Q and A on CLOSING COSTS, LEGAL PROCESS, MAKING AN OFFER, OWNER FINANCING, INSURANCE AND TAXES, AND BUYING A PROPERTY WITH A COSTA RICAN CORPORATION

 

Q. What are my rights as a non-Costa Rican buying property in Costa Rica?

One of the main attractions of Costa Rica real estate is that you have the same rights as any Costa Rican resident to own titled, fee simple property in Costa Rica. If you are buying CONCESSION property (which I don’t list or sell), there are restrictions if you are not a naturalized citizen. However, I only list, represent and sell FEE SIMPLE, TITLED PROPERTY, in which you are 100% eligible, entitled and protected under Costa Rica law to own property here.

Q. What are the costs typically involved in the purchase process in Costa Rica real estate and do I need a lawyer for the transaction?

You must use a lawyer for any property/title transaction in Costa Rica, and the Buyer is typically responsible for closing costs and the legal fees, so this is good information to know prior to making an offer.

The lawyer is a key player in the transaction as their duties include legal representation and counsel, due diligence and background check on the property, registration of property deed, and certified public notary for all documentation.

As a rule, your lawyer should be bi-lingual (if you don’t speak Spanish), with an office and website, dependable, computer literate, and with a good work ethic etc. and remember, NEVER deposit any funds into a lawyer’s personal account or seller's account, alwasy use a registered escrow account. If you lawyer doesn't have an escrow company, this is a red flag.

 

Q. What law firm do you recommend?

I use and recommend to my clients the law firm of RE and B. The partners are fully bi-lingual, the firm has an office in Jaco and another in San Jose, I’ve used them almost exclusively for over ten years, there site is here http://rebattorneys.com/  and the escrow firm I use is Trust Co, with Scotia Bank, their website is here http://www.trustcocr.com/

 

 

 

Q. What are the typical closing costs and legal fees?

Here are the basic fees that you’ll need to know about, all percentages will be based on the actual Purchase Price.

1.25% percent Legal fee (lawyer’s fee)

1.5% percent transfer tax

$800 for new corporation (in most cases, you’ll want to hold your property in a newly registered corporation that has no past history or holdings)

0.8 % percent for new corporation stamps and fees

$500 escrow fee

$350 due diligence fee

Please note that sometimes Sellers want their own lawyers to check the documentation; however that is not part of your expense.

Q. You mention “corporation”, why should I use a corporation to buy and sell property in Costa Rica?

Almost all of Costa Rica property transactions are done using a corporation. This option has many benefits and is the obvious choice for ownership of property and advisable if you are planning on opening up a business in Costa Rica. Some benefits include…

  • A corporation allows you to separate your personal liability from your property

  • It’s easier to transfer property out of your corporation into another in the case of a sale

  • You can also open a bank account and conduct business and pay taxes and bills using your corporation

  • The assignment of corporate shares can be divided as needed in the case of multiple owners.

Q. How do I get a corporation?

In many cases the seller will sell his property with the current corporation and all shares will be assigned to you as the new president of the corporation. This helps save money on closing costs (approximately 0.8%, as well as $800 dollars for a new corporation). Your lawyer will perform a background check on the corporation to make sure there are no liens, lawsuits, encumbrances etc. After the background check the lawyer will advise that you can proceed with buying the property with the corporation, or, recommend that you buy the property with a brand new corporation.

Q. And what are the steps involved in making an offer and closing?                                                                                                        

Here’s a brief description of the steps involved.

               

  1. I will create a LETTER OF INTENT for you that we will send to the seller which will outline the basic points of the deal (price, terms, timeline, etc).

  2. Seller will review and has the right to counter, accept, or reject. When both Buyer and Seller have come to terms that are mutually accepted and LOI has been signed by both parties, Buyer can then open up an escrow account. Through the law firm of RE and B, we use the escrow company Trust Co. a fully registered escrow service, set up specifically for real estate transactions in Costa Rica. Their website is here, www.trustcocr.com

  3. You will need to deposit 10% of the purchase price into escrow to take the property off the market and lock in the terms.

  4. When deposit is confirmed, your lawyer performs the due diligence on the property and gives you the results. I also help at this stage to assemble all paperwork, and/or receipts proving that all bills, taxes, etc are paid up to date and all services are in good standing. You can also order a home inspection at this point if desired.

  5. You have 48 hours after the due diligence report has been finished and sent to you, to either proceed or cancel the deal. If you cancel at this point, your deposit is fully refundable.

  6. If lawyer recommends proceeding and the due diligence report is acceptable, we move to the closing stage. Once a closing date is set, the balance of the funds are sent to escrow. On the date of closing, paperwork is signed and notarized by the necessary parties, funds are wired from escrow to the designated account(s), and new ownership information is duly registered in the public registry.

Q.  What about getting financing with a Costa Rica bank?

Costa Rica Banks typically don’t loan to foreigners unless you have property free and clear already in country that they can use for collateral. There may be some exceptions but the application process is lengthy and tedious. You are better off considering owner financing or getting a home equity loan in your home country to leverage your Costa Rica transaction. In the case of buying in a new development, there may be developer financing available as well.  

Regarding the increasingly common option of  Seller/Owner financing, these terms can vary but here’s an example of what I’ve seen lately in this kind of arrangement.

  1. Half down (or more) at closing.

  2. Balloon payment of the balance in three to five years (or sooner).

  3. “Interest only” style of loan (you are paying interest on the balance, this resets every year. Interest only loans do not pay off the principal so it’s basically just buying you time). Percentage rates can vary but are usually in the 4% to 8% range. You can pay off additional principal in small balloons if you want and that could lower your interest payment accordingly.

  4. No prepayment penalty.

  5. Property is annotated with a registered mortgage lien or in other cases in a Guaranteed Trust.

 

EXAMPLE (let’s run some numbers on a theoretical purchase price of 195k)…

 

With a purchase price of 195k, let’s say Buyer paid 100k at closing and Owner financed 95k for three years with an interest only rate of 7%. Buyer would be paying $6650 a year every year in interest until Buyer paid off the 95K in a balloon at the end of the term or sooner. Remember, Buyer can reduce your interest payment if you make some smaller balloon payments prior to the end of loan term.

Q.What about taxes and insurance?

Taxes and Insurance are about the same amount, and cheap! Taxes are 0.25% of the registered purchase price per year. And basic insurance is about the same. So for a house valued at 200k, we are talking $500 dollars per year. Basic insurance is for flood, earthquake, rain damage, tree damage etc, again about $500 per year for a home valued at 200k.

Inventory Insurance for personal belongings, (inside the house) is an additional fee based on your inventory; the insurance company will come out and give you an assessment and estimate for that.

What about costs for Maid/Pool/Gardener?

Manual labor for maids and gardeners can run from $2 to $ 4 dollars an hour and a pool guy will run you about $50 dollars a month for most average size pools this will include all chemicals.

 


More Costa Rica Blogs by Colin Miller



PLAYA HERMOSA, BIG TIME SUN AND SURF!


 

PLAYA HERMOSA 

 

 

PLAYA HERMOSA LOOKING SOUTH

 

 

OLIVER RIDLEY HATCHLINGS

 

HILLS OF PLAYA HERMOSA

 

There are two beaches with the name “Playa Hermosa” in Costa Rica. One is in the Central Pacific (just south of Jaco), the other in Guanacaste (Northwest Costa Rica). The Playa Hermosa in the Jaco area is a long expansive beach of cinnamon colored sand and is home to one of the most consistent surf breaks in Central America. However, despite its growing popularity, it still retains its laid back “pura vida” vibe and gorgeous natural setting.

 

This “Blue Flag Winner” beach is only a 1.5 hour drive from Costa Rica’s main International airport in San Jose, and is just 1 mile south of Playa Jaco. Hermosa can be easily reached from the Coastal Highway (HWY 34).  Playa Hermosa (Hermosa means “beautiful” in Spanish) boasts plenty of wide open and pristine shoreline, yet with a conservative number of hotels, restaurants and bars that dot the shoreline.

 

As testament to its consistent surf, Playa Hermosa has surf competitions almost every weekend throughout the year, and most famously hosted the 2009 Billabong Surf World Championship. The beach was packed with spectators and participants from all over the world, and the waves did not disappoint!

 

A visit to Hermosa may include walking or driving along the unpaved ocean road to the extreme south end of the beach where there is the Hermosa Wildlife Refuge, a sanctuary and nesting spot for Olive Ridley Sea Turtles that instinctively travel thousands of miles to come ashore to lay their eggs. When they hatch, the baby turtles, also by instinct,  make their way out of the broken egg shell and across the sand to the open ocean in a spectacular, unforgettable, and emotional display of Mother Nature at work.

 

This beach will maintain its minimally developed feel for years to come as there are very few titled beachfront areas in Playa Hermosa, however, I do have these fully titled beachfront options on my site and please contact me to discuss them. As Natural conservation is important in this area, most residential offerings are a few miles from the beach. These properties are an excellent opportunity for the buyer that wants a pristine, minimally crowded shoreline of big surf and natural beauty, yet very close to major amenities and conveniences.

 

I also have listings in the hills and bluffs above Playa Hermosa which feature panoramic, breathtaking ocean, mountain and sunset views. Some ocean view locations are more impressive than others but compromise can come into play as some roads are 4x4 only in the rainy season.

 

I am 100% “brutally honest” regarding all of my listings and would be happy to share with you my opinions regarding the rewards and challenges with each listing. Fortunately, I believe that if you have decided on Costa Rica, than I have something for everyone in this area; let me use my expertise and experience to guide you to the best opportunities that fit your needs. Please call or write regarding any of my listings or for further information regarding the Playa Hermosa area.

 

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Esterillos and Bejuco Area Descriptions, Pictures


Where are Bejuco and Esterillos Beaches?!!

These areas, pronounced Bay-who-co and Ester-eee-ohs, are south of Jaco but still in what I consider the Jaco Area. While Jaco is the epicenter of growth and entertainment in the Central Pacific, it’s not for everyone. Fortunately, there are a variety of locations in the area for those that want to be close to Jaco, but not IN Jaco proper.

So let’s take a little drive south…But wait, before we get started, note that there are two Playa Bejuco beaches in Costa Rica, and there are two Playa Hermosa beaches in Costa Rica. The Playa Bejuco and Playa Hermosa in the Central Pacific are the ones referred to in this blog and in all my listings. The other two are in the Northwest province of Guanacaste, Costa Rica. 

Heading south from Jaco on Highway 27, the beautiful coastal road, flat through Jaco, begins to climb and skirt ocean bluffs above the endless Pacific, offering wonderful views and plenty of places to pull over for photo ops. Even after over 10 years of living in this area of Costa Rica, the “embarrassment of riches” of natural scenery here never fails to impress me and put me in a good mood. Talk about a great commute! Especially after all those years battling California traffic jams on a daily basis. Life is too short for that grind.

JACO AS SEEN FROM THE COSTANERA HWY (below)

The highway begins to flatten out as you cruise south through Playa Hermosa on the “Costanera” (Spanish for Coastal Road) through rice farms, stands of teak trees, immense green pastures and jungle covered hills. The ocean is no longer visible on the right as the scenery changes. It’s now farms and meadows, the scenery dotted with an occasional herd of horses or cattle, a few small clusters of buildings, a modest country church, a school yard with local kids in their light blue uniforms, soccer fields and roadside restaurants, and the ubiquitous Costa Rican public bus stop.

AIREAL SHOT OF HIGHWAY 

 

After about ten glorious miles, you’ll see signs pointing to the entrance roads (there are two) to Playa Esterillos Oeste. The “playa” (playa=beach in Spanish) is not visible from the highway. However, let’s pull off the highway as we can be on the sand at Esterillos Oeste in about two minutes.

 

Esterillos Oeste beach with La Sirena (Mermaid) statue in the background

Esterillos Oeste

 

The town of Esterillos Oeste features a supermarket (called Super Sol), a handful of small restaurants, hotels and bars and a few locals meandering around the bus stop or checking out the surf. Once considered an area ripe for a development “boom”, the town now has reverted back to a sleepy seaside Costa Rican backwater, and that’s just how some people like it. In my opinion this town has such a beautiful beach, but it’s looking a little rough around the edges these days. The area is positioned for a comeback and we hope that the comeback is a result of a period of sustained growth and responsible development. 

Bus stop Esterillos Oeste

TIDE POOLS AT OESTE (BELOW)

 

While the big developments in Esterillos Oeste have been shelved for the moment, there are a couple of modest gated communities here with homes averaging in the 125k range.  Not much to do in the town itself at the moment, but plenty of beautiful beach to enjoy. In fact, this is one of my favorite beaches in Costa Rica, there is a huge amount of wide open smooth beach lined with coconut palm trees (careful where you park or sit), there’s a great section of tide pools and an awesome bronze statue of a mermaid out on a large rock! 

 

 

Homes on "Canada Hill" In Esterillos Oeste

 

After we’ve walked out in low tide to check out the mermaid, let’s get back in the car and head back to the highway. We’ll pass one of the few gas stations in the area, pay about 50 dollars to fill up our Toyota Rav 4, and maybe grab a bite to eat at the Restaurante next to the gas station (the name changes every six months, so I won’t put the name, in fact I can’t even remember what the current name is).

We get back on the road, head south and within about a minute we see more beaches visible on our right side. These beaches are really a continuous ten mile long section of coast, separated by rivers and tidal inlets, which create natural breaks, consequently dividing the coastline into four separate palm tree and jungle lined beaches. These beaches are called Esterillos Oeste (east), Esterillos Centro (center), Esterillos Este (west) and Bejuco Beach. Esterillos is Spanish for “estuary” and Bejuco is Spanish for “vine”. 

ESTERILLOS ESTE (BELOW)

These areas are much less populated than Jaco, yet are only a 15 to 20 minute drive away.  And, unlike other areas of Costa Rica which can become very dry and brown in the long Costa Rica dry season, these beach areas remain green year round, lush with tropical vegetation, and lots of un-crowded, beautiful, serene beach spots, country roads and pastoral scenes.

RUSH HOUR ESTERILLOS CENTRO (Below)

 

We offer several listings in this area, all within a short drive or walking distance to the beach. There are a few grocery stores in the area, some great restaurants and hotels. Outdoor activities include horseback riding, ATV touring, surfing, swimming, hiking, fishing, birding, sunset gazing, hammock lounging, etc. There are tide pools at Esterillos Oeste as well as a turtle sanctuary, and some of our most popular and sought after residential options at gated communities within 200 yards to the beach at Bejuco.

Bejuco beach is the last beach on our southernly route and the furthest southern beach in my market area. It also happens to be one of the best. Playa Bejuco is the last good beach before Costa Rica's most popular national park, Manuel Antonio National Park, which is another 30 minutes to the south. Bejuco has two of my favorite gated communities, just 200 meters (yards) from the beach, and both communities have brought me many clients who've now become friends over the years. I am grateful to live in this wonderful country and look forward to showing my clients the posibilities that exist for your future Costa Rica Dream Property. 

 

Church at Esterillos Oeste, Costa Rica

Neigh!.... bors at Esterillos Centro

 

Beach at Bejuco

 

 

Beach at Bejuco

 

 

Another glorious "moment in time" at Bejuco Beach