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Buying Process

View our podcast episodes, or read our detailed comments below.

1.

Locations

Start your search online for the locations that match your requirements.  Visit Costa Rica and the locations you are interested in several times. See our locations page for more information.

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2.

Research

Research the available real estate agents in the area(s) that match your requirements. Don’t hire any agents who are not an expert in the particular area that you are interested in because the right agent can help you for years to come with all your needs. Try to stick with one agent so you can expect that outstanding service. If you contact many agents, they will all just show you what they have listed and you will never find out about the best options.

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3.

Get it in Writing

Don’t make any verbal offers. Ask your real estate agent to write up the offer and take it to the seller. Once agreed on, have your agent ask your real estate lawyer to write up a formal purchase-sale agreement. When you and the seller sign the agreement, it is customary to wire 10 percent of the sales price (unless agreed differently) into escrow with your lawyer.  If you have not organized this before you traveled, you can do so when you get back home, but the purchase sale agreement will not be legal until the deposit arrives in escrow.

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4.

Inspections

Most Costa Ricans will NOT hire a home inspector before they buy a home in Costa Rica, because it is not customary. And few sellers are interested in getting a home inspection done before they offer their property for sale. Therefore, if the buyer needs financing and the bank’s appraiser will also do a home inspection, which some banks do, problems will arise as soon as the report is sent to the bank.  Costa Rica does not have licensed home inspectors. When you negotiate the purchase of the house with the seller (or your real estate agent does), you should make the purchase subject to a home inspection in Costa Rica. This is not regulated by law in Costa Rica as it is in some other countries where a title company will not allow for closing until all the repairs are done and thoroughly checked.  Without doing a home inspection, you will not only have to pay for the repairs yourself, you will have moved in already before you find out what needs to be repaired.

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5.

Title

Pursuant to article 460 of the Civil Code, all documents relating to an interest and/or title to real property in Costa Rica must be registered in the property section of the Public Registry. This database can be searched at http://www.registronacional.go.cr either with the titled registration number, known as the folio real, or by name index.  The record contains detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title. In addition to this resource, it is always advisable to have your attorney conduct an independent title search for further assurance of a property’s marketability.

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6.

The Deed

In Costa Rica, property is transferred from seller to buyer by executing a transfer deed (escritura) before a Notary Public.  By local standards the notary acts on behalf of the state; in addition, he or she must be an attorney, and may draft and interpret legal documents.  In order to close on the property, the parties involved must select a notary / attorney to draft the transfer deed and register the sale in the Public Registry (Registro Nacional).  In accordance with local custom, this designation is defined by the manner in which the financial transaction is affected.

Cash: When paying cash for the property, the buyer may appoint his or her notary / attorney.

Financing:  If a percentage of the purchase price is being financed, the designation of the legal representative depends on the proportion between cash and financing.  When a large part of the purchase price is being financed by the seller and a mortgage is required to guarantee payment, the seller may request that his or her notary / attorney draft the transfer deed.

If the ratio for the transaction is 50/50, it is common for the seller’s attorney and the buyer attorney to jointly draft the transfer deed and mortgage in a single document, in what is known as co-notariado.

In either case the buyer may insist that his or her notary / attorney draft the transfer deed while letting the seller’s notary / attorney prepare a separate mortgage instrument.  In this case, because the mortgage is being drafted separately, it carries a higher registration fee.

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7.

Power of Attorney

If you are not going to be able to be in Costa Rica for the closing, I recommend you leave a SPECIAL power of attorney for your lawyer’s assistant, your real estate agent or anybody you trust, that will allow that person to purchase the property in the name (personal or corporate) that you approve of this power of attorney ONLY.

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8.

Give it Time

Wire the complete purchase price and any necessary legal fees into escrow WELL before the closing date as banks in Costa Rica, to comply with money laundering laws, might hold the money for several days.  Ask your attorney to send you the “Get to know your customer” form in time, so there won’t be any time wasted in finding the necessary documents.

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9.

Property Rights

When you purchase Costa Rica real estate, you can register the purchase in your name.  In case you would like to share the property title with your spouse, another family member or business partners and you don’t want to allow the other to be able to sell without your consent, you can share the title in equal parts as a “right” or “derecho.” The title will show, for example, 1-345678-001 and -002, with as many partners as you’d like: -003, -004, -005, etc.  You can also purchase any Costa Rica real estate in a corporation such as 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.  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). Not all Costa Rican attorneys know how to do this, so do your research.

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10.

Title Transfer Cost

You can purchase a property in the same holding company or transfer the title to another company or your own name. The cost of the title transfer is 5 to 6 percent of the sales price total, which is customarily shared between buyer and seller unless negotiated differently. Legal stamps are approximately 1.1 percent, as they are on a sliding scale, and transfer taxes are 1.5 percent. Notary fees are also on a sliding scale and add up around 3 percent. Again, ask for your attorney’s advice on this matter.

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11.

Taxes

Besides the real estate transfer taxes that you pay at closing, you also have to pay the 0.25 percent annual property taxes at the local municipality, over the registered value in that municipality.  All property owners are obliged by law to reassess their property every five years.  If you don’t, the municipality will do it for you.  At closing, the seller should bring a certification from the municipality that the property taxes are paid up to date; just bringing the last paid receipts is not enough.  Since 2009, luxury homes pay an annual “impuesto solidario” or luxury home tax on a sliding scale that changes almost every year. Check with your real estate agent or your attorney to find out if the property you are buying should pay luxury home tax and how much.  It is customary for the buyer and seller to share equally in the closing costs, although this can be modified by agreement depending on the particular transaction The costs associated are: government taxes and fees, notary fee, and mortgage costs, if any. The government imposes a 1.5% Transfer Tax (Impuesto de Traspaso) based on the registered value of the property or the declared value in the closing documents, (whatever is higher). In addition to this tax, there are 5 more taxes that must be paid in the way of Registration stamps. This amount ranges between 0.7% and 0.8%, also based on the registered value of the property or the declared price in the closing document, (whatever is higher).  The notary that drafted the contract for sale and carried out the closing on the property transfer is entitled to a Statutory Fee. In accordance with Executive Decree No. 32493, the minimum for all acts and contracts that are authorized by a Costa Rican Notary Public is determined by the following schedule, based on the actual value of the transaction:

  • Up to 10 million Colones = 2%. On the excess of 10 Million Colones and up to 15 Million Colones = 1.5%.

  • On the excess of 15 Million Colones and up to 30 Million Colones = 1.25%.

  • On the excess of 30 Million Colones 1%.

The law also states that acts or contracts that are complex in nature may result in a 50% surcharge from the above. This fee is based on the real market value of the property. (For the purposes of this explanation and the aforementioned Decree, this is what is named as the “General Tariff”).

Please be aware that these costs are just for the transfer and ownership registration in the National Registry.  If there is a balance due after closing, the registration of a Mortgage, Guarantee Trust or other kind of guarantees may be required, in which case the respective costs must be added.  It is standard that the costs for these guarantees are solely paid by the Purchaser, unless parties have expressly agreed something different.  If closing takes place by means of a transfer of corporate shares instead of transfer of property ownership, the costs are usually a lot lower.

When a mortgage is required, it is customary for the person who is receiving financing to pay the costs of drafting and registering said instrument.  Either the Mortgage or the Guarantee Trust may be created either in the same transfer of ownership document or in a separate document.  However, it is very important to process and register them both together otherwise; one or more of the parties may be unprotected during such process.  Therefore, it is very important that the same Notary be processing them.

The cost of a Mortgage is based on the declared amount due and will pay a little bit more of 0.3% of such amount in Registration Stamps. (A form of tax).  A Notary Public will also charge for drafting the mortgage instrument according to the General Tariff indicated above.  If the Mortgage is to guarantee a loan, the full tariff will be applied. If it is to guarantee the Purchase Price Balance, only 50% of such tariff will apply.

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12.

HOA

If you purchase in a condominium or a gated community, the seller should bring a letter from the condominium administration that the HOA fees are paid up to date.

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13.

Estudio de Registro

Once the deed is registered in the National Registry, your attorney can supply you with an “estudio de registro” proving you own the property.  With that and your residency ID, you can go to the power company, the water company and the phone company to change the services to your name.  You need to be a resident to do so.  If you’re not, we recommend you purchase the property in a corporation and have a lawyer’s runner do all the changes at the utility companies for you.  It is also quite customary to leave all the utilities in the former owner’s name.

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