Sales Process Overview, Part II:
Once we have identified the purpose that the person(s) have in looking to buy land in Costa Rica, the agent will consider this as he directs them to the available properties that suit their interest.
I have always found it interesting to watch the process of land selection. I think that we all come down to Costa Rica with some pre-conceived notions of what we want, and for most of us, these change after we’ve stood on a few properties. Our marketplace is, for the most part, coastal mountain terrain. It’s hard to arrive here knowing what these properties are like; they are quite unique, even on a global scale.
Throughout the consultation and property viewing, the buyer is asking questions, getting informed, and making decisions. They are considering the various value affecting features of the property such as: the view, the access, proximity to neighbors, proximity to the beach, golf course, waterfall, how much breeze there is, the jungle, and so on.
Most buyers of land in Costa Rica are not all that familiar with the peculiarities of the land. However, most have had experience in land transactions somewhere, and that familiarity of basic good business is helpful. Basic good business practices are the same everywhere. The broker should be an open book with respect to the properties, “full disclosure” being the key words here. You should get the sense that your broker wants you to know everything that he knows about the property, good, bad, and indifferent. If you don’t get that sense from your broker, get rid of him/her and find another one.
When their property is found, it is time to move on to –
Making an offer:
When I recognize the moment that my client has “found” their property, I view it as imperative to get the property off of the market as quickly as possible. There is some cosmic mechanism in place that alerts all prospective buyers about that particular piece once one of my clients decides they want it. It has happened more than once that the day that I submit an offer on a piece of land, the seller receives another one within hours. Or an offer comes in just before I can get my client’s offer in. And this can happen on a piece that has been on the market for over a year!
Costa Rica real estate agents don’t “represent” buyer, nor seller as they do in the States. But as for services rendered, I think that our representation leans more towards the buyer. The seller holds the title to that property and so is pretty safe and doesn’t need as much care as the buyer. The buyer needs good guidance through the process, needs to know what to look for.
Having said that, “the offer” is the point where our representation of the seller kicks in. We can’t ask a seller to take a property off of the market, without it being a PDSD (Pretty Darn Sure Deal). The moment that they take the property off of the market by means of a signed OTP (Offer To Purchase), they will say “no” to any further offers, even if they are higher priced or have more favorable terms for the seller. So the real estate agent needs to make this clear to the buyer.
As for price negotiations, all things are negotiable. In the majority of the deals that I have brokered here in Costa Rica, the selling price has been at, or close to, the asking price. There have been some exceptions where the seller is particularly motivated and the buyer comes to understand this by the process of negotiations. When asked if the seller will listen to offers, I generally respond using the line that I learned from my real estate peers in the States: “I’ll present any offer you wish to make”.
There are basically two categories of concerns to a buyer that must be satisfied: subjective, and non-subjective.
- The subjective concerns are: Do I like the property? Is it in my budget? Is it where I want to own property, etc…
- The non-subjective concerns are: Is the land buy-able? Is it free and clear? Does the seller have the right to sell it? Are there any potential pitfalls to the title on this property being transferred to me? Can I build what I want on this property?
When we submit an OTP, all subjective concerns have been addressed. The buyer knows that they want to property and have the necessary funds to buy it. The offer cannot allow for subjective concerns since we are going to legally restrict the seller from being able to accept another offer on the property.
The non-subjective concerns:
The big 3 considerations in the non-subjective category are: Road, Water, and Electric. A typical land transaction in Costa Rica has the water and electric run to the property, and a community arrangement for road care.
The topic of soil stability is one that raises a lot of questions. As a real estate agent here in Costa Rica, I am way out of my comfort zone speaking to this topic at all. I’m certainly not qualified to be able to look at a property and recommend, or not, a soil analysis. A test of three perforations in our zone costs around $1,200 and falls to the buyer to pay for. Some developers have mentioned that they’d like to go ahead and have this done prior to listing the property for sale, but as of yet I’ve not ever handled a property with an existing soil analysis. This topic is extensive enough that I’ll likely make it the basis for a future article. So, for the purpose of this article, let’s just throw it in the mix of things to have in mind in the non-subjective concern category.
Frequently the “make an offer” stage happens verbally between the real estate agent and the buyer, the net result being that the terms of the deal, the price, the deposit, and the term of due diligence leading up to the close, are established.
The deposit is normally 10% of the purchase price. The property is not taken off of the market by the seller until hard money (non-refundable) is deposited. Keep in mind though that “non-refundable” refers to the subjective concerns. The non-subjective concerns can be put in as line item contingencies, and if these contingencies are not satisfied prior to the end of due diligence, the buyer can get their deposit back.
“Buyer will have the property re-surveyed and accept the new survey if it is within 3% of the original survey”, would be a non-subjective contingency. This particular contingency would be done at buyer’s expense and would be arranged by the agent. It would have to take place before the end of due diligence.
Getting the deposit into the lawyer’s escrow account is frequently one of the most challenging steps of the transaction. If you are buying a $200,000 piece of land, you need to come up with $20,000, obviously. This isn’t always so easy to do if it is a weekend, or even if its not. Generally you can get a $5,000 cash advance on each credit card by going into a bank. Frequently a call to the issuing bank is necessary. But it’s all do-able and I’ve seen it work many times. Even if the buyer is unable to come up with the full deposit while still in Costa Rica, they can always come up with enough to convince the seller that they aren’t going anywhere and that this deal is solid. The amount needs to be enough to assure the seller that he has a deal. How much this is varies, but it would be the rare buyer that would put $10,000 into a deal and then not see it through. This amount, or some other, will buy the buyer time to get back home and wire the balance of the deposit into the lawyer’s escrow account.
