Guide to The Real Estate Closing Process
in Costa Rica
In Costa Rica, like anywhere else in the world, the system for a smooth real estate closing depends on everything being prepared and reviewed before hand by the realtor involved and the attornies handling the closing. Below is what we believe each party should do to ensure there are no problems.
The real estate Broker can act for the buyer or seller. Whatever has been agreed to should be openly discussed from the beginning. Normally the listing broker will represent the seller, but as stated he can be a buyers broker if required. Isthmus Realty will act in either capacity if requested. The broker will receive all relevant legal information from the seller when listing a property and should do registry checks (easily done on the web) verifying the property and ensuring things are basically in order on the property as presented to him by the seller.
The basic property registration information can be viewed on any property in Costa Rica at The National Registry web site (registronacional.go.cr). All you need is the folio numbers to check. It is unbelievable how many amateur agents don’t even know how to do this and waste lots of time showing properties they have not verified. This is a firing offence at Isthmus Real Estate for agents. It is important to ensure the property Plan co-incides with the Folio real numbers, some plans are Fincas that have segregated from their original "Finca Madre" so this needs to be checked. An easy task. Once we have this we simply check in the registry that all is correct.
The most common forms of ownership of a property are:
1) Owned by an individual — as it suggests the property is in the name of an individual person.
2) Joint Title — Wher more than one person has an interest in a property the interest is undivided- — known here as Derechos.
3) Owned by a corporation or a Sociedad Anonima ( S.A.)
Once we have established and checked ownership we begin to list and show a property. The broker, once he has found a buyer, negotiates the price, terms, and conditions with all parties.
When buying land for development or other use make sure zoning is correct for the parcel involved, many buyers have fallen foul of zoning laws by believing unscrupulous sales agents.
Once an acceptable price is agreed, we ask buyer to sign a formal offer to purchase based on the terms and conditions agreed and at that point a 5% deposit is paid to us as escrow agents to hold while the transaction enters the next phase.
Once an offer is accepted we take this to the buyers attorney who will prepare a formal purchase contract which can be a reciprocal promise to buy and sell or an option to buy your attorney will advise which suits better but both achieve the same goal.
It is important to list all conditions of sale including any inventory on these documents.
The actual closing date will be included in the above and the agent should co-ordinate all aspects to ensure a smooth closing takes place.
All utilities, water, electric, phones, etc, should be told of prior to transfer and arrangements made for new hook ups and change of ownership name. Sometimes in Costa Rica people simply take over old utilities in the name of ex-owner so as to avoid waiting for a new hook up — that is fine as long as you have proof the utilities are paid up to date.
Proof of property tax payment is usually brought to closing in form of a receipt form the local tax authority.
If a home sale includes furniture a full inventory should be taken prior and after closing.
There are now a number of reputable title insurance companies operating here including Stewart and Chicago first. Use them if you think fit. We only recommend title insurance on large rural parcels, on regular home purchases especially in the central valley it is not needed.
Transfer of Title
The actual property transfer must be done in front a notary public who will pay any transfer duty that is due and records the deed. Each party will sign and the deal is done. Some closings are by way of simply transferring all the stock in a corporation to the new owner thereby making him the owner of the Real Estate — this is common in Costa Rica and is not problematic as long as its done properly with your attorney recoding the share transfer in the correct and proper manner.
All details for the closing should be in the contract and commissions and legal fees are all paid at closing.
Attornies normally charge fees on a scale approved by the local law association which is as follows:
First 10 Million colones or equivalent 2%
Excess 10 to 15 million colones or equivalent 1.5
Excess 15 to 30 Million colones or equivalent 1.3%
Excess 30 Million colones or equivalent 1.0%
This is just for the writing and filing of the property transfer deed. Other fees if any are extra. On top of this there are the government transfer taxes which are:
Transfer tax 1.5%
Registry fee 0.5%
Documentary stamps 0.6%
If you decide to buy a property by simply buying the shares to avoid these taxes be aware that under Costa Rica law if you buy a existing corporation you assume all debts of that corporation disclosed or undisclosed.
A Rapid and Smooth Closing
A good Real estate closing in Costa Rica should be only the exchange of financial instruments and signing of deeds, nothing else — no surprise should present itself at any closing with all the homework being done well beforehand. Let Isthmus Realty handle your property purchase in Costa Rica and there will be no surprises!