Costa Rica, or another country with these kinds of guidelines, we highly recommend the use of an Escrow company to take care of all the paperwork.  They know the different bank requirements to show proof of origin, and take out the guessing game of what documents you will need, making for a smooth and stress free real estate transaction.  You fill out the forms, provide the paperwork listed, one time, and they take care of the rest.  To contact our recommended Title company in Costa Rica, please fill out this Contact Form.
5. Include who will pay for transfer fees, closing costs and escrow costs (typically each part covers their own transfer fees, closing costs are split, Buyer pays Escrow).
6. Decide how you are going to register the property – in your name, joint names, as a corporation, etc. And if you will be registering the full sales price or not to save on closing costs (more on this in the Closing section below).  This is best gone over with your attorney for what will be best for you – both pricing and registration options.

“The most typical forms of ownership are (a) Personal ownership. This is where the property is owned in the personal name of one individual. (b) Joint Ownership. This is where one or more individuals own the property jointly and each have an undivided interest in the property. This is locally referred to as “derechos”.

The Buyers should be aware that this is NOT the equivalent of a Joint Tenancy with Right of Survivorship (JTWRO) that is common in the United States where the joint tenant automatically inherits title to the other joint tenant. In Costa Rica the 50% owned by your spouse will not automatically pass to the other spouse upon death and must be probated.

(c) Corporate ownership. This is a property titled in the name of a corporation. In this form of ownership the Real Estate Agent should verify with the Seller that he has the authority to act for the corporation. Ideally the Agent should procure from the Seller a copy of the corporate documents.

You will not be able to use your foreign (non Costa Rican company) unless you go through the tedious process of having that foreign corporation registered in Costa Rica.”  Costa Rica Law site

Side Note: For properties owned in a corporation:  “For many years there was a common practice to transfer the stock of a corporation instead of the property itself to avoid the property transfer taxes. However, the government imposed an indirect transfer tax which taxes the transfer of stock of corporations that own real estate.  It is generally much cleaner to transfer the property outright since it cuts off any potential liability for that property.  If you purchase the existing corporation it involves additional due diligence on the corporation.  Since there is no centralized corporate debt filings in Costa Rica there is no way to check for hidden liabilities. As such, when purchasing by way of a corporation the Buyer will assume a certain degree of risk which would not be the case when you transfer title to the property outright.”  Costa Rica Law

#4 – Contracts

First, all contracts in Costa Rica need to be written in Spanish to be legal.  They should also be notarized, especially in a Real estate Transaction, and only attorneys can be notaries in Costa Rica.

Sales and Purchase Agreement (SPA)

Also known as an Agreement to Buy and Sell or Option to Purchase (OTP); in Spanish it is called an Opcion de Compra y Venta or simply an Opcion.  But whatever your Agent or Attorney calls it, this is the meat of the Sale.  As stated above it will be in Spanish to be legal, and signed by a notary, but with a translation into your language if requested.  It will contain ALL the legal information on the Buyer and Seller (names, addresses, marital status and number of times married, profession, and ID #s), terms from the offer including Escrow and deposits, as well as the Agent’s Real Estate commission and how it will be dispersed in the event the one of the parties backs out of the sale. It will also include how Due Diligence will be performed and handled if anything turns up, and how any disputes will be handled.

Side note on Due Diligence:  There is NO TITLE INSURANCE IN COSTA RICA – Most attorneys will go back about 10 years in their review of a property FOR DUE DILIGENCE.  If you want to go back further, for piece of mind, or because you intend to build on a large property of virgin forest for example,  then we suggest the Non-Insured Title Search from Secure Title.  This will research the history of the property back to the day it was registered with the National Registry system in Costa Rica (a very tight, secure system used in Costa Rica to register ALL properties.  Considered the best in all of lower America to ensure land ownership.) While they cannot insure their findings, due to a change in Costa Rica law, they offer every process of due diligence on a property up to that point.  For more information on this, please Contact us HERE.

A note on Real Estate Lawyers:  Attorneys here represent the sale of the home and the registration of the home correctly, not an individual party like the Buyer or the Seller.  So fees are usually split 50/50 between buyer and seller. Another attractive part of purchasing real estate here!  They perform the due diligence, cancel or transfer any liens and mortgages per the agreed up0n contracts (if Seller has a mortgage, they pay to have it registered and cleared – if Buyer is getting a mortgage, they pay for the filing and extra paperwork involved).  Then the attorney files all the paperwork for correct transfer from Seller to Buyer.  Although it is typical to share an attorney, it is customary to allow the Buyer to choose the attorney.  If the Seller wants to use theirs, ask your Agent for guidance on whether they think this is a good idea.  Likely they will know most attorneys in their area.  This is actually how we bought our home and how many do.  But if each party really wants to have their own legal representative, or if the Buyer wants to hire an attorney that would be more expensive than the Seller, then you are going to have higher closing fees and in this case the fees of the attorney may need to be part of the offer and negotiation process.

#5 – Closing on your Property in Costa Rica

This is Costa Rica. There are  a hundred different real estate transactions daily and each is different because of all we listed above.  Part of the problem is many of them are done incorrectly, or incompletely.  So we always suggest using trusted Agents with references, and the same with Attorneys.  This is your best insurance policy, and quite frankly your only one with no Title Insurance.  While most of the transactions will never come across any problems, the few that do, will be a serious headache to correct, or may even be a complete bank breaker.  So if you follow the steps above, and use food people, by the day you close, there is very little left to do.

1. The Seller will need to show taxes are paid, supply utility bills paid, and Uso de Suelos for property purchases as required.  The Agent should help them with this.
2. You will need to pay the Attorney for the Closing Fees, and many times they will ask for cash.  Here is a great way to calculate what your closing costs will be.  They are regulated by the government –  Closing Cost CalculatorSide Note on Closing Costs: Many times, to save on fees and future property taxes, the exact amount being paid for the property is not used to calculate the closing costs.  You only need to use the amount registered, which can be as little a $1.  In these cases, your attorney will need to raise the registered value or flags will be raised at the registrars office.  But legal or not, it is common practice to register the property at a sales price MUCH MUCH lower than the actual price a Buyer pays for the property.  Since notary fees are calculated on this number, closing costs can remain very low.  For more info on this, talk to your attorney.  If it is a simple sale, some smaller town attorneys may just charge a flat fee plus the taxes and stamps required by the government.  I think my closing was only $500!”Keep in mind that this Notary Transaction Fee is for drafting and filing the property transfer deed. Any additional services such as drafting a purchase agreement or setting up and escrow account are additional to his fee.  The parties to the closing transaction must deliver to the Notary Public  the applicable property transfer taxes and registry recording fees due on the transaction and these typically include: (a) Property Transfer Tax of 1.5% (b) National Registry Fee of .5% (c) Documentary Stamps of Approximately .6%. ” Costa Rica Law Site
3. Again, all the documents will be in Spanish or they are not legal.  Some attorneys will provide a written translation to your language, though the forms are rather basic and many will just go over them with you and verbally translate.  If you want a written translation of anything before you sign, especially if it is into a language other than English, you may need some outside help.  Try Tiger House.    Once the Closing papers are signed, they will be notarized by the attorney.
4. Depending on how you set it up, a representative from the Escrow company may also be present to disperse funds per the instructions of the SPA.  If the Buyer needs to transfer funds, sometimes they will need to show proof of this transfer before the attorney will file the actual paperwork.  Again, WHO these funds are being transferred to will already be agreed upon, as well as those fees.  And here there may be a little trust involved if there is no Escrow.  Once the money is in the hands of the Seller, the attorney is legally bound to file the paperwork with the Registry.  Proof from the National Registry showing the new ownership can take a few days to a couple of weeks depending on several factors.Side Note:  No closing papers!  Every single one of my Buyers walks out with the same comment.  After transferring hundreds of thousands of dollars into a Seller’s account, they feel like they should walk out with SOMETHING!  But there really is just a copy, if anything, of some of the paperwork.  Even corporation documents need to be left with the attorney if you open a corporation to finish the filing.  So you could walk out with nothing to show for the house you just bought!  But you do have the Agreement signed, and soon you will be emailed the proof from the Costa Rican National Registry office showing the property registered to your name or corporation name.

So congratulations!  You now have about 50% of all the info on HOW to Buy a House in Costa Rica!  To go through everything, you would need a legal degree.  But this gives you a good idea of how most transactions on a house or property purchase should be handled in Costa Rica.  One of the last questions I get asked all the time is if the Buyer and/or the Seller needs to be present in Costa Rica for the Closing.

#6 – Who needs to be Where for the Closing

This is another hard question to answer, and depends entirely on how the Sale is set up.  We recently consulted on an FSBO and neither party was in Costa Rica.  Because the Buyer was simply purchasing the Seller’s Corporation, with the property held in that corporation, the attorney was able to create the Sale with no one being in one place at one time!  But TYPICALLY, both parties need to be present IN Costa Rica at Closing, or have a Power of Attorney in place to sign for you.  For many people this is the Real Estate Agent.  This is something you should think about during the offer or acceptance process.  For Sellers, if you are planning on leaving the country, think about it ahead of time!

#7 – How Long does a Closing Take?

If you decide on a property, a closing can take as little as a few day if negotiations are straightforward, property is being Sold as Is, and the attorney has time to do the due diligence and draw up the contracts right away.  If the attorney is very busy, the sale is complicated, or if a longer due diligence period is required, maybe even Powers of Attorney need to be created for out of town Sellers, this could take months.  But the typical time it takes from an accepted Offer to the Closing date is about a week or two.

For more questions on how to buy a house in Costa Rica, or other things we did not cover here, reach out to us any time!  We will be posting articles every week, and videos as well.  So sign up for the latest updates!