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.

Is the Property Survey Accurate?

I’ve encountered an interesting and potentially troublesome snag in our profession here. It has to do with the accuracy of the survey (plano in the local vernacular), or more accurately, the real estate agent’s knowledge of said plano.

When we (sellers of real estate) take a listing from a seller, we review the property with the seller. She shows us the property and we review the plano. We ask where the boundary lines to the property are and the seller will generally indicate the line in a diverse number of ways. Sometimes there are convenient line definitions: a road, a creek, a natural drainage ditch, ridge-line etc… But frequently the line is “over there”, stated with a wave of the hand, and gesturing towards a mass of overgrown jungle.

When a prospective buyer enters into contract with a seller, there is typically a 1 month term of due-diligence. It is during this time that the buyer’s agent and attorney will oversee any concerns about the property. These “concerns” are to make sure that the property has legal water, electric, access and, that the seller has the right to sell the property, that the property is indeed what was represented to the buyer AND, that the survey is accurate to within 5% of the size represented to the buyer.

It is this latter point this article addresses. In the due-diligence period, it is recommended that the buyer, at their expense and arranged by the agent, hire a topographer to re-measure the property. This is called “re-planteo” here in Costa Rica.

Some property owners maintain their property lines and so they are easily found. This is the exception and not the rule. When the original survey work is done, most topographers will place steel or cement posts at critical points along the boundary line that correspond to points indicated on the plano.

As stated, maintained property lines are not common. These lines frequently have become inaccessible due to jungle encroachment and the posts, if they are still there, are covered by vines, moss and lord-knows what manner of life, resulting in an appearance very much like their surrounding environs. In a word, they become invisible or certainly, difficult to locate.

Over the years, I have worked primarily in the mountains above Uvita. I have been shown the properties there by various sellers and followed procedure regarding where the property lines are/were. Again, this is a matter of asking the seller, and the seller indicating in one of the aforementioned manners where the lines are.

Bear with me, we are now getting to the “deficiency” mentioned.

I have a deal in process, actually 2 deals in process. These 2 properties sandwich a 3rd property where there is house and pool construction in progress. I have been involved in the sale of all 3 properties. Both deals are in their due-diligence period. In the re-planteo (topographer re-measuring the lines) it was discovered that the upper line of the selling property went through the middle of the pool of the middle (under construction) property. As chance would have it,

Costa Rica survey map inconsistency.

My conception of the 3 properties and their overlap.

the pool is in construction, being made with cinder block and lots of digging. That property owner is committed to it being there both in monetary investment as well as overall quality of the property. The error of where I had represented the line, years ago, and where it is being suggested by the topographer’s re-planteo to actually be, could cost the middle property owners a lot. In fact, it would seriously de-value his property and result in having to re-design things at a tremendous expense. The area that he would lose is the view area and also, is where his pool is.

How did this happen? I had represented to the various property owners, as well as the current buyer, where the lines were. In this case, the line was at a ridge. In my presentation of the properties I indicated the ridge line and stated “that is the property line”. This was based on the loose procedure that is used when we (us realtors and our sellers) discuss where the property lines are. Now that the topographer is doing the legal defining of the lines, we find out that it is not the ridge line but instead, is several meters beyond the ridge line.

The solution to this particular problem is currently in progress. We are getting a second opinion and may find that the topographer was simply wrong. The solution to the deficiency in our industry is another story.

When us real estate agents take a listing, we are not in the practice of hiring a topographer to verify where the lines are. This procedure runs in the hundreds of dollars per property. This would make working in the profession of real estate in Costa Rica cost prohibitive in many cases.

At first I thought that there had been an inaccuracy of the plano. One such glitch and the entire jug-saw puzzle of neighboring properties gets thrown into chaos. I imagined having to go around to the various property owners and explain how they will need to do a re-measuring of their property to see find how it effects them.

Then, when I realized that the plano was accurate and that the problem was in the presentation of the property – by me – based on what I was told by the seller(s), I started to think about the procedure we use in taking listings and found the deficiency. We simply don’t verify with a topographer that what the seller tells us is accurate.

So, what do we do? I’ve decided for my part that when I take a listing, I’m not going to go through the expense of hiring a topographer, but instead, am going to ask the seller to clearly define the property lines. Find and uncover the posts that were used. If they aren’t there, get them put there, and then keep the lines maintained.

This isn’t the end-all solution. They seller may be mistaken or there could be an inaccuracy in the existing plano. But it will clearly establish that all representations of the property have been done in good faith.