Costa Rica Real Estate

“Four percent of the sale price on top of your commission?!” exclaimed our client, a long time resident in The Zone. (In keeping with an old Guys’ tradition, I’ll refer to him as Mr. Zellbren throughout this article.) Ben and I first explained that we are currently dealing with a severely down market (approximately 50% off the peak value of three years ago) and an excellent time to wait for the market to rebound. Mr. Zellbren wasn’t interested in waiting, so we continued to explain the standard closing costs of a Costa Rica real estate deal. Some of the data he was familiar with; some of the finer points had to be clarified.

Traditional Closing Costs

Closing costs, when you add up the transfer tax, stamps, and legal fees, usually equate to approximately 4% of the sale price. Mr. Zellbren told us he would accept a $550,000 offer for his house equaling $22,000 in closing costs. In 99% of the deals we are part of, Buyers and Sellers split closing costs 50-50. It’s what we do here in Costa Rica. Additional costs—re-surveys, title insurance, new corporations—are typically paid by the Buyer.

Interestingly, there are a variety of stamps required to transfer a property in Costa Rica. They are– the Legal Bar Association Stamp (Timbre del Colegio de Abogados), the Municipal Stamp (Timbre Municipal), the Fiscal Stamp (Especie Fiscal), the National Archives Stamp (Timbe del Archivo Nacional) and the Agriculture Stamp (Timbre Agrario). Like everything else, your lawyer will take care of the licking and sticking of these stamps, which equate to roughly .05% of the sale price.

Legal fees, also known as notary fees here in Costa Rica, are calculated at 1.5% of the sale price. This is what is paid to the lawyer/notary for setting up the Sales and Purchase Agreement, as well as, researching and filing all of the necessary documents in the sale. These standard legal fees do not include any additional legal work (e.g., a new corporations, establishing an easement, etc.). One last point regarding lawyers that I would like to add is… you often get what you pay for. Continue Reading

A look at 2011 Costa Rica real estate trends as perceived and shared by Ben Vaughn and Rod Martin, the Guys In The Zone.

Guys In The Zone Talk Show – Episode 11 by GuysInTheZone

“Few people actually stumble into wealth.”
- Smith Barney (although I couldn’t determine if it was Mr. Smith or Mr. Barney?)

In Part One of this article, I outlined how million dollar houses fit into the Costa Rica real estate landscape, specifically in the southern Pacific zone (The Zone).  There are a few obvious reasons to buy a luxury home in Costa Rica—

*  It’s A Buyer’s Market (Prices are down approx. 50% from the peak in 2008.)
*  Desirable Area (International Living Magazine rated The Zone as, “one of the top three real estate destinations in 2010.”)
*  Stable Prices For Construction Materials And Labor

The three-year Costa Rica real estate trend has reflected a significant drop in value, including property in the luxury home category.  Although there are some very nice million dollar homes in the area, this young market enables another popular strategy— Buy-And-Build.

Buy and Build

The majority of buyers who come down to the greater Dominical area with a plan to purchase a house, often end up purchasing raw land instead.  The reason is the area has a relatively small inventory of quality homes with floor plans and finishes that appeal to most North American and European home buyers.  So, they end up buy raw land or a lot in an established development, design their home with the help of a Costa Rican architect, select a builder, and then start the building process. Continue Reading

Is the price commiserate with the worth?

“I need to sell my property.  What should I price it at?” is the common question heard in our real estate office in Uvita, Costa Rica.

“Whatever someone is willing to pay” is the universal response that drives the free market evaluation system the world over. However, is a price that is determined by this method a clear indicator of a property’s worth in Costa Rica?

The obvious answer is “of course”. However, in this uncertain world we live in, even this un-arguable standard of evaluation is sometimes brought into question and results in what can be described as quirky or illogical scenarios. Continue Reading

While browsing the storefronts of Quepos the other day, I saw this Hurricane History Map in an office window.  What caught my attention was how Costa Rica was completely free of any direct hurricane/tropical storm trajectories.  People ask us if we get hit by hurricanes, and now it’s nice to have a chart showing just how ideally located Costa Rica is, especially on the Pacific side.  Clearly, the vast majority of tropical storms and hurricanes are born in the oceans to the west and especially the east of Costa Rica, and then almost always track north.  In recent years, only Hurricane Cesar and Hurricane Mitch (1996 and 1998, respectively) traveled all the way across the Central America landmass.

Even though Costa Rica is Hurricane-free Zone, it still feels the effects of heavy rainfall from time to time.

During the hurricane season, June 1^st – Nov. 30^th, Costa Rica will occasionally feel the effects of these major hydro-meteorological events.  Tropical storms are more common than hurricanes in Costa Rica, and it is important to note that heavy rain isn’t the same as heavy rain AND 100+ mph winds!

According to this NASA webpage, “Tropical cyclones are like giant engines that use warm, moist air as fuel. That is why they form only over warm ocean waters near the equator.” The small towns in our area (e.g., Dominical, Uvita and Ojochal) are located at approximately nine degrees north of the equator.  The benefit of being at this latitude, and on the Pacific side of Costa Rica, is the wind is significantly lighter than along the Caribbean storm corridor where hurricane winds can rip off your roof.  I suppose that’s why the famous Portuguese explorer Ferdinand Magellan called the Pacific Ocean, Tepre Pacificum or “Peaceful Sea”.

What Does This Mean For Pacific Zone Residents and Investors? Continue Reading

Seller Financing Open The Door in Costa Rica

The Downturn… (cue ominous music)

It would be easy to label the decline of the Costa Rica real estate market (since the peak in 2007) in a negative light.  In truth, there is no such thing as “negative light” only the opportunity for change, and if our market has seen anything over the past three years, it is change.  The shift from bank loans to seller financing is one of the primary changes that has (pardon the pun) opened the door to prospective home buyers, as well as, land and commercial buyers.

Before defining the effects, basic models, and legal structure of seller financing, let me back up just a bit to clarify why we now find it present in about half of the Costa Rica real estate deals we facilitate.  Like most lending institutions around the world, Costa Rican banks are better described as “institutional holders”.  Banks are not lending for a few reasons— falling real property values, the recession, and they are not lending to each other (e.g., no credit to leverage).  In Costa Rica, the debt-to-income ratio required to obtain a loan is as ridiculous as the double-digit interest rates being charged (often twice the rates in the United States).  The banks’ parsimonious response has opened the door to seller financing, and Costa Rican property owners have embraced the new paradigm.

Sellers Get Creative

“What do I need to do to sell my property?”  We received this common question too many times to count over the past few years.  Our answer typically included these answers— Continue Reading

Half of my family is from Canada, eh.  My mother grew up in Newfoundland until the age of 13 when my grandfather found work in California.  The extended family that stayed behind, some later moving to Ottawa, would frequently visit us in the San Francisco Bay Area, especially during the cold, winter months.

A few years ago, when I moved down to Costa Rica full time, I realized there are a lot of Canadians visiting (102,471 in 2009*) and living the area.  One of the main reason Canadians (virtually all nationalities for that matter) visit, buy land, and in some cases, relocate to Costa Rica is the weather.  As one client put it, “Shoveling snow sucks.”  I have only experienced it a couple of times in Lake Tahoe, California, and I’d have to agree.

Canadians in Costa Rica

Shorts, No Shoes
The Southern Pacific Zone (The Zone) is the tropics.  Those living near the beach are rarely (if ever) cold here, and most people walk around in shorts 365 days out of the year.  For those who “melt in the heat”, The Zone’s unique geography offers many cooler locations up in the mountains, most offering spectacular views, waterfalls, and close proximity to the beaches and/or San Isidro, one of the fastest growing cities in Central America.  It rains 6 months out of the year, but even in September most mornings begin with blue skies and sunshine.

Active Adult Communities
The landscape and its wildlife are spectacular.  In fact, I’ve seen it written that the Corcovado National Park on the Osa Peninsula is “home to more plant & animal species than all of North America combined.”  Add in the many outdoor activities available in the area— world class sport fishing, whale watching, bird watching, hiking, golf, tennis, and surfing to name a few — and retirement in Costa Rica is actually when many expat residents really start living.  In fact, I just left two clients who were headed to a waterfall, then to the Whale’s Tail in Uvita for a low-tide beach walk and snorkeling session.

Another reason Canadians love Costa Rica is the cultural adventure.  It starts with the ticos.  On the whole, the polite locals are family and community-focused, and even the toughest-looking hombre will break into a smile if you smile.  Yes, there are a few cultural nuances to adapt to—“yes” doesn’t always mean “yes”, “tico time” means being late, strange driving habits— but ultimately these are all opportunities to take a deep breath and grow a little.  The Zone has a safe, laid back feel to it… add a hammock and a good book into the mix, and it is relaxation-defined.

A “Lot” For A Little
Foreign investors continue to visit and invest in The Zone.  Add in the fact that annual property tax in Costa Rica is .25% and there is no Capital Gains Tax, and the investment picture is even more appealing.  Canadian citizens who claim non-resident status and have residency in Costa Rica are not double taxed by the Canadian government on their Costa Rica income.  If you’ve always wanted to make Costa Rica your home, please consult your tax attorney for more details.  But, in summary, to be a non-resident Canadian you must—

1. live in Canada for less than 183 days in the tax year
2. not have any residential ties (e.g., cars, houses, a spouse or dependents) in Canada.

We see a lot of people visiting, buying and relocating to The Zone.  There is so much room for growth here, success only requires imagination, a little research, and some good connections.

Beautiful weather, abundant wildlife, friendly people, and good investment opportunities… no wonder so many Canadians are buying real estate in the Southern Pacific Zone of Costa Rica!

*http://www.visitcostarica.com/ict/paginas/modEst/estadisticas.asp?idIdioma=1

Answer: 98%.  The Question… what percentage of people first visit Costa Rica as tourists before buying their own piece of paradise?

Uvita's Whale's Tail formation taken from Escaleras.

Costa Rica is attractive as a vacation spot, for retirement and investment, especially in this “buyer’s market.”  In particular, the Southern Pacific Zone (and I’m talking about the area south from Quepos to Palmar) has a number a factors that set it apart from the rest of Costa Rica—the mountains-to-the-sea geography, sunset ocean views, the verdant jungles, and the protected habitats.  In addition, up and down this coastal region, resident Ticos and foreigners from all parts of the world enjoy a “small town” community feel.

For those who haven’t been down to The Zone (as we like to call it), there are small differences between the small towns in this area–

• DOMINICAL–  Many of the visitors who choose Dominical as a home base are surfers or other people who want to be within walking distance to the beach.
• UVITA–  Those who choose Uvita have either already explored Dominical or want to be close to the famous Whale’s Tail and boat launch for whale and dolphin tours, snorkeling and scuba diving adventures.  Simply put, the magical nature of these activities brings people back, year after year, in increasing numbers.
• OJOCHAL–  Located 15 minutes south of Uvita, Ojochal is one of the more established expat communities.  Originally, the coastal road only came as far north as Ojochal, hence the pre-Costanera wave of development starting in the late 90′s.  It is known as the multi-cultural hub of The Zone and home to an amazing array of culinary options.

The Zone has received a flood of publicity over the past four to five years.  Heralded as one of the world’s eco-tourism hot spots, most tourists come to our area excited by the likelihood of seeing exotic animals up close and personal.  In fact, groups of monkeys and toucans make daily visits to our property and most of the eco-hotels in the region.

Boom Markets

Another reason for the area’s popularity, one we have written about extensively, is access — the completed Coastal Highway, the improved road from San Isidro, and the proposed International Airport in the Palmar/Sierpe area 40 minutes south of Uvita.  According to the Instituto Costarricense de Turismo, tourism is up 9.6 percent for the first half of this year compared with 2009.[1] Perhaps the stimulus package in the U.S. and Europe is working?  (That was a joke.)

We only need to look at the effect of the new international airport in the Guanacaste region—131,295 tourist arrivals in the first half of 2010[2]— to understand why tourists, retirees and investors flocked there.  Thanks to the ardent publicity of television, print, and web advertising (e.g., International Living Magazine), there was a tourism and real estate boom in the first part of this decade.  The first part of 2010 is no different, as activity is up in this buyer’s market.

The Painful 2%

As for the two percent of property buyers left out of the original answer (in fact, they are the group who sparked this article), there are actually foreign investors who buy property sight-unseen.  Just in case you are not familiar with the term, it means buying land without physically seeing what you are buying.  This often happens when prospective buyers attend marketing seminars that pitch only one or two specific developments in an area.  The simple reason for this is… these marketing specialists are often The Developer!   They lure prospective investors to Costa Rica with attractive incentives like “fly and buy” programs, where discounts are applied to immediate land purchases.

There are potential problems with following this developer’s path to your future paradise.  Here’s a common scenario; you finally arrive at the small, regional airport in Costa Rica.  You meet your bilingual feet-on-the-ground sales agent/tour guide/driver.  He explains you have a full and exciting week ahead—dinners, outdoor activities, and multiple tours of the developments— so full and exciting that you never really have time to look around and get an objective view on land values and investment opportunities.

BEWARE… their bottom line is to sell you property in their developments.  I can’t tell you how many “seminar buyers” (most of whom are from Canada?) come to us after the fact and are shocked at the real market value of their land… and this was when the market was still strong.

Ben in the field with a client.

Pure Brokering

There is a simple way to avoid this investment pitfall.  Most of the real estate agencies in the area offer what we “Guys” like to call: pure brokering.  I use the word “pure” to indicate what Ben & I like to do.  I guess you could say, it’s the Guys In The Zone style.  First and foremost on our agenda is: “find you the most ideal property that fits your objectives” – pure brokering.

People ask us daily how the market is doing, and if you’ve been tuning into our Talk Shows for the past couple of years you know the market here has reflected the global market’s trend downward.  Markets go up and down… that’s just a fact of life wherever you are.  Ask any of the real estate companies in the area, activity is up… and this is typically our slow season.  It feels like we have hit the bottom, and this high season (Dec-Feb) is expected to live up to its name.

There are a variety of factors that make The Zone an attractive place to vacation, invest, and eventually retire.  And let me tell you, the only thing better than watching a flock of toucans hopping in the trees… is when you are watching a flock of toucans hopping the trees on your own property.

[2] http://www2.prensalibre.cr/pl/la_economia/28972-ingreso-de-turistas-aumento-un-96-en-primer-semestre-del-ano.html

Talk Show – Episode 7

Talk Show – Episode 7

Pura vida, compadres! With a focus on Costa Rica real estate, Episode 7 features our impressions on topics like–

The Rainy Season
Property Prices
Seller Financing
The NEW Forum

Thanks for watching and following us on Dailymotion, Facebook, Twitter, and our websites– www.GuysInTheZone.com, www.hotcostaricarealestate.com, www.Dominical.biz, and www.Uvita.biz.

Water is a necessity.

If you ask the World Bank or one of the mega-water corporations (e.g., Coke, Nestle, Vivendi), fresh drinking water is a commodity.  If you ask virtually everyone else in the world (including the United Nations), fresh drinking water is a basic human right.  Whether it is the encroachment of privatization or Nicaragua’s plan to divert the San Juan River[1], water in Costa Rica is an increasingly lively topic.

One of the most popular questions for potential property owners is, “What is the water situation for this property?” Most of these new investors come from North America and Europe, areas that have hundreds of years of infrastructure development.  However, this southern Pacific region of Costa Rica is still early in the cycle of development.  We continue to see rapid growth in communications (cell phones and high speed internet), power (high tension power lines), and roads (the newly paved Costanera between Quepos and Dominical).  That being said, cell phones are a luxury, but water… is a necessity.

Property In A Development

Most quality developments have a water system that has been installed by the developer.  The most common sources for these systems are high flowing springs, and in some cases surface water (e.g., creeks and rivers).  Some developments, like Osa Estates in Uvita, even have back-up systems and extensive water storage capabilities.  The interesting thing is very few developments actually have a concession (permission to extract water from the ground).  The good news is the majority of them are “in process”.  Either way, the developer usually provides the property owner a prevista (water right document) which guarantees use of water into the future (assuming the property owner is in compliance with established CC&Rs and other laws).  Proof of a water document, like a prevista, is also required by the local Municipality before they will approve any construction project on a property. Continue Reading