Guys In The Zone: Costa Rica Real Estate

June 16, 2007

HOA? CC & Rs ? Developments? I thought this was Costa Rica!

Filed under: Info & How To's — Ben @ 7:11 am

When visiting a new country, its such a treat to be able to speak the language and interact with the locals. Now add to this, the ability to “speak the language of the particular business venture that you wish to engage in whilst in that country.

There are some common use terms here in Costa Rica in the real estate business that don’t really jive well with the exact same terms in the States. Terms such as Home Owners Association (HOA) or Development, or CC & Rs. We throw these terms around freely and I’ve come to notice that there is either a bewildered look on the face of my client, or worse, they aren’t bewildered at all but are thinking that we are talking about something entirely different than what I had intended.

For instance, a “Home Owners Association” is something that a lot of my clients are trying to get away from by moving to Costa Rica. So after having a couple of buyers run screaming naked off into the jungle at my first mention of the dread “Home Owners Association” for the particular property that they were considering, I realized that this term needed to be clearly defined early on in the presentation.

We are in the business of real estate here, and so we use terms familiar to the industry. HOA, CC & Rs, Development, etc… These terms really serve as nothing more than identifiers here of arrangements that remotely resemble their US counterparts.

• Development applies to a large parcel of land that a Developer has purchased with a view to segregating, or cutting up into smaller peices. These peices can be for commercial use or single family homes, small developments, or condominiums. So, to the North American mind, when the word “Development” is used, instead of thinking about row upon row of cookie cutter houses, think instead of what it frequently means in Costa Rica. Large multi-acre lots, with jungle all around, and buffers between neighbors. A closed water system that services just the homes within the development. Many of our developers provide certified flow ratings so that you can be assured of uninterrupted water year ’round. The developer will also provide the amount of water storage necessary to accommodate the normal demands of life for the development.
• Codes Covenants & Restrictions (CC & Rs) – are the “rules” of the HOA. I know, you’re thinking: “huh? I thought this was the land of no rules” Right you are. Nearly all the surprises with respect to what you can do with your property once you own it, are pleasant ones here in Costa Rica. There are very few, if any, zoning restrictions in many of the developments here. But, believe me, you want CC & Rs in your development. The restrictions are for things like, not allowing a nude, mud wrestling, karaoke, pig farm to be put in next door. Thats a nice “rule” right? There are none of those “you have to paint your house this color” or “your hedge can’t grow over this height” etc… The CC & Rs that I have read are, for the most part, life enhancements to the residents that are protected by them. Of course, you want to read over the CC & Rs prior to purchasing (obviously). It can happen that you are buying to put in a Bed & Breakfast (B & B) but the CC & Rs read that you can only rent out your entire house and not just a room in it. Some rather typical rules of Costa Rican CC & Rs read that, in a given development, certain lots within a development can be used for commercial purposes, or can have several residential structures on them. The norm for a lot in a development is that there can be a main house, guest house, and a pool. I’ve never seen the ability to rent out either structure in its entirety, not allowed. Anyway, here in Costa Rica (at least in our neck of the woods down here in the southern zone), the CC & Rs are something that the land owner wants. They are not intrusive and they protect the quality of life for the residents therein.
• Homeowners Association (HOA) is the group of home owners of a given development. The members of an HOA around these parts generally have 2 things on their minds: road and water. Generally, the access to a development is what we here call a “public road”, which to a North American would mean a road maintained my the local municipality. HA! not so in Costa Rica. The public roads in Costa Rica that go back into the jungle are maintained by the people that live on and/or use the road for some purpose. The entrance to the development will likely run from the “public road” into the development, servicing the various lots within the development. These internal roads can be easements (servidumbre en Spanish) or simply private roads. So what the term “public” means, even though it seems that what it would mean would be that the government be in charge of maintaining the road, it isn’t so. It is maintained privately by those that use it. So, there is no difference to the homeowners with respect to the maintenance of a public road, an easement or private road, they all cost money to maintain. Keep in mind that we are here talking about roads that have turned off of the country’s main highway system, or town roads. The government does take care of those… well, for the most part… well, sort of. Anyway, the homeowners association organizes the funding and executing of road maintenance for the development. If the public road that is used to access the development is used by other homeowners further up the road, that are not part of the development, there will likely be a “road committee”. This is strictly for the maintenance of the public road and isn’t part of the HOA.

So now all you need to do is learn Spanish and you’ll speak the two primary languages of Costa Rica’s Southern Zone, Spanish and Real Estate.

May 9, 2007

Discovering Costa Rica’s Pacific Southern Zone

Filed under: Projections, State of the Market — Ben @ 12:13 pm

Investing in real estate in Costa Rica is not a new concept. Its been going on for years. In the more recent years however, it has taken on a voracious scope. However, this has been primarily up in the Northwest in the Guanacaste area. Playa Coco, Conchal, Playa Flamingo, Papagayo and so on.

Dominical entered the scene as a bit of a johny-come-lately, but it’s a funny thing, this is not due to being less desirable. In fact, what we hear down here in Costa Rica’s southern zone is that “we have finally found Costa Rica”, after having looked up in the Guanacaste area and around the Caribbean.

So why is the Dominical area and the southern zone so late to be discovered? There are a number of factors that all make some pretty good sense, one being access. Getting to the southern zone was a bit dicey in the past. For Guanacaste one could simply fly into the International airport in Liberia and short-drive it over to the coast. Whereas for the southern zone one had to fly into San Jose and then long-drive it (4+ hours) to Dominical, on rather unsavory roads. Although for some, the access was the reason they chose the Dominical area.

Also, there is the question of conveniences. We’ve got ‘em now, but in the very recent past, we didn’t. For instance, the highway was paved just in the last 5 years. What is now a 15 minute drive from Dominical down to Uvita, used to be an hour, and you weren’t really ever sure when you set out if you’d be able to make it, what with river crossings and all. Go to Ojochal? No gracias, that would put you out in the middle of nowhere on a car-abusing road with no services anywhere. Electricity was available in some spots, and there was a public telephone in Dominical, but you might get stuck behind a young Tica gal talking with her heart’s desire and so you might find the wait prohibitive.

So, for those that came into the area back when it was like that, and that for some reason decided to buy a large tract of land, and who then went off to make boatloads of moolah when the place got discovered, my hat is off to them. They invested a buck in what could only be deemed an extremely high risk venture, and they got $120 back for that buck.

This was all going on down in the Dominical area on raw land while hotels were already being built up in Guanacaste and as nearby as Jaco. There has been this gaping chasm between Quepos and Dominical that seems to have stopped the big development efforts right up there in the Quepos / Manuel Antonio area – that chasm being the bumpy road. This bumpy road is, as we type/read being improved and prepped for paving.

The new-ish highway that runs from Dominical down to Palmar is reputed to be one of the best in the country, and I ‘spect that’s true. You can almost use cruise control on the thing. If this is the quality of road that we get with the Quepos / Dominical link, we will be a mere 25 minutes from Manuel Antonio, which is reputed to be the number one tourism destination in Costa Rica. This will undoubtedly make the southern zone much more accessible for yet more investors to “discover” Costa Rica for themselves.

And then, of course, there is the much touted International Airport slated for construction in Palmar Sur. This means that travelers will be able to fly direct from say, Los Angeles to Costa Rica’s southern zone, no muss no fuss. The question of access is being addressed.

I think that with those two things, plus the “Third Thing” that I wrote about some time ago, we are in for a bit of a wild ride in our world of Costa Rica real estate here in the southern zone. For those of us that work here and support our families, the money is good, although, not at all like those that were here buying 10 years ago. We all live and work in a world that is probably a lot like what one experiences in Sacramento, or Des Moines, or Denver. We get up and go to work, hoping to make enough to live how we like. Of course, it looks quite a bit different here than in those places, but everywhere has its virtues and negatives.

There has been big money made here, word is out, numerous indicators suggest that the future is bright for the Costa Rica’s southern zone, what should we do? Should we jump into the fray? Should we come down to Costa Rica and get a piece of land and then subdivide it? How do we go about getting our piece? What about global warming? What about the fact that Guanacaste is lacking the necessary water to make life there comfortable? What about all this development in this land that was one time “third world” and that is now becoming the sweetheart of the world’s vacationers and consequently, the world’s tourism merchants? There is so much at play here.

So if speculation is your game, you might want to read up a bit on this new frontier in Costa Rica Real Estates new frontier – the southern zone. Check out “The State of the Market” and “The Third Thing”

April 14, 2007

Struggles of Conscience II

Filed under: Ethics — Ben @ 11:38 am

This is part 2 of the Struggles of Conscience series. If you missed part 1, please click here

If you are a reader of this blog, you know about my 70+ client Ruthie. Well, I am a little behind in cataloging her journey of selling out of her Florida home and relocating to Costa Rica. But she is here now, totally re-located. We are in the process of looking for a car for her.

We were at a hardware store the other day and saw a car outside the place that I thought might be appropriate for her. We stopped to talk with the owner of the car and he proceeded to tell us how he wanted to sell his car, and in fact, he also had a house to sell, surprise, surprise. In this discussion he let slip that he would be looking for no less than $500,000 for the house. I felt that he was preparing me for the high number he wanted for his property, but it didn’t seem out of reason, based on the description that he had given me of the property. So we exchanged numbers and set up for me to view the property a couple days later.

The house sits on a promontory that has another land owner’s promontory in between it and the ocean view. So the view of this property is mitigated by the other guy’s trees. There are parts of the view though that are quite nice. If you walk out to the edge of the main house’s site, right next to the small pool, you can see all the way up to Quepos. Relative to the other houses in the area it is a “fair” view. The land there is sufficient legally for 3 or 4 other lots.. Of course, in this part of Costa Rica you never want to assume that since you have sufficient acreage that you will be able to actually use those acres topographically and forestally (that word, although not found in dictionaries, means “trees that can’t be cut”). I have seen 10 acre parcels that have 1/4 acre of usable land and that’s it. This land seemed to actually be usable though. It was entirely conceivable that the land could be subdivided into the 3 lots that he showed me on our walkabout.

So, after our tour, we sit with a glass of lemon water and wipe our brows to discuss the business side of things. He asks the dread question: “how much do you think my property is worth?” Now, mind you, he had leaked to me that little point outside the hardware store of wanting no less than $500,000. Also, during our walkabout he made it pretty clear that he was a savvy international real estate investor with a degree in economics. He has bought and sold more real estate than I likely will ever handle in my career. So, I’m just a little bit intimidated. I forge ahead, nonetheless. I am, after all, a bit of an authority on the values of things in my little neck of the global real estate market. So, I proceeded to recite the values of a number of houses that were on the market and that had sold in the vicinity with their asking prices and selling prices as comparables, and concluded by saying, “so I would say the value of your property is somewhere between $500,000 and $550,000″.

Turns out that one of my fellow realtors had beat me to the punch with this particular seller and had given him a price in excess of $700,000, which of course, the seller was delighted to hear. The reasoning goes that, if someone could buy this property and subdivide it and then turn around and sell those lots and make “X”, why shouldn’t he, the original seller of the property, be a beneficiary of that fact? Sound reasoning right? Yeah, I suppose, what with the bottom line and all. The property was a nice large estate piece that, in my opinion, should stay that way, and that I would have marketed that way. As such, it had a value of what I mentioned. I explained my conservationist concerns to the seller. Costa Rica is in danger of being cut up into the smallest possible chunks except when someone decides to not, which does happen, but I fear not nearly enough. As this particular seller said to me, “I love nature as much as the next guy and want to protect it. But business is business.”

It isn’t hard to see his reasoning on the matter. And perhaps mine seems a bit idealistic. But if he were willing to take a bit of a hit on the price, although by his own admission, he was making a killing on how much the property had appreciated since he bought it, and if we were to market it as a single, estate piece… granted, the next guy could buy it and cut it up since there is no law against it on this particular piece. But, what if, (there is that Universal qualifier “what if”), “what if” us Realtors consistently promoted the point of view that “X” acres is small enough? Wouldn’t that effect some sort of influence for the conservation of what makes Costa Rica so darned appealing? Maybe of three such land sales, one would turn out different as a result of such a presentation, but isn’t that far better than pure ‘bottom line’” thinking?

The reasons that we North Americans love Costa Rica so much have everything to do with the catharsis of being in a land that has so much nature in it. We may not even consciously understand why we love it here so much. But I contend that the abundance of nature all around us here has an awful lot to do with it. High density human habitation has been proven to run the animals and birds out, effectively negating the positive things that we moved here for in the first place.

In this particular scenario, I lose. My cohort in real estate is going to win the listing. But what if – what if this seller had heard the “keep it large” idea from my peer, and then heard it from me, and then maybe heard it from the next realtor he invited to help him appraise and market his land? International economist with vast real estate development experience be damned, I wonder if he wouldn’t stop and consider letting us market the land with that bent: “this is not really a good development piece. Sure, there is room here but your neighbors all have large estate parcels and consequently, there is lots of wildlife here. We are hoping to keep it this way.”

This article is the second of my “Struggles of Conscience” series. I hope to here explain how I feel that a borderline tree hugger like myself can in fact effect a healthy influence in this amazing part of the globe from within the industry.

I know, you are thinking: “what an idealist”. You may even doubt that the idealism would hold up when the bucks really get flowing. Well, I would hope that the integrity would hold. My father used to tell me about the guy that approached the gal and said: “Would you sleep with me for $1,000,000?” to which the gal replied “of course”, to which the guy says, “would you take $10.00?”, to which she says: “what do you think I am, a whore?” His reply: “we have already established that, now we are just negotiating price.”

There is going to be one more installment, well that is the plan right now, of the “Struggles of Conscience” series. Part III is going to give an example of the ideal in practice, on it’s own, with no influence from me. I am an observer of it, and I’ll relate it in it’s detail. Stay tuned…

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March 28, 2007

Struggles of Conscience

Filed under: Ethics — Ben @ 9:08 am

I am a real estate agent in Costa Rica. I am also a borderline tree hugger. Oxymoron, right? Granted, I sell property here that has been developed by someone else who likely had to cut a road into the building site. He / she may also have purchased a large tract of land known here as a finca, and then went through the process of subdividing and bringing in the infrastructure necessary for human habitation. I do sell these properties, and so one might think that I, along with all of my professional peers here, are a part of the problem, ecologically speaking. I hope not.

My first 5 years here in Costa Rica, I started up a small Internet marketing company that actually worked, to a limited degree. My wife and I had some funds from the sale of a property in Colorado back in the States and felt that we would use those funds to provide the milti-lingual, multi-cultural experience of living in Costa Rica for ourselves and our children. We understood that making money in a foreign land was iffy at best and so we were prepared to use up what funds we had to provide this experience for ourselves. We calculated that right about when the kids were grown and ready to go off on their own, as is the custom of our culture, we would then turn our attention to making money. I would be in my mid forties, which would likely be my earning prime, so I could go back to the States and jump back into the market and work toward retirement at that point.

I am right on track with one difference. I didn’t need to go back to the States. Real Estate has afforded me the option of staying here and working toward my retirement. As regards my Internet business, it actually did quite well, but only slowed down the out-go of our funds. At that time here in the Dominical area there simply wasn’t the money necessary to pay well for Internet services. This has changed now though. Internet marketing is big business here.

When I first considered getting into real estate, I had a struggle of conscience. Was I really willing to jump into the industry that was involved with the development of this amazing and beautiful and delicate country? No, I wasn’t… yes I… well if… and on went the struggle. A lucrative offer was on the table from a local developer for me to start a company. Since I was without funds at that time, this was the only way that it could happen. But I was torn. Maybe if I went back to the States and got back into the environmentally sound industry of art marketing I would feel better about that. (Although, there has been some controversy around the use of yellow pigment. There was talk of banning “yellow” due to ecological concerns. I didn’t track that issue so I’m not sure how it turned out.) But I really wanted to stay here in Costa Rica, this had become my home. Would I be selling out to get into real estate?

Well, if it is “selling out”, then that is what I did. However, I did come up with a point of reason that enables me to represent myself as a “borderline tree-hugger”. By the way, I say borderline since I am not an extreme tree hugger. I really do feel that trees are the answer. I feel heart-sad when I am walking in the jungle and I come upon a large Guanacaste tree, or a Jabillo that is as big around as my truck or bigger. Just standing underneath one of these isolated behemoths of a time gone by has a wonderful affect on the human spirit. Shade, cool air motion, a moist healthy feel to the air as one breaths it in. There is a little ecosystem there, complete with lizards, frogs, birds, all manner of insects, but almost never bothersome. What would it have been like to live at that time prior to these trees being cut down? To walk under the canopy on the resulting soft loam. Now when we walk through the jungle, we oftentimes have to hack through the brush. Under the big guys there is no hacking necessary. It is park like with the under-story plants thoughtfully placed in their decorative places by an intelligent unseen hand.

These trees hold the soil, process massive amounts of carbon, and provide solace to over stressed humans. Need I say more? Trees are important.

So, is it possible that I could actually enter into this profession and affect a healthy influence from within? Looking back over my first 3 years in the business, I’d say that yes, I have been able to and am doing so. Bear with me as I relate an experience I had the other day that has helped me to better appreciate this now than when I originally made my decision. To be continued…
Read Part II of “Struggles of Conscience”

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March 13, 2007

About Construction Practices Here In Costa Rica

Filed under: Construction — Ben @ 10:05 am

They’re awful. No, let me restate that: they are abhorrent.

When we made the decision to move to a foreign land some years ago, we were motivated by the desire to enrich our lives by exposing ourselves to a new and different culture. We were not disappointed. Joys and sorrows abound in such an endeavor. Generally when something is irritating and we think that “they” are doing it “wrong”, with a little time it would become clear that “wrong” wasn’t the case. It was a matter of “different”. Not so construction.

In Costa Rica, construction is done wrong.

My first experience was enlightening in this regard, and many subsequent experiences have confirmed it.

I was a certified card carrying, 4 year apprenticed journeyman plumber in my former life as a young man in Colorado. I had mentioned this to a new friend that I met way back when we first moved here, and he remembered it. Everybody loves the plumber. (In fact, I can’t believe that I’m publishing this information to the web. Eeeeks!) My phone rings one day. My old friend is involved in a construction project down on the Panama border and the wife of the “plumber” for the project had had a serious accident and they had to leave the project. Would I be able to go and finish it up for him? “Sure” I said. So Neil, my son, and I were off.

When we got there and took a look around, I immediately knew that I had never seen any plumbing like what I was looking at there on that project. The next 20 minutes were an interesting study in how the human mind works.

I guess that, since I’m from the States, I assume others know what the heck they are doing. So, as I checked out this plumbing system, I assumed that the “plumber” knew what he was doing. So I kinda prioritized that in my mind: “the guy knows what he’s doing” but I also had the thought, “this all makes no sense.” I figured that maybe the near-the-equator physics worked different and I just needed to figure it out. After all, if you cross the equator the water swirls the opposite direction going down the drain, right?. As I mentioned, this lasted about 20 minutes, after which time I concluded that physics were physics, and it was simply wrong.

“I’m happy to finish this project for you”, I told my friend, “but you have to promise that you’ll never mention my name in connection with this project.” “Why do you say that?” “Because the system will not work without constant maintenance. It’s a good thing that it’s a public building so there is a his and hers bathroom. That way at any given time maybe one will be working”

The other option of course was for me to tear the whole thing out and start again, which is the option that he chose.

I have, since then, asked a number of contractors here and just people in general “are you just accustomed to plumbing problems, to sinks not draining, and toilets not flushing and leaks all over the place?” To which they all reply: “yes”. I then proceed to tell them how it is in my country, which is something that I am remiss to do since I didn’t come down here to extol the virtues of where I came from. But again, with regards to construction, it’s an exception.

I tell people here that in the States we install systems that work, trouble free, until the o-rings wear out in the shower valve, or the washer needs replacing in the faucet. There is the occasional stopped drain, but this is usually in response to inappropriate articles being flushed down the toilet or put into the sink. The systems are, for the most part, trouble free for the term of our lives.

But its not just plumbing. All aspects of construction are poorly done here. The strong suit here is cement work and cement block work. Almost everything here is done with cement, but its still inferior to the methods that I came to take for granted in the good ole US of A.

There is a very common practice here called “rapello” (rah-pay-oh). I suspect that the practice comes from not having cement trucks that can dump the whole pour at one time, and the fact that most of the cement work is done in the hot sun. Things like cement floors and drive ways are done with guys standing by a whirling cement mixer mixing and pouring while the cement is setting up almost as they pour it. It is a challenge, no doubt. Its kinda funny to note that in the States, you get washed sand to mix with your cement. Here, I have seen them throwing shovels full of dirt into the mixer, as well as the paper bags that the cement came in, both of which have a weakening effect on the finished product.

I feel like such a bigot writing this.

Anyway, rapello is letting the initial pour harden with a rough finish, and then going back later with a smoother mix of cement and putting on a ½” to 1″ layer of smooth cement so that it looks nice, at least for awhile.

The next time that you are in Costa Rica, look down, and look around at the walls and various surfaces. You will, everywhere, see how that layer of rapello simply does not last and the cold joint between the original pour and the rapello layer does not knit together. The cement is broken all over the country.

And I could go on.

So what is the deal with this article? This website is all about Costa Rica real estate, and as we cycle through our rapid growth in this mecca for relocation and investment, construction is a VERY hot topic. I find myself consulting a lot with my clients about avoiding pitfalls and how best to proceed.

In future articles I will be documenting some of the methods that are being employed here to be able to build a great home and minimize the frustration.

February 3, 2007

How To Do An Exclusive Property Listing In Costa Rica

Filed under: Info & How To's, MLS — Tags: , — Ben @ 7:14 am

Here are some possible services that can be offered to fill that gap.
1) Market the property to other agencies, allowing them to list the property as well. They will obviously get a share of the commission if they sell it. (I’ll deal with the possibilities presented by this option below).
2) Prominent Internet exposure. The agency can put the listing on their web site and feature it so that it gets better exposure than their non-exclusive listings.
3) Real World Advertising. Depending on the property, and the agency’s normal advertising program, an exclusive lister can request that their property be mentioned on any magazine, newspaper, or other type of non-electronic advertising.
4) Pay-per-click Internet advertising. This again depends on the value of the listing. Normally this type of extraordinary marketing would be for a luxury property to justify the expense to the listing agency. This is highly effective.
5) Signage on and off the property. Directional signs leading from the main road to the property as effective as sales tool as well, but can be limited by permissions in placing the signs.

More about #1:
The listing agency should promote the property to other agencies, doing that grunt part of the listing work that would normally be done by the seller themselves. In order to appeal more to the other agencies, a creative commission structure can help to stimulate things.

For instance: The listing agency could offer to pay a 6% commission to the selling agency, and keep 2% for the listing agency. Sellers should keep in mind though that doing an exclusive listing correctly is time and labor intensive on the part of the agency. Reducing the listing agent’s share may not be the best way to go about this. The seller wants the listing agency to be motivated to share the listing.

The lack of the MLS results in the real estate agents being accustomed to the full 8% flowing into their agency. So any deviation from this can have a negative effect. The ultimate marketing formula is for all agencies to receive the full 8% while still making it worth the listing agency’s while.

Obviously the seller can simply be willing to pay a 12% commission in the case of another office selling the property. Some might feel this to be a bit steep in the commission department though.

So what can a lister do that wants to have the benefit of the exclusive listing?

The listing agency should have in mind the standard and try to reach it’s level of efficacy in getting the property marketed and sold.

I suspect that some day we will have an MLS here in Costa Rica, but until then we will see a diverse mix of policies that vary from office to office of how best to serve the people and still have good business take place.

How to sell a property in Costa Rica

Filed under: Info & How To's, MLS, Processes — Tags: , , — Ben @ 6:49 am

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.

Options You 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.

January 29, 2007

The Current Market January ‘07 Part II

Filed under: News, Projections, State of the Market — Ben @ 6:10 am

As I wrote in my previous article “The Current Market”, the normal means that are commonly used by the world’s investors for determining if an investment is any good were misleading in the case of buying land here in Costa Rica. One would have needed to throw off the shackles of conservativism and forge ahead in what any conventional commerce maven would have deemed foolhardy behavior. But such is life. The “foolhardy” ones scored the big bonus, and the conventional ones find themselves here wondering how to capitalize on what has been, and continues to be, a strong investment opportunity.

So then the question: how does one go about it now, now that the sub dividable parcels are gone?

There has been a tremendous surge in land acquisitions down south of Ojochal. (For some reason, this word “Ojochal” is hard for North Americans to say correctly. It is frequently pronounced “Ocochal”, and who knows why. There is no “c” there where people say it. “J” in Spanish is “H” to our English way of looking at things. So it is pronounced “oho-chall“, with the emphasis on the “chall”).

When all those well heeled investors arrived to jump onto the land-grab ship, and they realized that there were no more investment properties in the Dominical area, they collectively did something sort of unique. They stood on the coast looking out at the Pacific wondering how they could have missed something so lucrative. As the waves continued to roll into the shore, and the pelicans flew overhead they got to thinking about how stuff just keeps moving on and forward motion is what keeps the guy on the bike from falling over. So what else does a guy do now but look to the right, up the coast to the north, up towards Manuel Antonio? This would make
good sense as far as progress goes, since after all, Manuel Antonio is THE most visited tourist area of Costa Rica, bar none. There is the little problem of that infernally bumpy road though. This kicked all but the most ardent investors off of that idea. So what about that forward motion? Well, the obvious next thing was to look to the left, towards the south and the Osa Peninsula, with that natural marvel Corcovado. What the heck, lets ask around a bit about that direction. Whats down there?

From Dominical, you drive down past Uvita, and get to Ojochal. Word is that the area had been initially settled by French Canadians, which is readily apparent when one visits the few shops and restaurants around. Go into the Internet café in Ojochal, and you are bound to hear any number of different languages being spoken. Apparently Europeans have also been drawn to that area. Ojochal is lacking in infrastructure. They are just now getting their land lines in for phone, and cell phone coverage isn’t the greatest. But the land there is beautiful, and the infrastructure is being worked on as I type.

Moving on down the coast, we get down to areas that are known as San Buenas, Tres Rios, Balsar. The towns are: Cortes, Coronado, Palmar Sur and Palmar Norte. These areas and towns are the current frontier. There are still a few large parcels available, and there has been a considerable amount of activity there. The current wave of investors, many of whom have impressive financial backing, have purchased and are developing these large tracts of land. So, there is a great selection of ocean view lots there.

Downside

The beauty of the Dominical to Uvita zone is the proximity of the ocean to your cool mountain, ocean view lot. A property in this zone can put you at 300 – 1,200 feet elevation, and still have you minutes from the beach.

In the south-of-Uvita zone, the mountains move back away from the ocean. This results in a number of factors that affect the value of the lots.
1. The ocean views are further away.
2. The air is warmer since it passes over some flat lands prior to getting to the lot.
3. The distance to a swim-able or surf-able beach is longer.
4. Some say that they feel “out in the boonies” there.
5. Some of the accesses to the properties are a lengthy drive on dirt roads.

Upside:
The big winners in the Dominical to Uvita area bought when it didn’t really make sense to buy. We can easily envision a repeat of this in the south-of-Uvita zone. It is possible to visit this area and feel like it’s a bit removed from everything. But it is exactly this point that makes it so promising.

The 2 most basic reasons that foreigners move to Costa Rica are to invest, and/or to re-locate. Both of these motivating factors can be achieved by buying land in this zone of Costa Rica. The infrastructure for the area is arriving at an astounding pace… well astounding by Latin American standards. When the government agencies are slow to build or improve, the investors have been known to take matters into their own hands and do it themselves. The roads accessing the various developments are among the best around, so one can drive back from the coastal highway to their property in relatively smooth conditions, (although it should be mentioned that 4 wheel drive is a must, if not to get home, but to live in the area and get around).
Reasons to consider the south-of-Uvita zone:
1. Great selection. You can shop any number of beautiful, large, ocean view lots and likely find one with the features you’re looking for.
2. Prices are low relative to the other more developed areas of Costa Rica.
3. The developers are doing high quality developments and providing the infrastructure (water, electric, roads, Home Owners Association, etc…)
4. The views, although not being close to the beach, are breathtaking. A typical view in this area can see out to the Pacific and take in the Osa Peninsula, the Terraba river, year round sunsets, misty mountain and valley views.
5. Large lots are available if one wants to ensure privacy in the coming years.
6. It is early so the upside for property appreciation is high.
7. There is an International Airport planned for Palmar Sur. History indicates that this will have a rather marked affect on land values in the area.
8. There is a modern hospital in construction in the heart of this zone. This indicates that the government sees tremendous growth for the area.
9. When the road linking Quepos and Dominical is paved, the southern zone will likely open up to much more tourism. (Aside from the coming airport and road improvement, I wrote about “The Third Thing” which will have a strong upward push on land values. You can read up on this by clicking here.)

I think that you get the point. I could go on. It takes a bit of an adventurous investor to buy into a remote section of Latin America. But there are lots of people doing it, and succeeding at it. Costa Rica, by comparison to Panama and Nicaragua is probably the safest bet, if for no other reason, for sheer desirability.

We hear it here repeatedly. After having gone up north to the Guanacaste area, where there are large hotels and golf courses, and having arrived here in Costa Rica’s southern zone, the visitor feels that they have finally “found Costa Rica” or, found what all the fuss was about.

The area south of Uvita offers a great opportunity for anyone looking to invest, or relocate to Costa Rica.

If you are interested in investing in Costa Rica’s southern zone, you are likely looking for signs that indicate what the headroom on your investment will, or can be. You might want to read this article which talks about 3 factors that point towards plenty of upward movement ahead.

A little more on Costa Rica’s Southern Zone.

January 19, 2007

The Current Market January ‘07

Filed under: News, Projections, State of the Market — Tags: , — Ben @ 11:45 am

Click here for part 2 of this article.

Our main web site www.Dominical.biz has a sort of Dominical-centric perspective to it, and so it is from this vantage that I view things here. Its kinda funny though, this perspective, because really, what the heck is Dominical? It’s a fun question. People travel here like they are going some place… I don’t know, some place impressive or involved or something. When they get here and see Dominical’s main road and its dire need for improvement, and it’s funky surf culture, I think that they often times wonder if perhaps they missed it, which is in fact what a lot of people do when they are driving south on the highway.

As you come down the highway from Quepos, you bump along on the dirt road for some 25 miles until you finally get to the big intersection of the coastal highway (that you are on) and the highway that comes down from San Isidro, (which is another way to get from San Jose to Dominical). That intersection is an introduction of sorts to Costa Rica’s southern zone. The roads smooth out, and there is a large fruit stand there, as well as a police check point, then a bridge over the Baru River that you cross – then the next right turn, such as it is, is what conducts you down into Dominical. I have talked to countless folks that passed right on by the turn into Dominical and arriving at Uvita they figure out that they missed it. Such is Dominical, the hub of it all here in Costa Rica’s south pacific – or so we are inclined to think – those of us who live and work here. (I should mention that Uvita is THE hot spot on the coast now. In fact, Uvita is where our office is located.)

Boom History
July of 2004 is when I put it. Someone threw a switch then. Prior to this date there had been quite a bit of inventory as regards lots and large parcels in Dominical’s real estate market. Beautiful ocean view lots that were within minutes of the beach. All prices sort of pivoting around that $100,000 figure. The really good ones started with a 2, even back then, but these were something VERY special. When the switch was thrown, it all got bought up.

Nowadays we talk about what percentage you can expect to make from an investment here. 20%? 30%? How does it compare with what you can do in the States? Well, you have to factor in the “riskiness” of investing in a foreign land, and all that. But these first round investor’s… well it would be a joke to talk about “percentages”. How ’bout buying a 60 hectare farm for $120,000, dividing it up into 15 lots and selling the lots off at $150,000 apiece, average price? Or even better. I have heard of factors of 60 over initial investment. Crazy stuff.

It’s these accounts that make the rest of us feel like we are a bit late. But really we’re not. This is a cycle that has been witnessed in human history repeatedly, and it can only be a select few that happen to be in the right place at the right time AND, who have the will and chutzpah to plunk down the funds necessary to secure a piece of land in an area where there is no electric, phone, nor roads really. Most of the transportation is via horse back. Who would want to buy land here? To visit, yeah maybe. Its like going into a National Geographic special, but to actually buy; power to them. They deserve what they got. I contend that the majority of us, if we were to stand in the shoes of these now very rich land investors, we would have opted out of investing here.

So, the first round of inventory that had been laying around, punctuated by the occasional sale happening, all got snapped up within a very short period of time. Then, these same developers rushed to prepare other pieces they had in the wings for the market, and got these to market, where they were greedily snapped up by the ever accommodating press of buyers to the various real estate offices in the area. Word got out to the global market place: “there is gold in them thar coastal properties around Dominical!”.

And so the next wave of global investors began to arrive in droves. These are the ones that respond to indicators. Indicators such as – well – such as people making buckets of money off of buying and selling land. These investors differ some from the first wave that really scored. So now it is their turn. They are arriving and saying: “I understand that if I buy a large parcel and cut it up, and sell the lots I can make great returns on my investment”. But there is a problem for these guys.

The problem is that there are no more such parcels. They are all gone. The last of the big parcels around the Dominical area have been bought up in 2006. I hear rumors about stuff up a little north of Hatillo for $6,000,000 that would accommodate a golf course, and there are still some sub dividable parcels down south of Ojochal, but not many. The problem is that the comfort level necessary to attract the big money investors arrived after all the deals were gone. Now what we have here are lots, great for single families and for the ever popular and necessary B & Bs, and other possible income generating endeavors.

Actually there was a little phase that we passed through that I call the “juicing” phase. To take advantage of the “juicing” phase, one needs to acknowledge that the above has come to pass, that there is not some big parcel out there waiting for them to buy it, cut it up, and make a bundle. To juice, one gets a good understanding of what’s out there and puts together a few single lots and gets creative with what one can do with it. Or, an investor can find a seller that wants to sell in the “zone”, but his property has some problems, such as poor access, or water or some such thing, and the resourceful investor can contract to buy the property, provided that he determines that the problems can be remedied and be willing to effect the remedies. I have personally had some pretty good successes with juicing and will be happy to discuss some possibilities with you if you like. I currently have one of these such listings that is a joining of 3 otherwise rather disjointed properties, and putting them together into one exceptional property. This took some diplomatic work on my part to get all concerned to agree, but the sale is now a perimeter around three seller’s property. The property has big ocean views, as well as waterfalls and numerous building sites. Click here to view

So where are we now? There has been a huge land grab by this wave of super-capable investors from all corners – well points, of the globe. I will write soon about the new frontier here in Costa Rica’s ever changing real estate market. To find this frontier, we have to travel south. “South of what” you might ask. Why, south of Dominical, of course.

December 17, 2006

Ruthie’s Project VI

Filed under: Stories — Ben @ 7:10 am

The deal that Ruth got involved in with respect to the Michael property is an interesting one that I think will be helpful to detail out just a bit here, before moving on to the next property that we nearly had a deposit on prior to it too unraveling.

The property needed to be segregated from the main, large piece that it was, at that time, part of. This is like taking a whole pie and cutting a slice out of it. For the purpose of the National Registry in Costa Rica, which attempts to register all property, and is where the change of owners of that property are changed, subject to a notarized transaction that we call a land deal, this slice of pie, must be measured and drawn by a certified topographer. The first draft of the drawing is called a croquis, which is an accurate drawing of the new property, but it has not yet passed through the various governmental departments charged with approving such drawings. There are ecological concerns that need to be satisfied with every drawing. Now, instead of one big property, you have two smaller ones. Both need to be drawn, and if put together, will look identical to the original property before it was divided into two. This is the same process, but on a smaller scale, that takes place with a large parcel that is bought and then subdivided.

So, with Ruth’s property, the concept was there, but the croquis had not yet been generated. It was generated by the seller, in that he hired the topographer to measure and draw the lines. The croquis was then submitted to the governmental department called Minae, and they said “no”. Here’s why.

The Costa Rican government has been working towards developing, or merely applying, laws that protect Costa Rica’s nature. There are many laws on the books that already do this, but that aren’t applied. One of the laws has to do with easements around ground water that are used as sources for drinking water. This is a variable measurement that goes from 10 meters, to 50 meters, depending on the size of the waterway. It seems to me that there is an increase of application of this rule lately. Aside from Ruth’s deal, I know of another developer that was about to close on a 7 lot deal, that all of the sudden, was a 4 lot deal, since 3 of the lots were now rendered un-developable.

This is what happened to this perfect piece of land that we found for Ruthie to purchase and then put her house on.

In both of the above stated cases, one being Ruthie’s property, and the other being the 7 to 4 lot deal, the ground water that affected the deal may not, in fact, be year round, and may not be used as a source for water by anybody. In the past they were useful as watering holes for cattle, and so they show up on the radar. But for the purpose of the law, well, these were not scenarios that the law was trying to negate. There would be no adverse affect of these properties being developed within the distance that they were from the water.

To deal with this conundrum, the seller must wait until the dry part of the year, and see of the water dries up. If it does, he will take an inspector from Minae out with him to note the fact, and he will then be able to get his plans surveyed. It is also possible that the property has an approved survey that doesn’t show the water way on it. It may be older or whatever, but this can be used to get the building permits which then gives the land owner the right to build on the property.

Now, here is the buyer beware aspect of this scenario that I’m going to share with you. Lets say that the developer that had the 7 lots under contract wants to go ahead and purchase the lots and sell them as lots. He can do this. There is no law that says he can’t sell the 3 that are inside of the ecological easement surrounding the water source. The law applies to whoever it is that decides to build on that lot. So, the developer can go ahead and make his money, but the end user will be sitting on a piece of property that they can’t build on, rendering it valueless.

This is not a scandalous scary thing though. It’s simply good to be informed.

The problem presented by this law will be discovered in the due diligence phaseof the land buying process Costa Rica, as it was in Ruthie’s case.

Lets say that you have decided on a piece of land. You should put your 10% down, into the escrow account of your lawyer. This deposit is protected by an Offer To Purchase document (OTP) that outlines the deal and is used to put the buyer and seller in agreement. With this document, the seller is re-assured that the buyer is serious and isn’t frivolously shopping around and putting lots of properties under such an agreement so that they can later on decide which one they actually want. The document also assures the buyer that if someone comes along with a better offer prior to closing, that the seller is still bound to sell to the buyer.

The document is binding, and in most cases, non-refundable. The trick of the deal in this case, is the contingency part of the document. These outline any concern that the buyer may have. This is a bit of a side note since I would venture that most of us realtors don’t have this water source easement law in mind when we draft these OTP docs up. I mention the contingencies mainly because this is really helpful to know about for when buying land in Costa Rica. If you find a property that you like, but you are unsure about something about it, say, the road access, or maybe there is a concern over an easement running through the land, or whatever. But you want the land. Tie it up with a deposit, and with a well written OTP that has as a contingency the concern in question which, if it remains un-remedied by closing, or by some time period defined in the OTP, will render the deposit refundable. In this way, you can secure your land here with the full intention of buying it, even if you are aware of a problem that needs solving.

But what about this little problem of the water source easement issue. This is a problem that you, nor your real estate agent are likely to be aware of.

Starting from the time that you put your deposit down, there is a due diligence period, where your legal counsel will work your property in a legal sense, making sure that you are not buying a piece that has a lien or some other encumbrance. Your lawyer will also make sure that you can use the property for the purpose which you intend to use it. It is in this process that the ecological easement can be discovered. I have seen it work, so no worries, but now you know and can be that much more secure as you move through the process of buying land in Costa Rica :o )

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