15 Frequently Asked Questions

1. As a foreigner, can I buy and own property in Costa Rica?

Ownership of real estate in Costa Rica by foreigners is fully guaranteed by the constitution. In addition, foreigners enjoy the same ownership rights as Costa Rica citizens, regardless of whether the property is placed in the name of a corporation or in the name of an individual.

2. Is financing available in Costa Rica?

Financing through a bank is still kind of complicated because of the bureaucracy. The interest rate is between 8.5% and 12% in a US$ loan. Most of the deals in Real Estate are cash deals or financed by the owner or seller, usually very short term with high down payments (like 30%-50%). Sometimes the buyer can get better rates and faster approval (or easier approval) using a first or second mortgage in their home country on property they have there, then the cash can be used for buying property in Costa Rica.

3. What is should I know about buying property in Costa Rica?

Ask to see an official Costa Rican Registry Survey of the property. If one has not been completed, which can be common when purchasing a section of a larger parcel, request that any deposit be held by the attorney until an official survey has been provided. If this is the case, ask to review the official Registry Survey of the mother parcel.

Always be sure to include any obligations promised by the owner (water, road access, etc.) in the written agreement. If the promised time for completion of these obligations is considerable, request an amount of the purchase funds to be held by the attorney until the obligations have been met. Check if all taxes on the property have been paid up to date. These are the basic steps, but the process of buying property in Costa Rica requires further due diligence to do before we can close.

4. How much property taxes?

Property taxes (Municipal Tax) throughout Costa Rica are very low when compared to the United States, Canada or Europe. The municipal tax is administered at the municipal level and varies throughout the country. Paid quarterly, the type of property, location and other factors contribute to the calculation of this tax. Here's one of the real perks. Real Estate taxes here are painless. Taxes on a $250,000.00 home are about $250.00 per year, and includes the local municipal charges, trash, etc. as well.

The real estate tax is based on the declared value of the property. This tax is applicable throughout the country regardless of the properties location and payable when transferring title.

5. What about closing costs?

The government collects a 3% transfer tax on all Real Estate transfers. Not to worrry! A lot of homes are held in a corporation, so simply buying the corporation includes the Real Estate and no transfer tax, just a small attorney fee. Another good need for an attorney is to assure yourself that the only assets of the corporation are the Real Estate with no liabilities.

Attorneys will usually charge $50.00 or less for a title search. Title insurance is also available here, your attorney or realtor can advise on this option.

6. Do I need to use a Realtor or Broker?

If you are buying property in Costa Rica, you should always solicit the services of a reputable and well-respected real estate company. There are many "Street Realtors" who are more than willing to show properties and seeking a sales commission, yet lack the resources and knowledge necessary to provide you with information critical to complete a legal and successful transaction. Do not think you will get it cheaper by using anybody else who is helping you with the purchase. It is like an unwritten law in Costa Rica that everybody has the right to ask a commission by just bringing buyer and seller together.

The services of a professional real estate company can be invaluable when you are buying property in Costa Rica, both during and after the purchase. Choosing the right agent will help you to build your knowledge of the area and compare values of properties. ABC Real Estate will provide the experience and expertise to answer all your questions.

7. Do I need to use an attorney?

Always be sure to meet with an attorney who can speak your language and answer your questions. ABC Real Estate will refer the services of a reputable attorney in the area who speaks your language and knows the specific needs of foreign property purchasers who wish to buy property in Costa Rica.

8. What to do first if I found the property I would like to buy?

Having selected your ideal property in Costa Rica, you will want to be absolutely certain of the legalities of the purchasing process, and particularly your rights in a foreign country. This is where ABC Real Estate will ensure that you have expert assistance and will guide you through each step of the buying process. When you have decided on a certain property the first step is to deposit a small amount in order to take the property off the market and reserve it until the remaining steps have been completed. The most common procedure is to establish a earnest money deposit agreement together with a down payment. This is usually 10% of the purchase price. Within this agreement you accept the terms and conditions to purchase the property.

ABC Real Estate will help you to establish this agreement and include all the necessary paragraphs in order to have a smooth and secure transaction.

9. What is important to know about buying property in Costa Rica?

Ask to see an official Costa Rican Registry Survey of the property. If one has not been completed, which can be common when purchasing a section of a larger parcel, request that any deposit be held by the attorney until an official survey has been provided. If this is the case, ask to review the official Registery Survey of the mother parcel.

Always be sure to include any obligations promised by the owner (water, road access, etc.) in the written agreement. If the promised time for completion of these obligations is considerable, request an amount of the purchase funds to be held by the attorney until the obligations have been met. Check if all taxes on the property have been paid up to date.

These are the basic steps, but the process of buying property in Costa Rica requires further due diligence to do before we can close. ABC Real Estate will work closely with the attorney and will do the follow up in order to have a smooth closing that will be completed to everybody's satisfaction.

10. How is title transferred?

When buying property in Costa Rica, property is transferred from seller to buyer by executing a transfer deed (escritura) before a public notary. Unlike common law countries, such as the United States and Canada, where the role of the notary is limited to authenticating signatures, in Costa Rica the public notary has extensive power to act on behalf of the state. The public notary must be an attorney and she or he may draft and interpret legal documents, as well as authenticate and certify the authenticity of documents.

Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry within 45 to 60 days after presentation.

11. What if I found a property by myself and I need assistance to purchase?

ABC Real Estate has served as a buyer's agent many times and will be glad to assist you. We can offer you a professional service during the whole purchase process. We have also worked as an intermediary where seller and purchaser contracted us in order to help with the negotiation and purchase.

12. Can I get financing in Costa Rica?

Financing through a bank is still kind of complicated because of the bureaucracy. The interest rate is between 8.5% and 12% in a US$ loan. Most of the deals in Real Estate are cash deals or financed by the owner or seller, usually very short term with high down payments (like 30%-50%). Sometimes the buyer can get better rates and faster approval (or easier approval) using a first or second mortgage in their home country on property they have there, then the cash can be used for buying property in Costa Rica.

13. How transferring title with financing?

If the purchase price is financed, there are generally three alternatives for selecting the notary/attorney. If the seller is financing a large percentage of the purchase price and a mortgage needs to be drafted to guarantee payment, then the seller may request that her or his notary/attorney draft the transfer deed.

If a property is purchased 50 percent cash and 50 percent financed, it is common for the buyer's attorney and seller's attorney to jointly draft the transfer deed and mortgage in a single document. This is known as co-notariado.

Finally, the buyer may insist that his or her notary/attorney draft the transfer deed and let the seller's notary/attorney draft a separate mortgage instrument. In this case, because the mortgage is being drafted separately, it carries a higher registration fee.

14. How much are the closing costs?

The general custom is for the buyer and seller to share equally in the closing costs. This can be modified by agreement and usually depends upon the particular transaction. Closing costs containing the notary fees are, based on the real sales price, 1.5% from the first one million Colones, the local currency, and 1.25% on the balance.

Further the transfer land tax, legal fees, and miscellaneous fees which is about 2.56% of the declared value of the property. For the purpose of lowering the property transfer land tax, it is a common practice to lower the gross amount paid by declaring a much lower sum than the actual sales price. Be aware that acting in this manner could cause problems in the future. As always, it is recommended that you consult a lawyer about closing costs before buying property in Costa Rica.

15. How much are the property taxes?

Property taxes (Municipal Tax) throughout Costa Rica are very low when compared to the United States, Canada or Europe. The municipal tax is administered at the municipal level and varies throughout the country. Paid quarterly, the type of property, location and other factors contribute to the calculation of this tax.

The real estate tax is based on the declared value of the property. This tax is applicable throughout the country regardless of the properties location and payable when transferring title.