Real Estate Practices in Costa Rica
Real Estate Best Practices in Costa Rica
In general terms, Costa Rica´s real estate most common practices are one of our Sales Agents represents the buyer and another Broker acts as the seller´s representative. Typically the seller pays the broker´s commission and legal fees related to the closing are shared between buyer and seller equally by law.
The healthiest scenario is that the buyer begins a search online for a professional local real estate company whom will assist him/her during the process of search and acquisition. After the buyer finds the right property, the broker representing the buyer writes a letter of intent (LOI ) or Formal Offer (OTP) to the seller with all the parties and property´s specifications. Once this LOI is accepted by the seller, the legal representation of the Buyer will draft a Sales Purchase Agreement (SPA). Upon completion and signing of the SPA by both parties, the buyer will deposit a 10% down payment into an escrow account managed by an authorized title and escrow firm chosen by the buyer, from this moment until the time for closing normally takes from 30 to 60 days. Therefore, immediately the buyer´s attorney begins with a respective due diligence (which could take no more than 15 days) to verify the property title is clean and clear of liens and annotations. During this time the buyer may order an inspection and/or survey of the property boundaries, at the buyer’s expense. After the due diligence is completed with a positive result and stipulations of the SPA have been met, the closing is officially and successfully finalized, when the transfer of funds and the title will take place. Each party must be present for the closing or will require legal representation.
The regular commission pay to a broker is between 5-8% of the property´s total price. Legal fees for closing are equal to 4% of the property´s value recorded in the National Registry. Sellers are required to pay 13% sales taxes on the commission; the Brokerage is responsible for collecting and paying this sales tax to the Costa Rica government. The Registro Nacional is the institution where all the properties should be fully register in country. The institution provides an online service where you can check your property status from your home and its service in general is categorized by international surveyors as a first world system for its efficient and secure results with the changes implemented in recent years.
Most people interested in Costa Rica have the tendency to purchase in the beach due to its spectacular beauty, warm weather, activities and good prices compared to other similar destinations. The countries shoreline is 95% concession (own by the government) any type of project it could be develop with a concession granted by the government ( granted normally from 20 to 99 years) according the regulation and law of the maritime zone plans in every province. However, in that 5 % left of title shoreline there is a hand full of real estate project that offers beach front title properties for sale today with all the rights. For city lovers, San Jose (the capital) and surrounding area offer a variety of lifestyles at variety of prices.
In Costa Rica any foreigner can legally own title properties including homes, condos, buildings and also develop any real estate project. Enjoying exact the same rights and duties than Costa Ricans. The only exception is when a foreign purchase a concession, a Costa Rican citizen has to own 50% of the rights. In addition, this offers up a host of incentives to investors such as no capital gains taxes on real estate, minimal business taxes, and very low property taxes. As a result, many companies such Intel, Microsoft, Oracle, Proctor & Gamble and other multi-national corporations have chosen Costa Rica for their Latin American base as the optimum investment site in the region.
In the recent years because of the lack of financing almost all the real estate transactions have been closed in cash only. Now several banks including Scotiabank, HSBC, Cuscatlan and several national banks, have launched nonresident programs specifically designed to fit the financing needs of the foreign investor in Costa Rica. Use of IRA funds to purchase in Costa Rica as also grown in popularity and owner carry can be a viable option of financing. Consequently it is not surprising that there are more Americans, Canadians, and Europeans living in Costa Rica per capita than any other country in Latin America.