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Buying Costa Rica Real Estate |
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Buying Costa Rica Real Estate
Step 1: Sign an Option to Purchase/Sale with seller
Step 2: Deposit funds into escrow
Step 3: Title research performed and Title Commitment issued (review if property is free and clear of defects)
Step 4: Closing - Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
Step 5: Register new owner with Public Registry
Step 6: Receive official Title Guaranty
The natural beauty, pleasant climate, and friendly people of Costa Rica, are luring investors from around the globe. The purchasing of Costa Rica Real Estate is one of the first and most expensive decisions they will make, and professional advice and assistance , is the best assurance of a smart decision and a safe investment. Land values in Costa Rica real estate have been steadily rising over the past 10 years, and there is every reason to believe it has only just begun for this tropical destination. Costa Rica's past growth, and obvious future growth ensure that Real Estate investors will continue to enjoy an excellent return on their investments and re-sale market, both in terms of increasing land values, and an ever-increasing amount of qualified buyers. When comparing Costa Rica properties on a global level, one finds property in Costa Rica to still be far cheaper than any similar tropical destination,...for now.
we are here to help guide you through the process of selecting and purchasing the ideal Costa Rica real estate for your project. The following guide is intended to answer some of the most commonly asked questions about buying Real Estate in Costa Rica. This is only a basic overview, and we cannot stress enough, that no property transaction should take place without the benefit of professional assistance.
Ownership of land
Costa Rica's laws and constitution, based on a well-developed tradition of Democratic government, include secure property rights for the private ownership of land. These laws are extended equally to foreigners as well as residents. Neither citizenship, nor residency, or even a presence in the country is required for land ownership. There are almost no restrictions to the ownership of land in Costa Rica, with the exception of direct beach front (SEE Regulations for Beach front).
To a prospective off-shore investor, the receptiveness of the host country to be invested in, is an important consideration of the investment. This is especially true for Real Estate. Few countries in the world welcome foreigners so well, and have such magnanimous laws that allow for, and protect, the property rights of foreign investors the same as citizens. Costa Rica's open door policy to foreign investment combined with secure property rights, has made it a number one pick for foreign Real Estate investment.
Land Records
Costa Rica boasts a safe form of title registration to protect buyers from hidden claims. In many ways, the Costa Rican system of maintaining property records is far superior to systems in use by more developed countries such as the United States. All documents are centered in the National Registry, where both titles and surveys are recorded. Records are kept in a central computer system as well as on microfilm, and in original form. Duplicates of all records are updated daily, and sent to two separate fireproof vaults in separate locations from the registry. Any change in the status of a title, or any claim that might affect it, must also be noted on the title registry page, thus making it easy to verify.
Those who purchase land in Costa Rica should get professional advise, which includes a search of the title in the Registry, so as to confirm there are no liens or encumbrances on it, and to establish its proper ownership. Once the deal is completed, the purchaser should receive documents to prove the sale was registered in the Registry.
Property Taxes
The yearly taxes on properties in Costa Rica are very low. Yearly property taxes based on 0.0025% of the declared value of the property. This declared value is a common law practice in which a property's value according to the government is very low, almost always lower than the sales price.
Closing Costs
Closing costs for a sale include a land transfer tax, a stamp tax, and attorney fees. The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on actual sales price of the property. Closing costs typically run a total of 3-5% of the actual sales price, including the attorney fees. Closing costs are customarily split 50/50 between the buyer and seller. Costs of obtaining and registering a mortgage are the buyer's responsibility.
Financing
Most property sales in Costa Rica are paid in full at closing. Bank financing in Costa Rica is difficult to find at economically feasible rates. Owner financing is often available, and typically requires at least half down with a 1-3 year note. Many people, who need financing, find they can obtain financing in their own country faster and at a lower rate than in Costa Rica.
Purchase Contracts
Costa Rica's legal system is based on a "civil code" system, as opposed to a "common law" system like that of the United States. Under Costa Rica's civil code, there is less interpretation of the law by judges, because the civil code is more restrictive. For this reason, land contracts in Costa Rica are far lass comprehensive, than the common law contacts most foreigners are used to. Under the civil code system, the contact covers only what is not regulated by law, and thus can be very simple.
In Costa Rica a land purchase contract is achieved through an "option to purchase". An option to purchase gives the buyer the right to purchase a described property in a set amount of time. Typically 10-20% of the purchase price is paid to the seller through a broker or attorney (after verifying the property can be legally transferred), for the purchase of the option. Most closings can take place in a matter of days if the property is already registered in the National Registry; however, most options are written for 30-90 days.
A purchase agreement or option to purchase under civil code has far less components but should include:
- The names and identification numbers of the buyer and seller, whether held by a corporation or personally.
- A description of the property, which includes boundaries and size (if know at time of sale) and all numbers identifying the property in the National Registry. Properties being subdivided from a larger property can be sold based on agreed upon boundaries, or based on the square meters of land to be divided off.
- The price in either colones or dollars.
- The dates for the option period.
- Terms or mortgages to be recorded at closing, if any.
- An agreement to the payment of closing costs; usually split 50/50 between the parties.
- An agreement to provide for a registered survey prior to closing, usually the seller's responsibility.
- Any other agreements or clauses.
Title Insurance
Title insurance is not necessary in Costa Rica due to the laws of the civil code. The buyer' attorney should make a thorough title search prior to closing; after which, one can safely purchase the property. To pay a title company to perform the exact same task prior to closing is redundant and expensive. Additionally, when a property is transferred to a new owner in Costa Rica, all past claim that were not properly registered in the National Registry, can not be placed on the new owner, thus eliminating the need to insure against past problems coming to light. Many properties are held by corporations (S.A.), and in these cases, more thorough research is required if one wants to assume the existing corporation, which can save money on closing costs.
After the Sale
The purchaser should verify, through his broker or attorney, that the property was properly registered in the National Registry, and receive originals or copies of the documents showing all the proper stamps from the process.
Beachfront Regulations
The most desirable and expensive land in Costa Rica is beachfront. The majority of coastal resorts are located on the beach in what is known as the "maritime zone" or "zona marítima". The maritime zone is a 200 meter wide strip of land running parallel to the coast, starting at the high tide line. This 200 meter strip is divided into a 50 meter strip closest to the shore ("inalienable zone") where no development can take place, and the remaining 150 meters, which can be leased from the local municipality, and developed after the filing of a regulatory plan with the government. Most vacant beachfront land does not have a regulatory plan filed, as this is usually done just prior to development of the property. The regulatory plan is the most time consuming and costly phase of obtaining the land lease, known as a "concession", and is best accomplished through professionals. With proper planning, a concession can be obtained during the time that the proposed development is in its planning stages. For those interested in developing land within the maritime zone, professional assistance is a must.
Land Measurement Conversion Factors:
hectare =2.47 acres =10000 square meters =107600 square feet
1 manzana =1.73 acres =0.699 hectares =7023 square meters
=75600 square feet
1 square meter =10.76 square feet
1 kilometer =0.6214 miles
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