The Golden Rules of Buying Real Estate

By Alvaro Carballo

Special to The Tico Times

March 17, 1995

If you have come to Costa Rica to retire, as an investor or as part of a business venture, sooner or later you will find yourself purchasing some kind of real estate. Although such an investment will probably be one of the most expensive you will make in this country, I never cease to marvel at how little time and thought most investors give to their real estate investments.

Costa Rica is one of the best places to invest in real estate from a business point of view. In the last 15 years, land prices have been increasing steadily, and I believe they will continue doing so while we have an increase in tourism.

The system that allows you to purchase real estate in this country might sometimes seem complicated if compared with those you are familiar with at home. This is not true if you have a good understanding of how it works. It may have pitfalls, especially for individuals who are misled by unscrupulous sellers or brokers, but if properly used, it provides good security.

The most important part of your purchase is the registration of the purchase document, not the deed itself. All property is registered in a central registry (Sección Propiedad-Registro Público). This registration allows everybody to know officially who the owner is and the conditions of such ownership. Most liens and encumbrances are registered in the same Registro Público, in different sections.

There is also a registry where property maps (also called plot or plat maps, or in Spanish - planos catastrados) are registered, called the Catastro.

Before you purchase, always make sure the information in the property section and the Catastro coincides with the property you are shown. In my experience, attorneys seldom check the catastro and almost never assure themselves that the actual property you are shown is the same one they are transferring. To do so, you will need a topographer.

Your first important decision is how to find the property you wish to purchase. Find a real estate agent you can trust. This last can be best achieved by referral from a friend or by looking up the agent's name in the Costa Rican American Chamber of Commerce (AmCham) or the Cámara de Corredores de Bienes Raíces de Costa Rica; even then, try to obtain references.

The second thing you must do is find a competent attorney. Try to have him or her involved early in your dealings. Referral is also the best way to find the right attorney.

If you have any doubts about what your real estate agent or your attorney is telling you, do not hesitate to get a second opinion.

Never use the seller's attorney as your own own.

With respect to real estate agents, keep in mind that customarily the brokerage fee is paid by the seller only if the property is sold, so you might think twice about the advice and information obtained from a person who will make his money only if you purchase the property you're looking at.

The cost of your transaction is another thing you must know. Usually you will end up paying approximately 5.28% of the sale price in transfer taxes, stamp taxes, registry fees and notarial fees. This is usually paid half by the buyer, half by the seller. This percentage does not include mortgage costs which are additional and paid by the purchaser.

The following are what I call the three golden rules of purchasing real estate:

1. Use your common sense. If the deal is too good, check it carefully. Make sure you are dealing with reputable individuals. This is a small country, and if you ask, chances are you can always find references about the persons you are dealing with. Just because the seller or his agent speaks your language, does not make him or her automatically honest.

2. Be well informed before you start. Select those professionals you want helping you before you need them. Have an idea of what you want, prices and possible future use of your land. Always buy with the thought that some day you will want to sell.

3. Be patient and take your time. If possible, try to live on the property before you buy. Take a lease with an option to purchase. Inform yourself of adjacent land prices, criminality or other problems in the surrounding community before you take definite action.

In my own experience, it is difficult to solve real estate problems once you are deep into them. A careful purchase is your best medicine.

Due to the lack of technical and practical information about purchasing real estate in this country, I decided to write a guide book on the subject titled "Purchasing Real Estate in Costa Rica." In it you will find a series of technical and practical information that will help you in your decision. Another book I found illustrative and entertaining on this same subject is "Developing and Managing profitable Rental Real Estate in Costa Rica" by Frank J. Thomas G.

Good luck! I sincerely hope you will enjoy your property in Costa Rica!

Copyright 1995

Note: The above information is not to be used for any other purpose other than private study, research, criticism or review. Thank you.