We are in high season here in the southern pacific zone. The months of November through April are typically when there are more tourists here than during the rainy months.

There is another type of “high season” happening right now as well. This has more to do with world conditions. I know, those from the States are going to think that Mr. Trump is pushing many to look elsewhere. And I suspect that this is true to some extent. I think that Mr. Trump has been good for my Costa Rica real estate business. I think Mrs. Clinton would have been as well. Such is the world that we live in.

However, our property buyers here are not just from the States. We’ve got buyers from Canada, despite their currently weak currency. These people are buying property and essentially paying 30% – 40% more due to the exchange rate on their currency. One has got to wonder – why?

France, Germany, Great Britain – all are providing us here with buyers. Again: why? There are economic, political and security issues happening in various areas of the world. I suppose that greater analytical minds would come up with the cause and effect links in trying to answer the question. But I find that there is one common thread when I talk with these people.

The Reason:
is pushing, and the promise of less stress, is pulling people to consider a life in Costa Rica. Simpler living is highly attractive. Costa Rica offers this and it (simple living) seems to be the antidote to whatever may be happening in one’s home country.

Uvita, Dominical, Ojochal and the surrounding areas that make up Costa Rica’s southern pacific zone are all seeing an influx of buyers. But there is more. There are some big-money players who are making some moves here that are notable. There are condominium complexes being constructed, and sold at a good clip. There are town homes, urbanization projects and upgrades to some of the antiquated infrastructure in some of these areas.

There is some talk of giving Uvita a facelift. This is much needed. With both Dominical and Ojochal, you turn off the coastal highway and drive into the town. In Uvita, the highway passes right through the town. Up till now its growth has happened with hardly any attention to the aesthetic and it is essentially a strip-mall, Costa Rican style.

This is a pity since Uvita could really have been (or be made to be) one of the most beautiful towns on the planet. So if these well funded entities see the beautifying of the town as in their best interests, great! Although it’s hard to imagine what can be done, short of tearing the whole thing down and starting over again.

The Envision Festival is going on currently. This has become one of the largest events of the year. Kudos to the organizers. I’ve heard that 7,000 people attended last year, but that about half that number are here now.

Uvita Costa Rica's Crunchy Envision Festival

2017 Envision Festival Uvita Costa Rica

Some of the Ticos complain a bit about Envision, claiming that the drugs, nudity and general licentiousness is disrespectful to their culture. I suspect that there is some truth to these allegations, but for me, I’ve never met an Envisioner I didn’t like and the festival provides a time of some fascinating people watching.

I’ve not  personally ever attended. I can hear the music from my home well, the bass notes anyway, and I routinely provide rides to those thumbing to the grocery store and back. There is also the complaint of them being a bit odoriferous, but I can’t speak to this having lost my olfactory sense some years back. So I get along fine with them in my car and always enjoy their upbeat spirit.

So between the time of year and world conditions, sales are good here in the Zone’s real estate market.

About Property Prices:
During the recession, there was not much of a market here. It hit hard and us realtors languished waiting for the anomalous inquiry that might result in a sale. I actually got into brokering hard money loans during this time in an effort to not only make a little commission, but to also help some land owners to not lose their properties.

Prices plummeted during the recession. This was an interesting time. The pre-recession time was a “boom”. The biggest challenge for a buyer then was being able to find an available real estate agent. I felt like I should put a Baskin Robbins “take a number” device at the door. Some of these buyers were our good-old bread and butter retirees, looking to retire to Costa Rica. However, there were lots of folks who refinanced their homes and then found themselves cash-rich and wondering what to do with it. The causes of the recession helped to fuel some of that heady boom and resulted in pushing prices up to a rather silly level.

So the fall of pricing some 40% – 50% during the recession could appropriately be called a correction.

Much of our land here is still at recession pricing. There hasn’t been a big upward push on prices since then. The demand for houses is strong and so we’re starting to see some upward movement there – all very rational though. This is no heady boom. Its simply that the inventory which was glutted post-recession, is finally starting to get mopped up. This was inconceivable in the years following the recession due to the glut.

I still get asked sometimes why it seems that everything is for sale. I find this interesting since I have to really work to find properties for some of the criteria lists I build for my clients.

Yes, I suppose everything is, in fact, for sale, at some price. However, finding what you want, finding that screaming ocean view with good access and amenities nearby, and all this in your budget, can sometimes be a bit daunting.

And then there is that wonderful amenity “simplicity”. I wonder if this could be put at the top of the list. Right up there with “ocean view”. I’m thinking that this one amenity is the primary mover of the current strong market we’re seeing here in The Zone.

Buy a Property With Seller Financing

It is a common question: “I’d like to buy a property in Costa Rica. What kind of financing is available?”

To be a foreigner in Costa Rica and look for a bank loan is like falling down the rabbit hole. The dizzying maze of requirements and documentation and “go visit that guy” and “you need to talk to the other department” and “you need these other documents” and so on, are stupefying. Possible yes, but not for the faint of heart. I’ve seen it done by foreigners, but only by seasoned veterans that have both lived here for some time, and also who have done considerable business here.

How seller financing works in Costa Rica.

Seller Financing is a great option for buying a property in Costa Rica.

Enter Seller Financing. This is the best option and it is gaining ground amongst sellers here in the Costa Rica real estate market. Side note: there are some options available for financing that don’t look to lending institutions in Costa Rica. You can use the equity you have in your homeland to get financing from a lender in your homeland. If you are interested in this option, let me know. I’ve got a couple of connections that you can talk with. These will typically have higher interest rates than what you are accustomed to.

For those who are looking to buy a property in Costa Rica and would like it financed, let’s talk about the seller of the property carrying some amount of the purchase price with terms that work for both buyer  and seller.

Seller Financing is a creative process which ideally is guided by the needs of both sides of the deal – buyer and seller. So, to describe a “typical” seller financed deal is a bit of a stretch, but I’ll stick my neck out here and put terms that can be, remotely, sort of, kinda, “typical” of such a transaction.

  • First payment: 40% of purchase price
  • Interest on balance: 8% (negotiable: 6% – 10% bracket)
  • Term: 2 years (in practice, this one is all over the map)
  • Payments: Interest only payments every 6 months
  • Balloon payment and interest payment at 1 year. 2nd balloon payment of the balance and last interest payment at 24 months
  • Securing documentation: a Costa Rica mortgage (hipoteca – ‘ee-poe-TEC-ah’ in Spanish)
  • Securing property: the property being purchased

Since I am a fan of the seller financed arrangement, (I’ve seen and been involved in a number of these) I always talk with my sellers to see if they are interested. The above scenario is presented as a reference-guide but is only one of the many possible options.

Down Payment: The example states a 40% down payment. I’ve seen the 40% to 50% down payment work. With this range of initial investment, the buyer has enough in the game that they are very reluctant to let it go due to some adversity in their life situation.

The seller is inclined to agree to this amount due to the stability that it offers to the deal. Also, depending on the situation of the seller, it is enough that he/she won’t mind so much if the deal defaults and they simply have to sell the property again.

The buyer is helped by this amount for the obvious reason that it requires much less cash to secure the property they have found and have fallen in love with. Buyer’s circumstances can be that they have an investment that will mature and pay-out during the term and so all they have to do is manage the interest only payments in the interim.

The seller may need some fixed amount that bears no resemblance to any “conventional” loan construct. I’ve seen deals such as a $125,000 property where the seller needed $100,000 for some reason and was simply not able to negotiate to a lower amount down. But since this amount solves his situation, he is flexible on the terms for the balance of $25,000.

The Term can be negotiated to see if there is a fit that satisfies the needs of both sides. This can be as short as say, 6 months, or up to 5 years. I’ve not seen any seller financed deals run longer than 5 years, but that’s just my experience.

However, most sellers are looking for a shorter term than 5 years. A 1 year term stands a good chance of working for the seller. 2 years? Less but still do-able. 5 years is at the outside in seller-carry scenarios.

The point is: negotiate it. Have clearly in mind what you as a buyer need and what you have to offer. It might end up being a simple fit, or you might have to compromise some to make it work. But you want to know that the final agreement works for you and that you’ll be able to get a good nights sleep with the terms decided upon. If not, no deal. Keep looking.

I know, this is easier said than done when you find the property you want. But if an enamored “need” for a property causes an emotion based outcome where you compromised out to the limit of what you can do, you may have a couple years of discomfort that can completely erase whatever heart-felt love for the property you had initially. Now the property reminds you of the stress and sleepless nights instead of the safe-haven from life’s anxieties that the property once represented to you. 

Payments: In the example, interest only payments are used. These obviously don’t pay down the principal at all but serve to buy the buyer time to arrange their affairs for the upcoming balloon payment. These work nicely and are easy to calculate.

An amortized deal is where both interest and principal are paid with each payment. I’ve not seen many of this type, but by searching “amortization calculator” on the web, these also are easy to calculate.

Balloon Payment: These are fairly self-explanatory. A big chunk, or all, of the balance due is paid.

Securing Documentation: I have always used a Costa Rican mortgage. My attorney is a strong proponent of this option, so it is what I use (no, the lawyer does not make more with a mortgage than with say, a trust).

His reasons are that, in the event of a default, the courts are now involved. There is no basis for dispute. The terms of the mortgage were breached and it now enters into a legal process that ensures the outcome. A trust is another option that should be considered but the detailed comparison of these two options is beyond the scope of this article. So for the moment, let’s go with the mortgage option.

Securing Property: the property itself. You now have 40% – 50% invested in the property and the seller is in a non-risk situation of either receiving the balance per the terms outlined in the contract, or getting the property back to re-sell at the same or perhaps even a higher price.

The buyer benefits from not needing to provide some other asset as collateral. Simple, right?

Closing Comments: To request a property purchase with seller financing you are reducing the negotiability of the price. In some cases it is an “either, or” situation. If you have the cash available, you can simply negotiate a price. Typical discounts on properties here in Costa Rica are loosely around 10%. With a seller financed deal, you will either pay the asking price or nearly so. You give up some of your negotiating strength with seller financing.

So the seller financed deal will cost you in that you’ll likely pay a little more for the property, plus whatever you pay in interest.

The benefits are obvious: you are able to purchase the property that you want. The paperwork is simple. The attorney for the deal will draft up the Sales & Purchase Agreement (SPA) and also the mortgage. In a non-financed deal, the buyer’s attorney does the SPA. However, when there is a mortgage involved, the seller may require that his or her attorney be used and the buyer will have his attorney review and approve the documents. Buyer pays the cost of the mortgage, usually around $1,000.

This is a rich topic that has many permutations. But guided by a knowledgable real estate agent and a good attorney, seller financing can facilitate the purchase of your property here in Costa Rica.