Real Estate Purchasing Process
You will hear many things when you talk to people about buying real estate in Costa Rica. Investing in real estate in Costa Rica can be a safe, exciting, and extremely rewarding endeavor. Whether buying land to develop yourself, buying an already developed property, or buying for investment purposes, this is a great start to your research. If you follow this process, you are much less likely to have any problems with your purchase, even if you’re not working directly with a real estate agent.
Here we will address the purchasing process in its entirety, as it should be carried out. Keep on this path and you can rest well at night knowing that things are going properly…and that’s worth gold.
1.) After deciding that, yes, Costa Rica is for you – and be assured it’s not for everyone – and talking to lots of people while traveling around to find your favorite part of the country, you find the right property, hooray!
2.) Choose your lawyer. While this could be moved down in the process, you should not be charged anything by your lawyer until closing on the purchase of your property, so why not have good professional advice the whole way through. Your legal costs will not increase. Confirm those two points.
3a.) You make an offer on the property. If working with an agent, he/she will help you draft an initial offer and will then present it to the seller or seller’s representative. If not, you will present your offer to the seller or seller’s representative. It’s not a complicated document, and truthfully it doesn’t need to be on paper until it has been agreed upon by both parties. Your offer should include: Your offered purchase price, The amount of your escrow deposit (10% of purchase price is standard), The time you require to do due diligence (30-60 days is standard and ample time unless there are problems, in which case the term of your not-yet-written contract can be extended)
3b.) Simultaneously along with making an offer, now is a good time to send a copy of the plano catastrado (plot map or plat) to your lawyer for an initial title study. If the person you’re dealing with can’t produce this, with the shape of the property on paper at least roughly matching the shape in the field, STOP NOW, you’ve got major problems. Size and location also need to match here.
4.) Counter offer(s) are almost always made unless you decide to offer full price…which you don’t. You and the seller come to an agreement on a price and terms.
5.) Get these details on paper and signed by the seller to be sure that everything thus far is clear. Send the offer (aka Offer To Purchase or OTP) to your lawyer who will now write up a Sales and Purchase Agreement (SPA).
6.) Read the contract, make corrections, re-read it and have a friend read it. This document is legally binding once signed. Once your lawyer has made any corrections to your satisfaction, sign it and send it over to the seller for their signature.
As both parties have now signed, you are now "under contract". For the term of the contract, the seller can not take any more offers on the property. You must now wire your earnest money deposit into a registered escrow agent’s escrow account.
7.) Due diligence has begun. Now you have time (as defined in the OTP and SPA) to have professionals resurvey the boundaries of your property, do a home inspection, and even do a soil study if there is any doubt as to the stability of the land. For most properties, due diligence shouldn’t cost more than $2,000 to $3,000 USD. Your lawyer uses this time to do a more in depth study into the property’s history, present legal status, and potential uses in accordance with zoning, setbacks, and easements.
8.) Okay, you have now walked the boundaries of your property with your topographer and they match up to the plano. You read the home inspection report and are satisfied with it, and your soil engineer isn’t worried about the stability of your land. Congratulations! You’re ready for closing.
9.) Get the rest of the necessary money into the escrow account before the closing date. Show up, sign the documents, and become a proud owner of a wonderful property in Costa Rica!
Ben Morris,
December 2011
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