This entry is part 1 of 1 in the series Understanding Costa Rica Real Estate

Costa Rica History in knife metaphorI’d say that about 1/10th of my time spent with people looking to buy property in Costa Rica’s Southern Pacific zone is spent in the actual buying/selling of property. The other 9/10ths is a mix of conversations regarding what’s involved with living here, as well as discussing the business of real estate in Costa Rica.

At its core, the lack of an actual MLS (Multiple Listing Service) colors all aspects of the business here, and I’ll go into that later on in this series. To really understand the business of real estate here, I have found it helpful to go back in time and see the progression of events up to the present. This helps to not only understand the current market but also, to project what is to come.

Early days:
I got into real estate in Dominical in 2004. It felt like the day I got into real estate was the day that someone threw the on-off switch on the market. Since then I’ve heard some tales indicating that the market was already simmering and poised to boil.

I made a sale on my first day in the business. A $60,000 gorgeous ocean view property sized at around 2 acres.  The property featured Uvita’s Whales Tail front and center. That property has gone on to have a lovely home, guest house and pool built on it. It has been re-sold and enjoys a stellar vacation rental history (link to rental page on HomeAway)

Quick overview of The Zone:
The Zone is made up of a string of 3 towns with Dominical at its northern end. The northern boundary is not a hard line but is decidedly fuzzy, easily extending up to Hatillo and at times, up to Portalon. (link to Hills of Portalon Development).

From Dominical heading south on the coastal highway you get to Uvita and then further south, to Ojochal. The area between Dominical and Uvita has a nicely laid out mountain range that runs very parallel to the ocean. Hence the handle “coastal mountain range” This means that you can travel inland from the beach just a short way and get to elevation where it is breezy and cool and offers expansive views of the ocean and coastline, attributes which make this area extremely desirable to investors, relocators and migrators (part-of-the-year residents).

More History:
Before the incoming press of foreign interest in The Zone, the Ticos (Costa Ricans) owned all the land, and their land holdings were always in the multi-hectares (1 hectare = 2.48 acres. Think 2.5 to make it easy).

There was a time in the not too distant past when land in Costa Rica was nearly value-less. There were land-grant programs whereby a man simply had to be willing to take responsibility for a property and the government would “grant” him the land, with conditions.

At that time it was not known that “nature” had a lucrative aspect to it. Instead nature was largely viewed as “in the way” and needed to be tamed, subdued or eliminated. So, one of the conditions to receiving a land grant was to cut the trees down and raise cattle.

I suspect that this era may have coincided with the “McDonalds” explosion. This is an arguable point, so let’s just say it coincided with an extreme demand in the U. S. (and world) for beef.

After some time of cutting down enormous canopy trees and attempting to raise cattle in former rain-forest environs, there was a shift in our world’s appetites; nature became an important commodity. Granted, beef has continued to be an active commodity, but it was also learned that former rain forest land doesn’t necessarily make for the best pasture land.

Raising cattle in Costa Rica was a daunting struggle. The farmers found themselves up against nature. Having to maintain former rain forest jungle land in “pasture” condition presented its trials, as well as the fact that the beef business (exporting meat, bureaucratic inefficiencies, and 3rd world infrastructure or lack thereof) made a guy scratch his head and wonder if having all this land was such a good idea.

The Tico culture was/is multi-generational. These large, granted tracts of land, would end up being populated by the man who acquired the land, his now grown sons & daughters and their families, and the grand kids (soon to also have families.)

So despite having lots of land, a condition that in first-world countries equates to being wealthy, these farmers were subsistence. They lived off of what their land produced. As a child would grow to adulthood, Abuelo (abuelo = grandfather) would simply build them a house and apportion off some land (or not) and they would continue on contributing to the sustenance of the family. The land itself was not thought of in lucrative terms.

Abuelo just happened to acquire a land grant on, let’s say, 60 hectares of land that reaches from the inland side of the maritime zone on the coast up to the highest point of the coastal mountain ridge. He’s not thinking “oh boy! I’ve got some ocean view land here.” No, he’s thinking: “man I hope this land is fertile.”

Enter foreigner:
One day Bob, a tourist, is exploring the area and decides that he’d like to buy Abuelo’s property. Bob offers Abuelo $60,000 for the land. Abuelo has never even considered the remote possibility of maybe someday having such a sum. In fact, he’s never even seen that much money. He talks it over with his family and they (very understandably) feel that this would be a wonderful thing for them to do. So, they sell their land.

Bos is a visionary. He sees what is likely coming and so he stakes his early claim. Now, keep in mind that there is no electricity to this property, the access is horseback and the water is from a nearby spring that is bubbling out of the ground. Abuelo has run a pipe from the spring to an elevated storage tank near the family homes. Bob’s a visionary in that – what foreigner in their right mind would possibly want such a remote and forbidding piece of land?

To understand this is to understand the element that is credited with making the world go round. We all have different likes and dislikes. I wonder at the likes of Steve Jobs, Bill Gates and Paul Allen’s level of focus on the personal home computing idea at the time that they had that focus. I’m not of this ilk and so my hat is off to such ones. I view the early investors here in The Zone as being made of the same stuff.

In looking back over the history of the first wave of investors here, I marvel at their foresight. My then wife and I looked at some Whales Tail view property in Uvita around 2002 and, despite its being gorgeous and nicely priced, I felt that it was simply too remote. This was in the same area where 2 years later I sold my first property.

Ok, so I said that to understand the real estate market here in Costa Rica, it helps one to know a bit of the history. Granted, we’ve gone back to what I appropriately call the first-wave of intrepid and visionary investors – The Visionaries. We’ll continue on in the next article with Bob’s next steps and incredible gains on his visionary act.


Costa Rica Real Estate Chit Chat 8


The Guys just got themselves certified! Rod & I are now card carrying Costa Rica real estate agents. Imagine that.

I know – you’re saying: “I didn’t know that there was such a thing”. Well, in fact there isn’t, yet, but there is about to be, and so we have joined a number of our peers in anticipating the coming change to the U. S. (and elsewhere) model of licensing for real estate agents.

Training for Costa Rica real estate certification.

Rod being attentive at the Camara de Bienes Raices course in San Jose Costa Rica.

The organization is called CBR or “Camara de Bienes Raices” (Chamber of Real Estate).  Perhaps you’ve seen the CBR logo around on various websites. You’ll be seeing it on ours as well now.  It is a 4 day course of 8 hours a day.  We did it, enjoyed it (for the most part – butts are a little sore.), met & networked with lots of people and now feel just that much more entrenched with our chosen industry in Costa Rica.

CBR has proposed a law that they feel will become adopted this year of required licensing of Costa Rica real estate agents.  Our position is that this will be yet another upgrade for the real estate industry.  Many times has it been said that “everyone is a realtor in Costa Rica”. This will change with this law, and in the process help to protect the interests of buyers and sellers alike.

Ben at the Camara de Bienes Raices or Costa Rica Chamber of Real Estate course.

Proof that I was there. I was actually quite impressed with the professional presentation of the CBR.

But that’s not all.  There’s more.
This Friday Rod & I are going to be attending the first of several required courses being offered in Costa Rica’s southern pacific zone for the newly formed, and widely embraced Costa Rica Multiple Listing Service (MLS).  The service is privately owned and appears to be well funded and organized.  I personally visited their offices in San José and got to see the workings there and was truly impressed.  More on this as it develops but needless to say, us Guys are enjoying the spate of improvements to the real estate industry in Costa Rica.

About Trusts, or the lack thereof:
I spend a certain amount of my time in putting together hard money loans.
There is a growing need for this service since credit is hard to come by in the current global economy.

My attorney has always advised my clients to use a Costa Rica mortgage for their loans, and so we have.  I’ve heard the reasons for this position of his a number of times and would say that the benefits of a mortgage outweigh a trust, but only marginally.  So, today I was working on a loan with a lender whose needs I felt would be better served with a trust.  So I called my lawyer to ask that he set up the deal using a trust.  He informed me that there are currently no trusts being formed in Costa Rica.

It turns out that in the car industry in Costa Rica, the trust has been used to avoid paying taxes on the sale of the car.  So, the governmental agency called SUGEF, which is like the SEC in the States, says that, in order for any Grantor, or Custodian to be recognized by them as legitimate, the Grantor or Custodian must be registered in the National Registry, which now conveniently takes a prohibitively long time to happen.  In other words, there aren’t any officially recognized financial custodians to act as the necessary 3rd party in a trust.  So, this leaves just leaves us with the mortgage in the loan business, which is fine with me anyway, but I found it interesting.

I’ll post more about Costa Rica mortgages in a future article. It’s a bit dry, but for those interested in using a Costa Rican mortgage, its a fascinating read.  Click here for a Spanish language article that explains the law.

About reading stuff in Spanish on the web:
There is no reason to shy away from going to a Spanish language web page anymore, especially if it has information that you want.  Google has got a great page translation function now.  We have installed a translation widget on this site and the www.GuysInTheZone.com site as well.  It makes translating the entire site a simple mouse click and takes just a few seconds.  Amazing.  I use Google “Chrome” browser and it asks me if I’d like to translate any non-English page for those websites that don’t have one of the fancy translation widgets on them.

Anyway, ours is over there on the right of the page.

It doesn’t always translate well.  I found this translation kind of humorous from an article on the new traffic laws on that same site:

Much has been made of the famous law of traffic, however this IS NOT A NEW LAW transit, but a 7331 amendment to the Act, but appears to be confusion among the general population, be it drivers, pedestrians and transit authorities themselves . Just as this little-known offenses, I also penalize pedestrians for risky actions, but they have not received enough publicity. Doubt also exists about the application of certain sanctions for lack of regulation, as is the case of baby chairs. Would be prudent to count on the full text with the reform that is already built and to clarify to the people whether or not the promulgation of a regulation necessary to apply some sanctions. Many thanks.

Oh well, such services will serve to offer yet further motivation to learn Spanish.

By the way, I’m writing a series of articles that will help you to learn Spanish over at my Dominical website.  Click here to view. There are just 2 articles there at the moment, but I’ll be posting more progressively.

 

Certified and Official Costa Rica Real Estate Agents

The Guys, Rod & Ben, proudly display their Costa Rica Camara de Bienes Raices certificates.


8 thoughts on “Costa Rica Real Estate Chit Chat

  • RCH

    It would be nice if a licensed RE agent, member of NAR, could get licensed in CR without spending 32 hours…but of course that's not going to happen.

    Nice article Ben, nice to see the progress, it's going to make more than a few people unhappy if this becomes law. But it's a good thing imo.

  • RCH

    It would be nice if a licensed RE agent, member of NAR, could get licensed in CR without spending 32 hours…but of course that's not going to happen.

    Nice article Ben, nice to see the progress, it's going to make more than a few people unhappy if this becomes law. But it's a good thing imo.

  • Ben

    Hello RCH,
    The advent of licensing and an MLS all at the same time bodes very well for the real estate industry. We have made some serious strides towards cooperation between the agencies that has resulted in a number of shared commission deals. Seller's are getting representation, and buyers are seeing all that is appropriate for them in the zone. All good. Now we could just use a healthy economy. Can you help with that?

  • Ben

    Hello RCH,
    The advent of licensing and an MLS all at the same time bodes very well for the real estate industry. We have made some serious strides towards cooperation between the agencies that has resulted in a number of shared commission deals. Seller's are getting representation, and buyers are seeing all that is appropriate for them in the zone. All good. Now we could just use a healthy economy. Can you help with that?

  • Real Estate

    and finally there is a real MLS in Costa Rica, which offers real estate professionals the ability to co-broker, but it also provides education, contact management, internet data exchange, exclusive listing tools and much more…

  • Real Estate

    and finally there is a real MLS in Costa Rica, which offers real estate professionals the ability to co-broker, but it also provides education, contact management, internet data exchange, exclusive listing tools and much more…