When our clients are buying a property, it is usually a large financial investment where, at times, even their life savings are involved. All to fulfill their dream of having a home in Costa Rica. To help you in your process of buying a home, we assembled this list of Frequently Asked Questions our team of Real Estate professionals get most often. We hope this helps you be prepared before you embark on this new adventure.

What sort of closing costs should I expect?

There are two types of costs when purchasing a property in Costa Rica: fixed, and sliding scale based on price of property.

Fixed expenses

These include the Option to Purchase Agreement (AKA Purchase Contract), which Outlier Legal charges USD $500 for plus Value Added Tax (VAT) and, the comprehensive Due Diligence Report for which Outlier Legal charges USD $900 plus VAT.

It is important to remember that depending on the type of property you plan on buying, you may have other expenses that arise. For instance: if you are buying an existing home, you may need a property inspection. If you are buying raw land, a soil study. Perhaps you need an appraisal of the property if you are taking out a loan, or if you’re planning to do this all remotely, a Power of Attorney. Outlier Legal can connect you with trusted professionals who will support you in all aspects of the purchase process, from beginning to end.

Sliding scale

These are based on the purchase price of the property. The standard costs expected to be paid by the buyer include the transfer taxes and the fees of the Notary Public who will be drafting and completing the public deed of transfer before registering that document with the National Registry.

These expenses are calculated based on a table provided by the Ministry of Finance, and may be significantly higher than the notary fees you have incurred in your home country. Our Real Estate team will provide you with an estimate of these fees before you start. If you are planning to use an Escrow service (and we strongly suggest you do), there will be a cost associated with this service, depending on the funds being held. For amounts under $50,000, expect to spend about USD $600.

What is the process when purchasing a Costa Rican property?

The process will consist of several stages: The Letter of Intent (Offer), The Option to Purchase Agreement (Contract), Due Diligence, and Closing.

Letter of Intent (Offer)

The first step will be to send the seller a Letter of Intent, formalizing a buyer’s desire to purchase the property. In general, it outlines the basic terms like who the buyer is and how much they intent to pay (and how), and provides contact information for the buyer’s representation, should they have it.

Assuming the price is settled between the parties, the next step would be to obtain basic information on the property such as the folio real/plano and registered property number, so it can be checked in the National Registry.

Option to Purchase Agreement (Contract)

Once these terms are settled and basic information is received, the Option to Purchase Agreement will be drafted based on the terms agreed to by both parties.

Given every transaction is unique, we can’t give you all the specifics on what your contract would include, but briefly, it will cover items like the down payment, due diligence period, expected closing date, included or excluded items (grandma’s chandelier, for instance), and any commission splits to Real Estate Brokers involved in the transaction.

Due Diligence

Once the Option to Purchase Agreement is duly signed by both parties, the Due Diligence period begins, which consists of a complete study of the property to see its physical and financial condition.

This period usually takes about a month, but much of the timing depends on the cooperation of the seller, because the attorney will ask for documents that only they might have, and if the sellers are unwilling to cooperate, your attorney may have to dig for them. Our staff works very hard to keep communication lines between the parties open so that the due diligence process moves along smoothly, but we often have to play detectives.

Closing

Assuming the Due Diligence report is accepted by the buyer and the other aspects of the transaction are completed, the closing date is scheduled.

On the day of the closing both parties will appear before the Notary Public to make the transfer of ownership official. At the same time, the purchase money will be disbursed to the buyer.

Finally, after signing the deed of transfer of the property, the property is registered and recorded in the National Registry. This can take up to 2 weeks.

How long does all of this take?

If everything goes as planned, your purchase process should not take more than a month and a half, but it is best to be prepared for a full 2-months in case there are delays due to due diligence or disbursement of funds.

Do I have to be at the closing?

It is not necessary for the buyer to be present as there are legal mechanisms through which we can represent you. For instance, you can issue a Power of Attorney (POA).

If the buyer is not in Costa Rica at the time of needing to sign the POA this will have to be signed at a Costa Rican consulate abroad. You should know that this can severely delay the process as POA’s are signed at the consulate by appointment only, and at the time of this writing, the wait can be many months long.

Otherwise, the buyer could come to the office and appear before the Notary Public and guarantee a Power of Attorney, in favor of the office to represent on their behalf in the closing. Alternatively, you can open a corporation and then act through proxy letters, which can be e-signed on your computer or phone.

What aspects are reviewed in the Due Diligence report?

The purpose of due diligence is to determine whether the property is a secure investment from a legal perspective.

Due Diligence includes:

1. Review of the title. Does this property belong to the person representing themselves as the seller? Is there an adverse possession to deal with?

2. Confirmation that the property is free and clear from liens and encumbrances. We look for many encumbrances including water, national parks and easements. While they may not affect your ownership of the land, they may affect what you can actually do with it.

3. Tax compliance. It is important to determine whether the property is compliant with its tax obligations both at a municipal level and a national level, and if the property is designated as a “luxury” property under the Costa Rica tax code. If it is, it is subject to an annual luxury tax.

4. Legal compliance. This is to determine if the property is compliant with zoning regulations or permits.

It is possible to purchase the property with a corporation?

Yes, it is and actually, it is our recommendation to buy it with a corporation if you are not going to live in Costa Rica full time. Buying through a corporation means you don’t need to have a Power of Attorney executed by a Costa Rican notary each time you need to do something with the property.

Will I qualify for residency once I buy a property?

If you are buying a property for at least USD $150,000 or  planning to build a property with a value higher than the above, Yes! For more information on residency by investor, click here.

Our Real Estate team is here to answer any questions you have. Let us know how we can help.