Buyers

Purchasing a property in another country is most likely one of the biggest financial decisions and one of the most exciting decisions you will ever make. Whether this is your first purchase or you are an experienced buyer, this decision must be made carefully.

Why Do You Want To Buy in Costa Rica?

Are you dreaming of owning a vacation home in Paradise? Do you want to start a new life for your family and expose your children to a new culture and language? Are you wanting to retire somewhere warm? Are you looking to expand your investment portfolio and invest outside of your home country? Are you looking for a Beach home to spend your weekends? Are you looking for a rental property? Are you looking for a property to have for your sabbatical? Are you tired of paying rent? Have you outgrown your current home? Are you working from home and realizing life would be better working from somewhere tropical? Having a clear sense of your reasons for buying will help you choose the right property.

Has Your Income Grown? Are You Looking For An Investment?

Property ownership is an excellent investment; whether you are looking for your dream home, a rental property, or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or to obtain a greater return on your initial investment.

Before you start shopping for your dream property, it is a good idea to make some preparations. Figure out what you are looking for and how you can best afford it.

What is your Dream Wish List?

Make notes to share with your real estate agent on your ideal property. Is it a Villa? Home? Condo? A Lot? A Farm? Something Commercial? What are the key features you would like to have with this property? What size are you hoping for? How many bedrooms and bathrooms do you need? What size land do you want? What type of view are you dreaming of? Do you want a pool? Start thinking about what you will be doing while you are living at this property? Set your budget. How much can you afford to spend on this property?

Figure Out Your Finances

Determine how much cash you have available for this purchase. 95% of real estate transactions in Guanacaste, Costa Rica are cash transactions. If Buyers need funds to purchase a property in Costa Rica, there are 4 different funding options to investigate. The best and most affordable option for financing would be to secure the funding from your home country; through a home equity loan, second mortgage, line of credit, personal loan, etc. For this option, you would need to contact your local financial institutions. The second best option is to see if the owner of the property that you are interested in, is willing to offer owner financing. Owner financing typically requires a 50% deposit and has an interest rate of 6-10% for 2-5 years with interest only payments and a balloon payment at the end. Each owner will have specific requirements. There are government and lawyer fees to register a loan in Costa Rica and there are fees to remove it from the title once it has been paid. Third, there are a few local Costa Rican banks offering financing for foreigners: Lafise, BCT, and BAC. At this point, you must be approved for the loan which requires an almost perfect credit score and an in-depth study of your finances, and then the property you want to purchase must be appraised and approved. The process can be lengthy and costly. Currently, it will cost you approximately 8.5-10% interest plus 4% of the loan value in fees. There will be government and legal fees to register the loan and fees to remove the loan off the title once paid. In Costa Rica, both the person who is getting the loan and the property they are getting the loan on need to be approved. If going through a local bank, this can be a lengthy process so it is important to start this process as soon as possible and work on getting yourself approved first and know how much money they will lend you. Depending on the loan amount, the lending bank will ask you to get a health exam in Costa Rica (you must be in the country for this exam) and apply for local health insurance. You must be approved for this health insurance and be willing to pay the monthly premiums in order to qualify for the loan. The banks will also require you to have approved property insurance on the property so it is important you understand all of the fees. If you are interested in this option, reach out to us and we will connect you to the different financial providers. Last, if you do not qualify for bank financing or do not have time to wait for bank financing to be in place, private funding may be available at 10-15% interest. These also have fees associated with them. This is a faster option. We are part of Quatro Legal’s Realtor Hub and our clients have preferential access to bridge loans of 1-3 years with an interest rate of 10-12%. The areas we specialize in have been pre-approved. This is a 20 day process. For more information, reach out to us and we will connect you to their lead loan manager.

Build Your Green File

A green file contains all your important financial documents. You will need it to open Escrow and to secure financing for your property, should you need to go that route. The typical green file should contain:

• Financial statements
• Bank accounts
• Investments
• Credit cards
• Auto loans
• Recent pay stubs
• Tax returns for two years
• Copies of leases for investment properties
• 401K / RRSP statements, life insurance, stocks, bonds, and mutual account information.

Check Your Credit Rating

Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and TransUnion. Come prepared knowing your budget for your dream property in Costa Rica.

Buying a property in Costa Rica requires understanding the process from start to finish, finding the best area for you and your family, searching for the perfect property, paying market value for that property, having professional and easy-to-understand attorneys to keep you protected, making important financial decisions, and completing paperwork.

It helps to have an expert in your corner when undertaking such a large purchase, especially in a foreign country. We will guide you through this entire process from the moment you consider purchasing to after closing. We make sure you have everything you need to be able to start enjoying this Pura Vida lifestyle! We are trilingual (English, Spanish, French).

We will offer you listings from every agency in the area, and will also provide you with access to property listings before they hit the general market. Although we can sell you any property in Costa Rica, our area of expertise is the northern Pacific Gold Coastline of Guanacaste from Peninsula Papagayo down to Playa Negra. We specialize the following communities: Peninsula Papagayo, Reserva Conchal, Las Catalinas, Hacienda Pinilla, Mar Vista, Playa Conchal/Minas, Playa Flamingo, Playa Potrero, Playa Brasilito, Playa Tamarindo / Langosta, Playa Grande, Playa Avellanas, Playa Junquillal/ Negra / Marbella, Playas del Coco / Ocotal / Hermosa / Panama, Villa Real.

Here are some factors to consider when choosing your real estate professional:

• Look for a full-time agent – one who has experience completing transactions similar to yours. We have helped over 560 families buy or sell property!

• Check out their Google Reviews – what do other clients say about them? See what Flamingo Beach Realty clients say HERE.

• Ask if they are familiar with the area in which you are interested. Where do they live?

• Ask how they typically work. Do they research all available options for you or tend to just present and show you options within their own portfolio?

• Ask how much time the agent will have for you, and if they are available at night and on weekends.

• Does the agent return your calls promptly? Time is money when attempting to buy a property.

• Ask for a list of properties they have sold or check out their social media to see what they have been posting as SOLD sales. See Flamingo Beach Realty’s Instagram, Facebook, Linkedin, and Youtube .

• Ask what happens after the sale. We at Flamingo Beach Realty assist you after the sale as well. We have a large network of professionals in all fields to assist in making this a smooth and easy process. We will connect you with lawyers, handymen, architects, builders, interior designers, furniture makers, property management companies, insurance agents, etc.

• Choose an agent who listens attentively to your needs and concerns, one you feel you can trust. Pick an agent, with whom you feel comfortable. One of our core values at Flamingo Beach Realty is to treat clients like family. We want you to know we always have your back and are here for you.

Once those preparations are out of the way, it is time to find the right property for you. Our clients are choosing their Costa Rican beach properties either by going on live tours or by video tours which can be done together by FaceTime, Zoom, or WhatsApp, or by reviewing videos that we prepare and send to you.

Do Some Online Research or Take a Drive

Get to know the neighborhoods, gated communities, and different beaches that interest you. Research or drive around and get a feel for what it would be like to own a property in that area. Start getting a sense of the properties available in those areas. Check out our COMMUNITIES section for helpful information and videos to guide you to the area that you feel will be most suited to your needs and desires. Think about how you will be spending your time at this Property. Do you want to be walkable to the beach? Are you a surfer? Do you love to go hiking? Do you love to swim? Is having an ocean view a must for you? Do you want a pet-friendly neighborhood? Are you OK to drive to grocery stores and restaurants or is it important to you that you are able to walk to them? How close do you need to be to medical? Is being in a gated community important to you? Do you like the hustle and bustle of a busier tourist down or do you prefer to see wildlife over other human beings? How much land do you need? Is a certain view important to you? Do you need to be close to schools? Is being close to a farm to ride horses important to you? Do you imagine yourself eating your dinners outside so you need a covered balcony? Do you want to be near a church? Is having social activities nearby important to you? Are you OK with paying a monthly HOA knowing you get services for it?

Narrow Your Search

We will always listen to your wishlist and dreams and will do a full property search for you. Select a few properties that interest you the most and have your real estate agent make appointments to visit them. We suggest you keep this to no more than 5 or 6 properties. Otherwise, it gets overwhelming and it is difficult to distinguish them and you could have trouble making the best decision for you. Ask your real estate agent about the potential long-term resale value of the properties you are considering.

Time to Buy

Once you have picked out the property you want to purchase, we will help you make an offer that the Seller will accept. Closing costs on a property in Costa Rica are approximately 4% (2.5% government transfer taxes and stamps, 1.25% closing notary fees, and 0.25% escrow agent fees). The closing costs are negotiable but tend to be borne by the Buyer. The Seller is responsible for paying real estate agent commissions. Your real estate agent can also help you draft your offer in a way that gives you an advantage over another offer.

The Process, Step-by-Step The Initial Agreement and Deposit. The Purchase and Sale Agreement is a legal arrangement between a potential purchaser and the property’s seller. Some important tips to keep in mind to streamline the process:

• Keep written records of everything. For the sake of clarity, it will be extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
• Stick to the schedule. Now that you have the property under contract, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process we will keep you constantly updated, so you will always be prepared for the next step.

Set Up An Escrow Account

Choosing the ideal Escrow Agent for a real estate transaction is a key part of the purchase process. Escrow Agents can be foreign or domestic. For safety purposes, the main role of the Escrow Agent is that money is not exchanged between parties until contractual conditions are met. Escrow activities in Costa Rica are regulated; meaning domestic escrow agents, shall be registered before the Costa Rican financial regulator SUGEF. All Escrow Agents charge a fee for their service which is fixed or established proportionally to the value of the transaction. Along with the Escrow Agent’s appointment an escrow agreement shall be executed. Other documents such as Know Your Client forms (KYC), identification documents, and source of funds proof may be required. SUGEF regulated Escrow Agents have more compliance requirements than foreign escrow agents as they must comply with local regulations.

Due Diligence

Costa Rica does not have title insurance; therefore, performing a thorough due diligence is the most important part of a purchase decision. Due diligence is a process whereby the buyer – through a legal firm or attorney – for a specific period prior to making the final decision of whether to close on a property, systematically researches and verifies the legitimacy and accuracy of the title as well as the contingencies that could cloud it, such as taxes, debts, liens, encumbrances, lawsuits, zoning and building restrictions, utility availability, HOA information (homeowner association dues, finances, minutes), etc. The attorneys we recommend and work with specialize in preparing due diligence studies and will draft a due diligence report with all the information obtained as well as a summary of all the key points needed for the buyer to make an informed decision.

Inspections and Topography Studies

Once your offer is accepted by the seller, we believe it is important to conduct an inspection and a topographical study.   We work with professional inspectors that will provide you with a written report and photographs of their findings.  The topographers we will work with are trained to show you the lot lines and to make sure that the home you are buying has been built within those lot lines.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or
2. The buyer, after reviewing the property and the studies, requests a renegotiation of the terms of contract (usually the price, but sometimes buyers complete all of the necessary repairs or work to get the topographical errors fixed prior to closing).

Appraisal and Lending

Should you be using Costa Rica financing for this purchase, it is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and let you know when payments are due for the appraisal. The property will be appraised by an appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc.  When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.

Set Up A Corporation

If you’re planning to invest in Costa Rica, it may be a wise decision to set up a corporation and have the property held by the corporation. The two most common corporations in Costa Rica are “Sociedad Anónima” abbreviated as “SA,” and “Sociedad de Responsabilidad Limitada” or “SRL”.

Some of the reasons to do business through a corporation in Costa Rica are:

• Operate your company remotely. From a practical standpoint, corporate operation and decision-making can be done by proxy for foreign owners who do not reside in the country or who may reside in Costa Rica but travel constantly. Therefore, it is not mandatory being physically in Costa Rica to make corporate decisions, execute agreements, purchase or sell property or close on transactions.
• Separate patrimony. Costa Rican Law considers corporations to be separate entities from their representatives, owners, or stockholders and, as such, have separate patrimony. If a claim is filed against the corporation, the personal assets of the representatives or stockholders may not be pursued and vice versa, except for very specific situations, such as criminal cases or family disputes.
• Estate planning. A company is a great vehicle for estate planning and to secure your assets and belongings under one entity. It also facilitates setting up a will, probate and reduces procedures and costs.

Property Insurance

It is always a good idea to get property insurance.  If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property.  The value will depend on the lending institution and the purchase price of the property.  We will be happy to recommend experienced knowledgeable insurance agents for every property type.

Preliminary Closing Statement

It is a good idea to ask your Costa Rican attorney at the start of a transaction for a detailed Preliminary Closing Statement containing all costs associated with the transaction. This way there will be no surprises.  The law firms we recommend also include a variety of items that are essential to close the transaction and a set of optional services with recommendations based on our experience of what foreigners and investors need to be fully set up for their Costa Rican life.  Eg: Opening bank accounts, setting up wills, assisting with getting the property insured, etc.
Credit Quatro Legal

Closing Day

If you are purchasing the property with a Costa Rican corporation you do not need to be in the country for the closing.  It is most common that are Buyers are not at closing.  You simply need to assign a Power of Attorney with your lawyer to sign for the closing on your behalf.

Final Walk-Through Inspection

More of a formality than anything else, the final inspection takes place a day before, or the day of the closing. You or your real estate agent will visit the property to verify that all is in working order, everything is the same as when you last viewed the property, that there are no extra items left behind, and that everything included in your purchase is still at the property.

Home Services and Utilities

It is easiest if you hire your Costa Rican attorney to assist with transferring all of the utilities and taxes into your or the corporation’s name.  They are fluent in Spanish and are knowledgeable in all the necessary documentation.  This will happen after the title is in your name, which takes about 10 business days.

Property Management

It is important to have a property manager lined up in your absence.  Depending on your location and if you want to rent or not we will recommend to you different property management companies to interview.  They will manage the property in your absence, pay all the bills for you, do all the marketing and promotions for the rentals, handle all your accounting requirements, deal with any necessary repairs or maintenance, check in and check out renters, and provide concierge services for your renters.

Be Prepared

We are ready to assist you should an unforeseen glitch pop up, even at this last stage. Something at the property breaks down, or some other minor detail – no need to worry. We have encountered these problems before so we know how to handle them efficiently and in a stress-free manner.

Closing: Execute Purchase Deed And Register It Before The Public Registry.

In Costa Rica, closing a transaction normally implies signing a purchase and sale deed. This is a legal document prepared and authorized by a Notary Public, whereby, Seller agrees to sell, irrevocably to Buyer one or more assets under specific terms and conditions. All Notary of Publics are Attorneys.  For the purchase of real estate in Costa Rica, the purchase and sale deed must be incorporated in a Notary Public’s Protocol Book and registered in the Costa Rican Public Registry for it to be binding and enforceable against third parties. The purchase and sale deed is the main document to close the deal and it should reflect all final terms agreed during all stages of the transaction. There is a registration process that by law shall take about 10 business days and once completed a new title in the Buyer’s name/corporation shall be obtained. At this stage, all final numbers are settled, and disbursement instructions are signed by the parties to pay Seller, lawyers, notaries, realtors, lenders and any other third party that rendered services in connection with the transaction.

The Seller should arrange for you or your property manager to have all property keys, alarm and internet codes, and any other important information you may need at closing.

Congratulations!  You now own your own slice of Paradise!