What is the procedure to buy property in Costa Rica?
The procedure for purchasing property in Costa Rica is relatively straightforward. Foreigners may purchase and own Costa Rica property outright in both their personal name or company name.
Typically, buyers should only make offers on Costa Rica property with the assistance of a qualified real estate agent. Once you identify a property, your agent can assist you with an offer to Purchase Agreement, which then is presented to the seller and/or the selling agent.
This offer will include terms such as the purchase price, closing date, specified closing fees, and the timeframe for closing. From the day the offer is submitted, the seller has 24 to 48 hours to accept the offer or provide a counter offer. Once an agreement is reached, the buyer needs to hire an attorney to complete the Due Diligence process which normally takes 21 business days.
During Due Diligence, the attorney completes thorough legal research to ensure there are no contingencies, that the property has the correct building permits and essential services. The real estate agent is responsible for coordinating a house inspection and for taking property inventory.
The buyer, on the other hand, deposits 10% of the agreed-upon offer into escrow, on or before 7 to 10 business days from the day the offer is accepted. This deposit is fully refundable during the Due Diligence period. Afterward, the deposit becomes part of the full payment.
What is an escrow company and why is it important?
An escrow company in regards to Costa Rica real estate is a neutral third-party that safeguards monetary transactions and documentation in a secure holding account. They protect all relevant parties in a real estate transaction, including the seller, and the buyer.
In Costa Rica, escrow companies are regulated by SUGEF (Superintendency of Financial Entities in Spanish) which helps enforce the agreement which both parties agreed upon. We strongly suggest you use an escrow company for your investments in Costa Rica. We personally recommend using CR Trust Services, who have helped make escrow transactions as easy as possible for many of our clients.
How does an escrow transaction work?
Escrow funds are held in trust until all conditions in the purchase agreement have been met by all parties involved. Their main job is to ensure the transaction proceeds smoothly, which includes transfers of money and documents. They further safely hold on to assets in an escrow account until final disbursement.
Once all contractual conditions are met, the escrow transaction reaches its finalization stage.
This is the time when closing costs are paid, the money is released to the seller and your notary records the title.
What are the closing fees and costs when purchasing property in Costa Rica?
The total closing fees including transfer tax and stamps, escrow fees, along with attorneys’ fees for due diligence and closing are:
- Approximately 5.5% of the transaction value and/or the registered value of the property, whichever is higher
- Sellers pay the real estate commission
What restrictions are placed on foreigners buying property in Costa Rica?
When it comes to real estate in Costa Rica, there are no restrictions placed on foreign property ownership. The one exception to the rule is in regards to concession land.
Roughly explained as a property located within 50 meters of the ocean or within 150 meters of the country's restricted area; concession land may not be purchased by foreigners or companies owned in their majority by foreigners.
Although a foreigner can't own a concession directly, there are certain legal procedures to protect their interest in the concession. One of the most popular ways is where the concession is majority-owned in trust by a local company (or a Costa Rican resident) for the benefit of a foreigner.
How do I transfer funds when buying a property in Costa Rica?
You will need to open an escrow account to transfer funds. The next step involves submitting certain documentation to ensure the money you are wanting to deposit is coming from a legitimate source. The actual transfer of funds is completed via a bank-routed wire transfer to the escrow company.
Once the funds are deposited, they are held in trust by the escrow company until all contractual obligations and contingencies have been fulfilled by all parties involved.
It is important that the escrow company you work with is registered with SUGEF (Superintendency of Financial Entities in Spanish) and legally authorized to receive and administer third-party funds. We continually recommend working with CR Trust Services who have helped many of our clients complete the escrow transaction process.
Do I have to be a resident to live in Costa Rica?
No. Upon entering the country, foreign citizens may remain in Costa Rica for up to 90 days. You can further renew your travel visa every three months but will have to leave the country and re-enter. Many expats spend a few days in Nicaragua or Panama to renew their visas or fly back home for a quick visit before returning.
Property owners who invested $150,000 or more can apply for foreign investor residency. Digital nomads will soon also be able to receive a renewable 12-month travel visa when showing proof of income of $3,000 or more per month.
Is there a Multiple Listing Service (MLS) in Costa Rica?
No. There is no MLS in Costa Rica now, nor has there ever been. Most real estate agencies rely on their own sales databases and sharing of information.
This is why buyers need to work with a trusted real estate agent who is willing to partner up with other agencies and agents. When doing so, they will be able to show you all the properties that match your search criteria, rather than just those in their personal inventory.
Why Invest in Costa Rica Property?
Costa Rica is proven to be a reliable and stable real estate market that offers a lot of options for middle-class investors and high-income buyers. Aside from low taxes, and an economy that stimulates tourism, Costa Rica is a foreigner-friendly country that purposely expands its infrastructure to increase foreign investment.
Politically speaking, Costa Rica is a democratic society that has held elections since 1949. It is also the only country in the world without a military presence.
Why invest in the Papagayo Region?
Since the 1980s, the Papagayo region has been declared a focal point for foreign investment by the Costa Rican government. This is because it has a great climate, beautiful beaches, and is but a 30-minute drive to the large city of Liberia.
Since the economical stimuli and development began, the Liberia International Airport, commercial lots, and available healthcare facilities in the area have seen intense expansion. The force behind this is due to foreign investment and the almighty tourist dollar.
With this new influx of high-end developments and modern conveniences, you'll find many expats now living in the nearby beach communities. The locals love it here too and seemingly go out of their way to make you feel at home.
Beyond the natural beauty found on land, you can discover a whole new world when diving, snorkeling, sailing, and sport fishing in the great blue beyond.
How Is the Real Estate Market currently in the Papagayo Region?
In just one word, Papagayo real estate is booming.
There have been huge gains in property sales figures this year compared to last. The 2020 market swung from being unpredictable to the current high demand in for properties that sat on the market for years.
The fourth quarter of 2021 is showing a 15% increase in real estate market prices with inventory depleting due to a higher number of buyers than sellers. New developments are also on the rise in 2021, with a similar forecast for 2022.
The latest buying trend is the opportunity to invest, visit, and then live full-time in Costa Rica.
What are the running costs for owning property in Costa Rica?
In general, running costs in Costa Rica are significantly lower than in most places in the Caribbean or coastal areas of the US and Canada. The cost can also vary based on whether you own a condo (HOA fees) or a private home.
These fees vary between developments and are dependent on the amenities or services they offer. The more luxurious and maintenance-heavy your development is, the higher your HOA fees are likely to be.
The costs can generally range from $100-$700 per month ($1200-$8400 per year). Many gated communities can be found in the middle range, which would include 24/7 security, maintenance of common areas, and landscaping. Resort-like properties with private tennis courts and beach clubs will have the highest HOA fees.
You'll find annual property taxes in Costa Rica to be are quite low at 0.25% of the appraised value. For every $100,000 your property is worth, you will pay $250 in property taxes per year.
Depending on the size of your property, you can expect to pay $200-$1000 per year in maintenance costs.
The average electrical bill in Costa Rica is $140. Air conditioning units take up the bulk of the costs, so if you use them less, your bill should be lower. If you run your A/C all day and night, your electrical bill will most likely be above average.
The average water bill can range from $10 in a small condo to roughly $40 when living in a larger house. If you own a pool or you like to run the sprinkler and water your garden or lawn, this will increase your bill.
A normal cable package will cost you around $35 per month.
A normal internet package will also cost you around $35 per month.
You get generally get a 30-day pre-paid SIM card with 25 texts and 200 minutes for around $20. Most people, as well as, many stores and restaurants use WhatsApp here, so as long as you have internet access it's almost like having a phone.
The cost of insurance in Costa Rica is generally based on:
- The value of your home and other items your want to insure
- What you want to ensure it against
A full insurance policy combines four different classes and will have an annual cost of roughly 0.3% of your home's value. So, a $100,000 property could cost $300 per year to insure, while a $200,000 property would cost around $600.
- Class A (0.08%) — Damage caused by fire and lightning
- Class B (0.04%)— Damage caused by vandalism, hurricanes, cyclones, explosions, smoke, falling objects, vehicles, and resulting fire
- Class C (0.09%)— Damage caused by floods and landslides
- Class D (0.09%)— Damage caused by natural disasters, earthquakes, tremors, volcanic eruptions, tsunamis, etc.
Most condos have general insurance included within their HOA fee, so be sure to check their policy for double coverage.
The average cost associated with a property management agency is between $85 and 150 per month. This would include having them pay your utility bills, coordinate cleaning, inspections, and repairs.
Property management is available whether you are out of the country, or just need someone to manage your home while you're in it. If you're looking to also have the gas up your car or stock your fridge, the pricing would be on the higher end.
The minimum cost for registering your property title in the name of a Costa Rica corporation comes with an annual cost of $194. If your corporation is actively doing business, the cost is $365 per year.
- Non-active Corporation Tax — $194 — The company is not doing business, and is just being used for liability purposes.
- Active Corporation Tax —$365 — The company is actively doing business in Costa Rica, whether producing a positive income or not.