A step-by-step guide for buying real estate in Costa Rica in 2020
Real estate in Costa Rica may have slowed in 2020 like in almost every global market since the borders closed to world travel. But Costa Rica real estate is incredibly well-poised to reignite as soon as international tourism is allowed to continue. Buyers are telling us they can’t wait for the borders to open so they can come down and buy. So if you want to get ready to jump in on the sunny, tranquil, and pura vida lifestyle, this is your guide for how to make it happen!
Why Choose Costa Rica
Many of our clients, both near and away, have realized that Costa Rica is the best place to be. Costa Rica’s small scale — both in area and population — has many big benefits! Those who made the choice to weather this pandemic in Costa Rica have counted their blessings for being amidst our peaceful and sheltered Costa Ballena communities. Our region has remained almost untouched by Covid-19, with no spread from the very few cases that have approached our area. And yet we still have easy access to all of the services needed for daily life.
Costa Rica will certainly remain a perennial, world-class travel destination thanks to its year-round pleasantly warm weather, vast amounts of green and marine spaces, and peaceful, welcoming vibes from its people. This is a country like no other and people are taking notice, wanting to spend more time basking in its great essence.
Why Costa Rica Real Estate
As mentioned above, today’s buyers are seeing the full value of purchasing property in Costa Rica, rather than simply the fiscal value. Still, real estate is one of the best investments to weather a crisis. “Real assets” maintain their value and provide the most effective hedge against an inflationary environment. And real estate in Costa Rica has the added favorable conditions of a high growth potential and lower costs, which includes unique tax advantages.
Those with ample cash on hand who are tired of stomaching the volatility of the stock market are currently looking for safer places to invest their money. And Costa Rica real estate is uniquely positioned for investors who seek a stable, steady return on investment and diversification. Savvy investors are keeping a close eye on the markets and positioning themselves to move on great investments when the timing is right, in anticipation of tourism and the vacation rentals market to return.
Any foreigner, whether legal resident of Costa Rica or not, can purchase and own real estate in Costa Rica. Your passport could be used as your identification throughout the process. The property may be your dream home for retirement, an investment home or a business.
Viewing Properties in Costa Rica
At Osa Tropical Properties, our team of agents preview new listings for sale on a weekly basis and update our website daily. We stay on top of our real estate market to keep our clients informed of new listings, price changes, sold properties, and market trends in the Costa Ballena region. Our website acts as an MLS for home, lot, farm, and business listings in Dominical, Uvita, Ojochal and their surrounding regions.
Costa Rica does not have a Zillow-equivalent MLS with which to look for properties. Instead, buyers looking for Costa Rica real estate rely heavily on realtor websites that are specific to the regions they are searching. There are some properties that individual brokers will choose not to list for a variety of reasons that include proximity, price, size of the property, location, etc. Our team chooses to focus our attention and efforts on listing properties that meet the standards of our typical client base. We feature the best properties the Costa Ballena region has to offer and we regularly reevaluate. Our goal as expert agents is to keep abreast of what properties are available in the region at all times.
Osa Tropical Properties’ services include a full digital experience of properties in Costa Rica. You can carry out your search for your ideal property from the comfort of your home. On our website and social media channels, you will find videos of property walk-throughs, 360° virtual tours, drone flyovers, client testimonials, and expert agent advice sessions with answers to frequently asked questions.
Our new tech-friendly resolution begins with promoting efficiency and cost reduction for our clients. You won’t need to make several trips for scouting out properties throughout the year. We want to create an immersive experience for our clients to really get to know this area from a distance and all of the properties that meet your criteria. Let us know your criteria for buying a property in Costa Ballena and we will send you great resources — like videos, descriptions, and photos — showing you the properties that best match your needs and wants. We will refine these criteria together with you over time until we find the properties that you want to see in person.
Making An Offer on Costa Rica Real Estate
An Offer to Purchase is a simple document that your real estate agent in Costa Rica prepares when you are ready to start negotiating to buy a property. It can be done by email as long as the buyer prints it, signs it and scans it. This begins the process of negotiating the price and terms of the transaction. When the offer is signed by the buyer, the realtor will present the offer to the seller’s realtor. At this point, the seller has three options: accept, reject or counter. Often negotiated during this stage are the closing time frame, closing costs, the results of inspections, and, of course, the price.
Once both parties agree on the price and terms and sign the Offer to Purchase, a Sales and Purchase Agreement is drafted and notarized by a lawyer. To complete the Sales and Purchase agreement, the buyer will make a 10% deposit into their escrow account.
If you are traveling to Costa Rica and think you may make an offer on a property while here, it is important to meet with your local banker before you leave home to make sure that you have things in place to initiate a wire transfer. This is important because a Sales and Purchase Agreement is not official until your deposit is in an escrow account.
Most often the escrow funds are sent via wire transfer. Due to the tight banking regulations in Costa Rica, your wire transfer may take a few days. Your realtor should advise you on the steps you need to take to make sure this process goes smoothly.
The Due Diligence Process
Property hunters and real estate agents typically only notice cosmetic defects when walking through a property. The purpose of the due diligence process is to do a thorough inspection of all of the details of a property. In a home, this will include plumbing, electrical, foundation, and roof integrity. On an undeveloped property, you will want to get a soil test, check for water, check if utilities are set up, and guarantee that you can easily get a construction permit. All types of properties require boundary verifications to be completed.
Due diligence begins when the Sales & Purchase Agreement has been executed. It includes legal verifications of the corporation holding the property, which is a necessary step of the real estate buying process in Costa Rica. If there are any liens or embargoes on the title of the property, your lawyer will recommend that you should not buy the property before those are cleared.
Your real estate agent and attorney will help you understand all tax rules and regulations that apply to the property. If you purchase in a condominium or a gated community, for instance, it is important to receive written documentation regarding the amount of fees and exactly what is covered by these fees.
Closing On A Real Estate Deal
Once due diligence is accepted, the balance owed on the property is deposited by the buyer into escrow. Roughly a week later (5 business days) both buyer and seller will meet to sign the final documents to transfer ownership and the purchase can close. If for some reason you cannot be present, you can grant a Power of Attorney in your place. Realtors and lawyers frequently perform these roles. At Osa Tropical Properties, we offer this service free of charge.
Signing Over Ownership of the Property
Your real estate attorney will be able to advise you on the best way to register your property in Costa Rica. For foreigners buying property in Costa Rica, there are multiple options of registering your property in your name or in a corporation.
The best option to purchase Costa Rica real estate is through the creation of a local corporation. There are options of a Sociedad Anónima (S.A.) or a Sociedad Responsabilidad Limitada (SRL), which is similar to an LLC. Ask your attorney for advice on the legal part of the transaction. This is the best option for non-residents because you cannot register utilities in your name, only through a corporation.
You can also choose to register the property in your name and share the property title with your spouse, another family member or business partners. You can share the title in equal parts as a “right” or “derecho” with as many partners as you would like.
Another way to purchase your property is in the name of your retirement fund or the corporation that represents it, such as an IRA or 401( k).
Once the deed is registered in the National Registry, your attorney can supply you with the needed documentation to allow you to change the utilities for the property to your name or under a corporation name. Your real estate attorney can provide you with advice on the best route to take for your particular situation.
How to Pay for Real Estate in Costa Rica
Buyers of Costa Rica real estate most typically pay in cash. A cash offer gives the buyer the strongest negotiation position and will likely result in you getting the best deal on a property in Costa Rica.
Costa Rican bank financing is available but at a cost of incredibly high interest rates of between 8-12%. This option comes with a number of conditions that make this option highly restrictive to foreign buyers.
Owner financing is being increasingly offered by sellers in Costa Ballena. This option usually comes with the conditions of a 50% down-payment, low interest rates, and a short term of two years, allowing for buyers to allocate the necessary funds with the sale of their home property or the liquidation of other investments coming due.
Next to buying with cash, the second best option is to buy property in Costa Rica with a low equity loan from your home country. Rent out your Costa Rica home while you are waiting to move here and use the rental income to pay for your low interest loan back home to use your investment to pay for itself.
Converting an existing IRA into a self-directed IRA (SDIRA) is a specialized option for Americans to take control over the investments in their IRA account. This account is administered by a self-directed custodian or trustee, giving you the flexibility to invest in a wider variety of investments, which can include foreign real estate such as in Costa Rica.
Costs Associated With Purchasing Property in Costa Rica
Other than the price of the property you purchase in Costa Rica, there are a few additional charges that a buyer will incur during their real estate transaction:
- The cost of a property survey depends on the size of the Property. A surveyor will charge from around $450 for boundary verification.
- A home inspection cost depends on the size of the home. The average price would be around $600 for a 2000 sq.ft home.
- Legal fees amount to approximately 4% of the sales price and are usually split 50-50 between the buyer and seller.
- The buyer will have additional costs like purchasing a corporation, which costs between US$800-1000, and the escrow fee for transferring funds from outside of Costa Rica.
- The seller pays the realtors’ commissions in Costa Rica.
- There is an annual real estate property tax that you will pay that is 0.25% of the registered property value. There are additional taxes added to this that include garbage collection and maintenance of public areas.
At Osa Tropical Properties, we are more than happy to help our new neighbors make a smooth transition into their new Costa Rica property. We view the post-purchase process to be a professional courtesy that helps make sure that everyone in our community is informed about what to expect from daily life in the Southern Zone. Contact us today to take advantage of our extensive knowledge, connections and passion for real estate in Costa Ballena!