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Costa Rica Buyer's Guide

General Rules and Guidelines

1. Fall in love first. Whether you are looking for a retirement home or an investment property, if you love the area, chances are there are many others that think the same.

2. Visit the area on vacation. Rent a property that fits your purchase criteria and experience it in person. Worst case scenario you will have a great time.

3. Deal with professionals. Deal with long standing, reputable real estate professionals that have worked in the area for a while. One or two years experience is simply not enough time to understand the intricacies of a complex market such as Costa Rica.

4. Perform due diligence. Your real estate professional should perform a good deal of preliminary due diligence prior to presenting you properties. This is an extremely key step that is often overlooked by most real estate agents in Costa Rica and can end up costing you valuable time. The in depth due diligence should be performed by an experienced Costa Rican Attorney with the guidance of your real estate professional.

5. Always involve your real estate professional. Remember that everyone in Costa Rica is a potential real estate “agent” and that there is no formal Multiple Listing Service. Every once in a while a bonafide “good deal” comes to your attention through someone other than your Realtor. Do yourself the favor and make it known that you are being represented by a Realtor and get them involved in the process. A Good Realtor can determine if the property is worth looking at seriously. If the seller or “agent” is not willing to work with your Realtor than something is wrong and you should not waste any more time.

6. Give your Realtor as much information as possible. A good Realtor in Costa Rica has information on the good value properties in their area and given a good input from you can zero in rapidly on various options for you to consider.

7. Be skeptical. Don’t expect things to function as they do in your home country. Don’t assume there are services to your lot or that all the issues of the Home Owners Association are disclosed to you. If your common sense you use at home is telling you something is not right then don’t be afraid to ask questions.

8. Have Fun. The Bottom line is to enjoy yourself and have fun. Your experience in Costa Rica should be relatively hassle free and relaxing. Live the Costa Rican “Pure Life”. Pura Vida.


Frequently Asked Questions (FAQ’s)

1. Is it safe to buy real estate in Costa Rica as a foreign citizen?

 

2. Can you get Title Insurance on Property in Costa Rica?

 

3. Is financing available to foreign citizens to purchase property in Costa Rica?

 

4. Are Realtors licensed and insured in Costa Rica as they are in the United States and other countries?

 

5. Can I earn rental income on my Costa Rican Property?

 

6. Can a foreigner own beachfront property in Costa Rica?

 

7. How much are Property Taxes in Costa Rica?

 

8. What are the tax laws regarding buying and selling property in Costa Rica?

 

9. How much are closing costs?

 

10. What is the closing process?

 

11. How much are real estate commissions?

 

12. Corporations - What are the reasons people own property inside corporations?

 

13. Is there any truth to the horror stories of building in Costa Rica?

 

14. Why should I buy property in Costa Rica?

 

15. Is the government and economy stable in Costa Rica?

 

 


1. Is it safe to buy real estate in Costa Rica as a foreign citizen?

The constitution guarantees the same rights of property ownership of titled property to everyone, regardless of nationality. This encompasses all property that is titled with the exception of beachfront property. See FAQ#5.

2. Can you get Title Insurance on Property in Costa Rica?

Yes – Many international Title Insurance companies offer Title insurance in Costa Rica. In addition, many of the title companies provide escrow and closing services. Keep in mind that you should read your title policy carefully before you accept it. The Title Insurance industry in Costa Rica is in its infancy that has not been subject to many years of scrutiny as is the case in the United States or Europe.

3. Is financing available to foreign citizens to purchase property in Costa Rica?

The quick answer is yes, the long answer is more complicated.

Financing is available to foreign citizens through most of the financial institutions in Costa Rica. As a foreigner the requirements and financial information required as well as the time needed to secure financing is much more complicated than what you are probably used to in your home country.

Over the last few years the public and private banks have become more sophisticated in trying to fill the demand for foreigner financing to the extent that private mortgage brokers have sprung up as well as the Title companies joining in to provide loans to foreigners and nationals alike.

The key things to look out for are: Be aware that there can be numerous up front bank, attorney and mortgage brokerage fees that can add up to a heavy up front load. Try to opt for a simple mortgage attached to the property rather than a relatively more risky guaranteed trust arrangement preferred by most private financing companies.

4. Are Realtors licensed and insured in Costa Rica as they are in the United States and other countries?

Contrary to popular belief, there is no officially recognized licensing body for Realtors and Real Estate Brokers in Costa Rica. There are two organizations that have responded to the lack of licensing and formal training requirements and have made good progress towards educating the industry. Both the Costa Rican Chamber of Realtors (CCCBR) and the Global Association of Realtors (GAR) have extensive memberships and sophisticated training programs. GAR is affiliated with the Nation Association of Realtors (NAR) in the United States even though GAR does not require its members to be legal to work in Costa Rica. Interestingly, only the CCCBR requires their members to be able to legally work in Costa Rica.

The bottom line is in order to protect your interests in Costa Rica you should deal with a well informed, well respected Realtor at all times. Don’t be afraid to ask for references, credentials, or proof your Realtor is legal to work in Costa Rica.

5. Can I earn rental income on my Costa Rican Property?

Most foreigners who own property in Costa Rica do not live here year round and attempt to rent their property to vacationers or on a long term basis. If you work with a reputable rental and property management company as well as invest in a marketing effort to promote the rental of your property your can expect to enjoy a decent level of rental income. Much of the rental income success is a function of the attractiveness and appeal of your property as it relates to your rental market and the extent to which you successfully market the property.

6. Can a foreigner own beachfront property in Costa Rica?

The short answer is yes. The long answer is more complicated.

The Costa Rican government established the Maritime Zone Law in the early 1970’s. The first sentence of the law shows the clear intent. ‘This law is designed to protect the patrimony of Costa Rica – our Coastline’ (rough translation from Spanish). Many experts have interpreted the law as an attempt to control the zoning of the coastline that Costa Ricans have quite intelligently understood to be their best asset. Looking at the law in detail shows that indeed the usage Is controlled as is the form of ownership.

The brief summary of the Maritime law as it pertains to property use and ownership is as follows: The Maraitime Zone is designated as the first 200 meters inland from the mean high tide as determined by the Costa Rican Geographic Institute. The first 50 meters from the mean high tide is public and can contain no permanent buildings. These first 50 meters is for the free enjoyment by the public to the extent that if the only physical access to the beach other than by sea is through private property or otherwise, transit to the beach must be allowed. The Costa Rica Geographic Institute places physical markers (mojones) at the 50 meter line.

The land area between 50 meters and 200 meters from the mean high tide is held in the following ways: An overwhelming majority of the property is controlled by the respective municipalities who in turn grant concessions for the use of the land. Most concessions have 20 year terms and can be eternally renewed as long as you follow the rules of the concession and can be transferred or sold with the approval of the municipality and the Costa Rican Tourist Institute (ICT). These Concession properties function much like long term renewable leases and have specific usage restrictions based on what type of concession has been granted. Concessions can in theory have sub concessions (ie to sell individual condos on a single concession property). Technically concession properties must have at least 51% Costa Rican ownership. Costa Rican Attorney’s have devised ways in which foreigners can own concession outright. There are many schools of thought on this issue and due diligence should be very detailed if you are considering acquiring a concession property.

There is a small minority of land area between the 50 meter and 200 meter mark that is titled. These properties were titled prior to the enactment of the Maritime Zone law. These properties enjoy the status of being titled but are still subject to the zoning laws of the Maratime Zone of their particular municipality or beach area.

7. How much are Property Taxes in Costa Rica?

 

Currently property taxes in most municipalities are .25% of your properties assessed value per year. If your property has an assessed value of $100,000 then your tax for the year would be $250. Rarely does the assessed value of your property exceed the real value and in most cases the assessed value is much lower. Each property owner is responsible for paying their taxes at their respective municipal office. Most pay at the beginning of the year for the whole year in advance. Concession property is taxed at a different rate (usually higher) varying by municipality. 

There is a new property tax in effect as of the end of 2009 that applies to properties of high value.  The calculations of this tax a better left to professionals trained to perform this but as a rule of thumb if your property is worth over $500,000 then you will be subject to approximately another .25% of the value per year.  Basically doubling the normal property tax.

 

8. What are the tax laws regarding buying and selling property in Costa Rica.

 

There is a property transfer tax of 1.5% of the transaction value. Currently there is no capital gain tax on property sales in Costa Rica unless it is considered a business activity. Many property purchases change ownership through the sale of the shares of the corporation that owns the property thereby avoiding the payment of the property transfer tax. Many Attorneys do not recommend this since in effect you are taking on most likely a very low cost basis for your property. In the event that a property gain tax is enacted then when you sell you will have the additional gain due to your low cost basis. It is a good policy to record the sale at the sales value and pay the property transfer tax.

 

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