For Sale By Owner in Costa Rica- Watch out!
Overall, my experience with For Sale By Owner in Costa Rica has not been great. Our family has been looking at real estate and investing here since 1999 (and even before that since we are from here originally!) So let’s go through the problems with for sale by owner properties in Costa Rica, and then I will tell you how we can help fix them for you if you still want that property on the side of the road.
A Brief Overview
First problem is that I regularly find them grossly overpriced for the market. Next, you have no idea what you are really getting if you’ve never purchased real estate here, and there are guidelines and processes any sale needs to go through. And third – there are a handful of seasoned crooks, even here in our little peaceful country. How do you know who they are? They will sell you anything you want to buy, even if it’s not theirs to sell, for 3 times what its worth. And they can smell you coming a mile away. Some folks think that because there is no license formality in Costa Rica for real estate agents, that means any one can do it. While that’s true – you need your real estate purchase to be done correctly, and not everyone knows how to do that, not even a Seller. And no seller of their own home is going to share all the truths of the house – a Seller’s rose colored glasses can also get in the way. And in the case of a Seller who built the home, they are likely trying to get back the money that they put into it. But in many cases this has nothing to do at all with its value even in today’s growing market. So that is what this all boils down to – are you really getting the value you are expecting? And do you know how to make sure your real estate transaction is properly recorded? Where is you deposit being held? once you start asking the questions, you realize you may need more answers than you originally thought.
Our Background:
My husband and I started looking for properties in Costa Rica back in 1999, and my husband is tico. It was the wild west of Realty in Costa Rica, and basically just the primitive beginnings of the internet Real Estate Search we all now take for granted. Back then, things were a lot different. How did you find what a property was worth? Who set the asking price? Really – whoever was selling it, or possibly a made up amount by the person you were with that day. It was just what you were told – come back the next day and it could be different. And there is always a mystical buyer who has no problem with the price so you better decide quick! lol. And many Buyers and gringos did. At least up until 2008 when the market came to a halt. But 20 years ago there were few real estate agents to choose from, no regulations (and there still aren’t but more on that later) and little on the internet to compare. If you liked it, and had the money to buy it, you did! Market value was barely a concept – it was all based on what I call Personal Value – how much it meant to you. And there are 1000s of wonderful expats who happily purchased or built homes here, moved down, started lives and created their own history here by purchasing in that market. But there are also horror stories you can hear about to his day – how people poured money into properties and never even got electric, or the papers and the owners didn’t match and they found out AFTER they built the house on someone else’s land. Many were just miscommunications, but still – these are very expensive miscommunications. And this is where a good agent can help. Once an honest and knowledgeable Agent steps into the picture, so many of your worries when it comes to property searches and buying real estate in Costa Rica go right out the window. These kinds of miscommunications, problems, worries and disasters can be avoided.
But why all these problems and how have things changed? Why is for sale by owner still such a hot mess with all this free information floating around?
Problem #1- Overpriced
Gringos, ticos, private resorts – all overvalue what they have for sale. I see it every day. For private sellers, folks just simply think their home is more valuable than it really is. It could be they paid more than they should have initially. Or they heard that Juan is selling his house for 1.2 million so they think they should ask the same. Whatever the reason, a person’s value of their own home or property almost always exceeds the reality of the market value – what most buyers will pay for that house, in that area, in this year. When an owner thinks of the price of their home, there’s way too many factors involved. There’s emotion, the money they put into it, and there is also the desire to get the most of their investment. But emotional attachment does not add value, and sometimes money put in doesn’t either. Sometimes design choices are so personal, no one else will even like them! But without an experienced Agent to point out what truly adds value to a house or not, a person thinks they can sell their home for more money that the market can bear. From personal feelings of the value of the items they have chosen to build with – like Italian tile or a certain kind of granite, to the desire to get the most out of a buyer in a Buyers market, the mix of asking too much and giving too little is what kills it for me in a FSBO.
Problem #2 – No Records
A real estate professional will look at a home very differently than the Seller. Sellers usually have very little understanding of the market they are trying to sell to, especially in Costa Rica. So why doesn’t an owner know the market they are in? Unlike other regulated markets, Real Estate sales are not properly recorded here. There is no registry of the TRUE sales history of a property here – homes are regularly registered as selling for less than they really are to save on taxes. And as a result, there no comps to look up (comparative properties to get an idea of what a property is worth). Since there is no true national recording of the sale prices of homes to get a comparative value for their home, many FSBOs have an elevated view of their home’s financial value. An experienced Agent or Realtor, however, has plenty of experience on what Buyers are buying, and for how much. Its not that RE Agents are trying to undervalue the home just to get an easy sale – the higher the price tag, the less homes they have to sell to make a living! But they know the market – they know the buyers, and that is what sets market value. NOT what a home is worth to the Seller, or even what they paid for it – but what it is worth to a buyer, and what they will pay for it. You can build a million dollar home here but if its to your own personal taste, with murals of angels and gothic columns throughout, you likely will only get half of that back when it is time to sell.
Problem #3 – Seller already has the Upper Hand
The FSBOs already have the upper hand over a Buyer. Someone off the street typically has no idea of what the market is, and already thinks they will be getting a better deal by skipping the Real Estate office – why else would you skip using an actual professional? Because you think you know better and can get it for less. So why wouldn’t a seller try and take advantage of the situation? Why not name a price that will get their entire family through the next 20 years without working? They already know the person likes it, they came knocking! True story – I had clients come to my office looking for a specific kind of property. We sat down, and looked through my listings on the big screen so they could see everything clearly before we set out the list of what we would see in person. I also showed them some lovely listings of other agents in our network. At one point they got very confused and pointed out a property that was listed for 364,000USD. They started asking about the development, and asked if there was a for sale by owner sign on the lot. We decided to investigate. And sure enough – same place! Now, the reason they were so confused – they called the number of the scratch board sign when they were driving by the day before, and were told the property was 450mil. Thats about 800,000USD. That’s more than 2x the listing price with the Agency. Same exact property. So why did the owner tell them such a high price? Why not?! Maybe they really like it and will pay it!
Problem #4 – Not everyone in Costa Rica is sweet and honest!
I know, I know – this may seem like common sense. But its amazing how expats will negotiate the price of their hotel, their car rental, even haggle over the price of tomatos at the farmers market – and then be so trusting with 100s of 1000s of dollars on buying a property! Do you really know that the plano they are showing you matches the property you are looking at? Do you know how to read one? Do you know the information on it? Has an attorney done due diligence on the property before transferring it, and all its liens to your name? Do you know if the owner was really the one who signed? Did it really get transferred to your name at all? Do you know how to check? Because a trained Real Estate professional from a real company can. And a company like ours checks all this before we even LIST the property. Who wants to try and sell a mess? Not me, that’s for sure.
So to sum all this up – Find a Good Costa Rica Real Estate Agent to help!
Retaining a real estate professional for your home, lot, or investment purchase is, hands down, the best way to go – whether you are buying or selling. And with no licensing here, it can be a difficult task finding someone you can trust. But try and find someone who has worked AND lived in the area where you are looking for at least 3+ years. Someone who knows the rules and laws, the local mechanic, and the lady at the Municipality to pay your taxes. Maybe they have taken the real estate courses offered here, even though they are not mandatory. Or perhaps they are an international Realtor© with the National Association of Realtors – there are different ways to check to see if someone is just a good website builder/testimonial writer, or if they are an actual qualified Agent with the experience you want for a smooth and successful real estate transaction. Remember, just because someone has a pretty website does not mean they are a professional.
Striking it out on your own is not a very wise decision unless you REALLY know the market value of things, the laws, and how to do title searches – or have a great personal Costa Rica attorney that is trustworthy and can do all that for you. Because there is also the knowledge of how title transfer works, whether things are in a corporation and what that means to you, the different kinds of beach front title, easements and driveways and how those are created and legalized – starting to sound a little overwhelming? Well, it should. Unless you hire the right people who know how to navigate these parts of a home and property purchase in Costa Rica. An experienced Agent or Realtor© will explain all this to you, and take care of all this for you.
How to buy a for Sale by Owner in Costa Rica
I think I make my point. There is A LOT more to buying a property here than many people realize, but with the right people, it can be a stress free step to get you moving down to Paradise with the rest of us. And if you STILL want to buy that For Sale By Owner house or property that you found on line, or Craigslist, or any other way, ask us for help! You can always hire us as a consultant to act on your behalf, and steer you clear of a disaster. Sometimes we can even negotiate our fees with the Seller and simply make sure you have a successful real estate sale in Costa Rica. We want you to move here and be happy! So give us a call, and let us steer your purchase in the right direction. Pura vida!
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