Costa Rica Property Buyer FAQs
FAQ’S: Things to Consider When Purchasing Real Estate in Costa Rica
Purchase and Sales Agreement: Once you’ve found the property you would like to purchase, your real estate agent / or your Costa Rican Attorney will prepare an Offer to Purchase. The offer will require you to make a International wire deposit into an Escrow or Money Mgmt bank account in Costa Rica. (Checks are not acceptable as it takes up to 45 days for them to clear.) The offer will allow you and your legal representative a Due Diligence period to research the title of the property, the corporation that it may be held in, Home Owners Association dues and rules and regulations, taxes and any other relevant details. Should the Due diligence uncover issues the buyer finds unacceptable, the deposit monies are returned and the Offer to Purchase becomes void.
Should the Due diligence reflect that all pertinent details of the property are in good standing or can be rectified easily, the deposit monies shall become non refundable and the purchase process continues.
The attorney will then prepare the Transfer documents called an Escritura, transferring the property from the Seller to the Buyer in the National Registry, called el Registro Nacional, which will be signed by both parties at the time of closing
The balance of the money for the purchase need to be wired to the Escrow account or Money Management account 3 days in advance of the closing. Allow 3 days for the funds to arrive from North America to Costa Rica.
Costs Associated with Purchasing: The closing costs in Costa Rica are government governed but a quick rule of thumb is 3.5% of the purchase price OR the registered value of the property in the National Registry-whichever one is higher.
Example: $100,000 purchase price
Closing costs: $3,500
Very often, the closing costs are split 50/50 between seller and buyer. The Buyer’s attorney generally is responsible for drafting the Transfer document and will send to the Seller’s attorney for review. The costs for the Seller’s attorney to review the Escritura, is at the seller’s sole expense and not included in the 3.5%.
Corporations in Costa Rica: Most properties are held in a Costa Rican corporation commonly referred to as an S.A. Sociedad Anonyma or S.R.L When purchasing a property, often the Buyer will simply have the shares of the Corporation transferred into their names. There are legal books that are associated with corporations that physically change hands and in which the transfer of the shares are noted.
Your attorney may advise against assuming the shares of the S.A. if there are any tax liabilities that you as the shareholder could be responsible for in the future.
Attorneys can easily and quickly supply a new corporation, if the property you are purchasing does not already have a corporation or if you require a new one. You can select a name for the corporation and the approximate cost is $800-$1,200 USD.
Closing on a Purchase: The day of the scheduled closing, according to the Purchase Agreement, the buyer and seller meet with the Buyers attorney and possibly Seller’s attorney and both parties sign the Escritura or Transfer deed, which is written in Spanish and recorded in the Notaries book. (For non Spanish speakers, the attorney will read the document in English, explaining all of the details.)
Once all documents have been signed by both parties and notarized by attending notary, the Escrow Agent will disburse the monies to the various parties, such as attorneys, realtors and the seller. Bank account information is provided in advance so that it’s a simple press of a button and the funds are transferred.
Once the Transfer deed has been signed, the Buyer’s attorney will register the paper work at the Registro Nacional, which takes approx. 2 weeks to receive a copy of the transfer, showing it is complete. Ensure your attorney provides you with a copy after the closing.
Closing on a Purchase, when not in Costa Rica: If you are unable to be present for the Closing of your property purchase, your attorney can draft a Power of Attorney, assigning the rights for a 3rd party to sign the closing documents on your behalf. This is a ‘limited’ power of attorney, which specifically outlines the ‘powers’ this 3rd party has been temporarily given.
An additional fee is associated with your attorney drafting the Power of Attorney, which you will need to sign and return in advance of the closing. Please discuss the costs directly with your attorney.
In some cases, the Power of Attorney must be taken to the closest Costa Rican consulate in your country and signed in front of the Consular, this is called having the document authenticated. Ask your attorney if this is necessary, in your case.
Utilities: In many cases, the electricity, cable, Internet, water and telephone are registered with the various providers under the name of the Seller’s Corporation. In this case, nothing needs to be switched over. The seller provides the account numbers for the utilities and the Purchaser begins paying them, without any changes necessary.
If the utilities are not in the Corporations name already or if you are purchasing via a new Corporation, your attorney or Property Manager via a limited Power of Attorney, can assist you in changing the utilities from the old corporation into your new corporation for a minimal fee.