Guys In The Zone: Costa Rica Real Estate

A great example of how to go about buying a piece of land in Costa Rica

I thought that it might be interesting to catalogue the recent visit, well actually the current visit, of The Smiths. Their visit is very representative of what are perhaps the bulk of my presentations. From their upper budget limit of $200,000 for raw land, to their purpose for the purchase: they hope to relocate to Costa Rica in the coming years, a consideration of their experience will likely be a help to other who are looking to buy land in Costa Rica.

Using the Internet, Mr. Smith did the research on the Dominical and Uvita area real estate agencies and their listings. Mrs. Smith studied the geography of the area and what the various zones are called. They wrote to me asking for 3 references, which in fact isn’t so representative of what most prospective buyers do, but I think is a very smart idea.

To digress for a minute, all us real estate folks down here in Costa Rica are not licensed. There is no policed nor enforced procedure for buying land in Costa Rica. Consequently, (Read the rest of this entry.)

Down and Dirty:

• Pick your real estate agency
• Pick and Consult with your agent
• View properties
• Make an offer either in writing or verbally through your agent to the seller
• Negotiate the price and terms
• Get signed Offer To Purchase document to lawyer that outlines the details of the deal so that he/she can draft the Purchase and Sale agreement
• Deposit 10% with the accepted offer. The deposit is “non-refundable” with the exceptions of the contingencies mentioned in the offer. The deposit is held in escrow until closing.
• Due Diligence period
• Close

If you want to know specifically about any of the above details without reading through this entire 3 part article, please click on the bulleted point above to go directly to that information.
(Read the rest of this entry.)

Go and View Properties:

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 –
(Read the rest of this entry.)

Due Diligence

The term for due diligence is normally 3 weeks, and closing is usually in 4. Due diligence starts when the deposit is made, and the written offer has been signed by buyer and seller. This document will have the contingency points detailed out. Some properties have no contingency points, some have several, it depends on the property. This is one of the more important areas where you, the buyer, has to rely on the expertise of your broker.

Your broker may have an intimate understanding of the property. He/she may not due to the amount of inventory available in the area.It just isn’t possible to know each property that well. I have some properties that I know extremely well, perhaps having sold a number of lots in the development already, and so I can authoritatively speak to the specific contingencies that should be itemized on the Offer To Purchase (OTP) form. When I don’t have this familiarity with the property, it still works out since I know what the basic concerns are. Road, water, electric, soil stability, and knowing for sure that the buyer will be able to use the property as they wish.
(Read the rest of this entry.)

The absence of an MLS or Multiple Listing Service causes an interesting challenge for those that would like to sell a property in Costa Rica (I wonder how many articles I have started with those words). In the U.S. you simply list your property with your favorite real estate agency and voila! Your property is listed in a huge database of properties for your area that all of the real estate agencies have access to, and your property gets represented in the fullest way possible. You’ve got your listing agent that represents you, the buyer has his/her representation from their agent, and everybody’s happy. Not so in Costa Rica.

In Costa Rica when you tell your real estate agent about your listing, that is usually where it stays, within that agency. I have seen cases where agents don’t tell others in that very same agency about a hot listing. The reason for this is simple; they want the sale, and consequently, the whole commission. In Costa Rica real estate there is no “listing agent” and no “selling agent”. This difference seems to be really difficult for our North American clients and sellers to understand. Understanding the difference though, can make all the difference in successfully selling your property.

Setting the Standard
The standard for selling a property in Costa Rica is to get all of the real estate agencies to list and show your property. There are a number of ways to go about this. Perhaps the most common method is this: the property owner makes up a flyer that features a photo or photos of the property, along with the details of the property ie. size, distance from the main road, electrical service, water, any distinguishing features about the property such as creeks and waterfalls. The prevalence of wildlife is helpful as well. Describe the view and if its quiet or not. Is there financing? Is there a Home Owners Association (HOA)? Are there Covenants, Codes, & Restrictions (CC & Rs)? Oh, and the price as well.

Its not a bad idea to make a number of copies of this flyer and emplasticate them. It might be good to have 2 versions, one that has the seller’s contact information on it and one that doesn’t. The one that doesn’t will be more likely used in the office to present to property to prospective buyers.

The seller then visits all of the real estate offices, or the ones of their choice, and distributes these flyers. Then a regular visit, say on a monthly basis, is a good idea. This keeps the agents mindful of your property, and insures that all agents within the agency know about your property.

Most of the agencies will ask that you fill out a “Non-Exclusive Listing Agreement”. This document will give all the details of the listing, and will also state clearly the commission percentage so that there is no confusion at closing. 8% is the norm in Costa Rica’s southern zone for single family lots and houses. This can vary for farms and luxury properties.

OptionsYou can give an exclusive listing to your brokerage. This sets things up as though there were an MLS in Costa Rica. What this means is that they become the listing broker, and that if the sale takes place during the term of the exclusive contract, the brokerage will receive a percentage of the sale, or all of it if they sell it in-house. The concern with this is that the exposure that your property gets on the market might be limited since your agency might decide to not tell the other real estate agencies about it.

I like to mention the standard so that we can use it as a – well, as a standard by which we measure the effectiveness of the other options. The Standard option above sets the bar and really represents the level of market exposure that can be achieved by an enterprising land seller in Costa Rica. It is against this standard that we need to compare all other marketing of a given piece of property.

Why would a seller want to do an exclusive?
The benefits are that, since we don’t have a multiple listing service here in Costa Rica, it takes a lot of feet-on-the-ground effort to keep the agencies mindful of the listing. To do the printouts, the initial visit to the agencies, subsequent visits, perhaps on a monthly basis, requires more than many land owners have to offer. Having a single point of contact here that does all of this for you is attractive to some sellers. Also, it may be that the seller has built up a trusting relationship with an agency and so would like to deal exclusively with them, effectively insulating the seller from the other agencies.

Why would an agency want an exclusive listing?
One might wonder at this question, thinking that the answer is obvious, but really its not so. As a real estate agent here for a number of years I can honestly say that I’m not real quick to offer to represent a property on an exclusive basis. It’s a lot of work. If I get the listing in a non-exclusive, general market sort of way, and I think that the property is a good one, I can probably sell it quickly to a client in my database, and get the whole commission without having to do any of that extra work. So, to answer the question: “because it might make good business sense”.

I might be in that “trusted” position with a client, in which case there is a certain sense of responsibility to continue to represent my client. If their desire is for me to market their property on an exclusive basis, I’m on it.
It also might make good financial sense to do the exclusive. With the exclusive listing, the listing agency is guaranteed a percentage of the sale, no matter who makes the sale.

The Objective
The objective then of the listing agent will be to make up the difference between the standard, and just having the listing in one house. To repeat: listing your property with an agency doesn’t guarantee that other agencies will know about the listing. There is a gap that the listing agency should try and fill with extraordinary marketing services.

My next article will deal with the mechanics of how to do a successful exclusive listing.

How can one be sure that they are seeing all of the possibilities that fit their real estate criterion?

There is no MLS here in Costa Rica. Its too bad. The MLS system in the US came about due to the needs of the customer, not the vendor of real estate. It truly is a superior system. But, having said that, all is not lost. One just needs to understand the Costa Rica system a bit and then make the best of it.

All of us real estate brokers want to have all of the available properties we can in our inventory. It is every agency for themself. So, we spend a good bit of our time driving around in the mountains and along the coast, scouring the countryside getting those oh-so-valuable listings. There is, as of this writing, a good amount of inventory in our portfolios. However, it is the good stuff that is getting scarce. A real estate agent here knows when he’s got a good thing. It is akin to falling off a log to sell a good listing here.

So, how can the land buyer feel that they are seeing whats out there? One is to be thorough with your web search. There are several really good Costa Rica real estate websites out there. Get familiar with the sizes and prices, what influences the value, and so on. Then, pick your agent.

I think that this is one of the more important steps, if not the most important. You want someone that is concerned about getting you your property. This is Costa Rica Real Estate, unencumbered by licensing and any sort of a qualification process. So the onus is on the buyer to be able to discern what is, in fact, going on. Understanding the system helps.

Since there is no MLS, the seller of a property will likely want to list their property with all of the real estate agencies. This is one of the inconveniences of our non-MLS system. The sellers have to manually make sure that all agencies know about their property and are up to date with pricing and availability, not to mention things like lot lines, water, electric and road systems for each property.

In the event that a seller doesn’t want to do all that, they may opt to give an exclusive listing to an agency. This is usually because they have had a good experience with the office, or more likely, with someone in the office. This may affect things a bit though since the seller will likely still want to spend the normal 8% commission on the sale of their property. So, it is conceivable that the other real estate agencies will be dis-incented to show a property that some other agency has an exclusive on. If they show you a property where they might only get half of what they would get by showing you another one, they/we might be tainted.

I would like to think that I am above all that, and maybe I am. But I suspect that all of us real estate agents down here in Costa Rica would say that we are. One would hope that their primary concern is getting the client the property that is right for them, regardless of how the commission is split up.

Once again, we come back around to the buyer using discernment. Although, this really is what we do throughout most of our days here on good ole Planet Earth. Costa Rica real estate isn’t the only arena that we are on the watch for those who are truly interested in our well being so that we can do business with them, and conversely, watching to avoid those that don’t seem like our welfare is all that important to them.

So to answer the question, I think that the way to feel that you are getting to see the options that could potentially be right for you, is to ally yourself with a real estate professional that works in the area that you are interested in, and that demonstrates an interest in your success here.

Real estate in Costa Rica is an ongoing process. Once the sale is made, it is frequently followed by a huge life change, that of re-locating. It is nice to feel that you’ve got an ally in the process.

It is assumed that by the time you find this info that you have probably searched the internet for “Costa Rica real estate” or “buying land in Costa Rica” or “Dominical real estate” or some facsimile thereof. You have likely perused countless listings and considered the bountiful information on how to visit Costa Rica (airline tickets, car rentals, hotels, etc.) Just getting here, especially if it is for a family, requires some time-consuming planning. I got to thinking… since typical tourism travel to the tropics generally requires the same stuff, you know– shorts, light fabric shirts, sandals, sunglasses, a hat and some sunscreen, with these things you can pretty much get around the tropics in whatever part of the globe you’re going to. But if you are coming down to look at land, well that can be a twist that can leave one sandal-clad in the jungle with a rash up to your knees. So, here is a step by step for those whose next visit to Costa Rica is for the express purpose of shopping for real estate.

1. Make an appointment:

If you are looking for land anywhere south of Quepos (Matapalo, Hatillo, Dominical, Platanillo, Uvita, Ojochal, etc…) you will find when you get here that getting a realtor’s attention can be a bit tricky. There is a real estate boom going on, and its not so much that the real estate agents are getting snooty… well maybe it is, but I know that in the case of my office, there have been times when we are hard-pressed to have the office manned, womaned, or peopled. If you make an appointment, you will get put into the calendar and get the undivided attention of myself or one of my associates. (Please click here to go to our contact form. There you can send some of the preliminary information that helps us to help you get your property.)

2. Bring the right stuff:

Footwear is a big concern. A number of folks have come in wearing the Keen brand sandal-shoe hypbrid. These are cool, and everyone goes on about them. I got myself a pair and they are cool insofar as they are different. I get asked about them quite abit, and there seems to be a brother/sister-hood among those that wear them. But for stomping about in the jungle… not so good. Entirely closed in shoes/boots are better.

Bring some hiking boots. I recently discovered that using rather thick hiking socks, made of some kinda synthetic material work great. I was surprised to discover that they were actually cooler than my here-to-for exclusive use of cotton socks. Obviously if you are coming down to view exisiting houses, or say… Canto Del Mar condos, you will be fine in flip flops, which by the way, are my footwear of choice when I am not in the jungle. For rainy season, I always wear rubber boots in the jungle. During dry season hiking boots are fine with sneakers a distant second.

A good hat. Sun is another big consieration here. I like the broad rimmed variety since I get a red neck with a ball cap. There is a lot of sun here, even in the shade. A hat can make or break a day’s outing.

Sun screen if you’re not a hat wearer… or even if you are.

A wattle ‘a botter. A carrying thingy that goes over your shoulder, or around your waist for a liter of water is super-deluxe. At the very least, remember the bottle as we head out, and be sure and remind me to do the same.

Bug repellant. I don’t use it myself and I find that I get very few bug bites. But, there does seem to be about a 3 week period when you first get here when your legs are going to get nibbled on up to about the knee. I’m not sure what happens at 3 weeks, either we become distasteful to the little beggars, or they continue to nibble and the body simply quits taking notice. Since the land buying visits don’t normally exceed 3 weeks, it is probably a good idea to bring some kind of defense against these guys. For those that are moving down, I have a theory. It seems to me that among my friends here (yes, I do have some friends here :o) that use bug repellant, they seem to continue to be “bugged”. Since I was bugged initially, and now am not, I wonder if maybe letting it all run its course isn’t the path of profound wisdom. This is a bit of an ongoing debate here among some of my collegues.

Coming next: Strategize!

Purchasing Property in Costa Rica: The decision to purchase real estate in a foreign country can at first be a daunting proposition. However, it is possible to safely buy property in Costa Rica with the assistance of a reputable Realtor and attorney. Your Realtor should be able to help you to locate property suitable to your needs, educate you as to property values and other considerations in your chosen area, and assist you with negotiating a fair price. You should also use an attorney (Certified Public Notary) with a good reputation who can handle the financial aspects of the transaction and ensure that you will have legal title to your property.

Title Insurance: Is available in Costa Rica through well-known international companies such as First American Title Insurance, Stewart Title and Fidelity Life.

Ownership: It is possible to purchase Real Estate through direct transfer where one or more individuals acquire property in their personal name. Purchasing properties through a new or existing corporation is also very common in Costa Rica. The process of setting up a corporation is not complicated or expensive, but requires the expertise of your attorney to follow the legal protocols involved.

The Public Registry of Properties: All property in Costa Rica should be registered in the Public Registry of Properties, whether the property is fee simple or concession. By means of the Public Registry of Properties your attorney will be able to confirm that the seller possesses ownership of the property, and to discern if there are any restrictions on the property before the deal goes through. Avoiding the purchase of unregistered property is strongly recommended.

Folio Real Numbers and Catastrado: Each property registered in the Public Registry of Properties has a Folio Real Number, which is the unique number assigned to each property to identify it. The number is comprised of three parts, the first number indicates the province, the second group of six numbers is the number of the property itself, and the last group indicates how many owners the property has. All properties must have this number in order for clear title to be obtained. Each registered property also has a survey plan, or cadastral. In order to transfer, mortgage, or acquire a property, the survey plan must be recorded at the Public Registry of Properties.

Property taxes: In Costa Rica are very low, only ¼ of 1% of the registered property value. Certain standard closing costs are required in Costa Rica to transfer the title of a property from the seller to the buyer, and are usually split between the two. Closing Costs: Include: (1) Real Estate Transfer Tax, which is 1.5% of the registered value of the property on the deed; (2) Documentary Stamps, which total approximately 1.25% of the registered value; (3) The Notary Fee, which is 1.5% of the first million Colones and 1.25 % on the balance of the property sales price. This means on the purchase of a $100,000 property, closing costs would be approximately $4.250 and property taxes $250 per year or lower.

Financing: If you need to borrow funds, it is generally far simpler and interest rates are usually lower in your home country. However, if your credit rating is impeccable, financing in Costa Rica may be available. Some banks, such as the Bank of Nova Scotia, offer financing to foreigners. Usually the bank will finance somewhere between 40 and 50% of the purchase. Current rates could be easily obtained from local banks. Certain projects and/or private owners may also offer some kind of financing arrangement. Your realtor should be able to tell you which projects and owners offer financing.

Dominical Dot Biz Real Estate Services provides a team of real estate professionals educated to answer your questions about purchasing property, and are dedicated too helping you through the steps required to safely purchase your dream property in beautiful Costa Rica.

The following was a quote from an article on an AOL page that is no longer active.
Living in Costa Rica Web page~ http://members.aol.comHomesCRica/living.html: “Do I need a realtor? Some of the nightmares that have happened, (and the government is taking steps to correct), are disputes over property titles and squatters. A previous owner has up to 10 years to make a claim on their property, if it had not been sold and recorded properly. (This is where a real estate company with a good team of research lawyers who know all of the peculiarities of local title searches, can save this headache from happening). Squatters are basically homeless people, who have to right to move onto someone’s land, build shacks, and can legally remain there IF they can prove that they have been in that place for over 3 months. This is why landowners in remote locations will hire caretakers to live on the property, or lawyers to periodically check, to keep squatters away while the owners are absent.
Other reasons for using a real estate professional include the advantage of having a third party to keep the transaction honest, (just in case one of the parties isn’t). If you give the deposit or ‘earnest money’ to the seller or seller’s attorney, it is possible that you may not get any of that money back, should the deal fall through for any reason. Zoning restrictions are another thing that a good realtor will alert you about. Because of the two-tier tax system, your realtor or lawyer can advise you how you can legally save money on fees and taxes during the closing process. A seller may not want to work with a realtor if they are trying to take advantage of a buyer, - not wanting to risk having a conscientious realtor ‘blow the whistle.’ “