Aside from starting the financing process, the first real step retirees take toward putting down a deposit on a piece of property will be preliminary due diligence. We’ll get into the details of comprehensive due diligence in the next chapter, as they depend on a number of factors and are often very involved. There are a few basic, initial checks for deal breakers that you should make immediately before even making an offer. No one wants to waste two months navigating price negotiations and lining up financing only to find that the “owner” does not have the authority to close the deal.

Start by meeting the owner. As mentioned before, this is an important step for putting you in a better bargaining position, as well as for avoiding several kinds of fraud. This won’t be as important if you’re dealing with an established development with its own sales office and a track record, but when buying a farm from a Costa Rican or a house from a foreigner it becomes crucial. If you can’t meet the owner, talk to him or her on the phone or otherwise make contact that confirms the owner’s wish to sell. As mentioned before, the blocking of access to the owner isn’t necessarily a red flag, however it should make you cautious.

Next, look up the property on the National Registry’s Web site. Every property in Costa Rica has a number – called the finca number – under which it is inscribed in the National Registry. Ask the owner for this number and go to the Web site www.registronacional.go.cr. After the welcome page, click on the icon labeled Bienes Inmuebles, near the top of the homepage. In the menu on the left side of the screen, click on Servicios en línea, then click Solicitud de Informe. The next screen is where you enter the number of the finca. The number you have will look something like this: 5-065078 F 000. The first number will be a number, one through seven, that indicates the province where the property is located– in this case Guanacaste, or five. Select the province number from the pull down menu. The next number is the number of the property, or Número de finca. Type it into the second field manually. The following letter indicates whether the property is a piece of land (M) or a condominium unit (F). Pick the appropriate letter from the pull down menu. Finally, type the last three numerals – the Número de derecho – into the fourth field. Type in the letters that you see in the squiggly little picture (it’s a measure to keep computer programs from automatically accessing the Registry) and click Consultar.

The next screen should be a big blue box with lots of Spanish-language legal jargon in it. For the moment, all you’re interested in is the line near the bottom of the page that says Anotaciones and another just under it that says Gravámenes. Next to both of those words you want it to say NO HAY, meaning there are no liens or encumbrances. That’s the easiest scenario. Of course, liens and encumbrances are not deal breakers (people sell properties with mortgages on them all the time) but at the very least this step will tell you what exactly you’re negotiating over. If any liens or encumbrances do turn up, you may want to have the results of your search translated or go over it quickly with your lawyer.

In addition to liens and encumbrances, the registry search will tell you who owns the property. The first line under the heading Propietario contains that information. There you will see either the name of a person or, as is increasingly common, the name of a sociedad anónima, or corporation. Properties owned in the name of corporations are fairly common practice in Costa Rica as a way to avoid the property transfer tax and protect the asset from seizure in the event that the owner is personally sued. While ownership through an S.A. should not necessarily raise a red flag, it is a signal you will have to delve a little deeper. Either now or later in the due diligence process, you or your lawyer will have to answer the following questions:

- Who has the power of attorney to dispose of the corporation’s assets (ie – this property)?
- Is that the person with whom you’re negotiating?
- Does the corporation have any other assets? Any debts?
- Is it a new, clean corporation, or an old on with a history?

The process of doing a complete background check on a corporation is a complicated one and best left up to your lawyer. Finally, this might sound strange, but visit the property several times and during several different times of day before you start negotiating over it. A surprising amount of retirees purchase property in Costa Rica without even seeing it. Maybe you have that kind of money. More likely, however, you’re going to want to know if there’s an auto body shop next door, if the view is as described, if the driveway is drivable, and if the “rainforest” and “beach access” advertised actually exist.

As a side note, many responsible brokers have already done a certain amount of basic property background checking before listing the property. They will have files on the property that contain tax and utilities receipts, as well as provide you with any other documentation that might be needed to establish ownership. Still, even responsible brokers won’t have all this background data for newly or un-listed properties, though they may be willing to assist you with these preliminary steps.

Anyone who retires I Costa Rica and want s to buy property should become familiar with these steps.

Due diligence is the process of researching the physical and legal status of the property you are about to buy before you buy it. During this process, you are confirming that the property is what the seller says it is; that it brings with it no legal complications that will make your life difficult; and that you can do with it what you have planned.

Depending on the identity of the owner, the size of the property transaction, and your plans for the property, your lawyer could carry out due diligence or you could hire a due diligence professional. Likely your lawyer would handle the hiring of this person and receive all the data that person collects. Once again, be sure to ask for references. Along with the due diligence professional, you will likely want to hire a site surveyor as part of the due diligence process. Keep in mind that whether you hire extra professionals to carry out due diligence depends on what you want to do with the property.

If you are buying a condominium in a development that has all its ducks in a row, your lawyer’s services will be all you need. If, however, you’re buying a building or a piece of land where you want to do some sort of construction – be it an addition on a house or a 200-unit development – it will be necessary to do a more detailed analysis to make sure you will be able to get the permits necessary for the project you have in mind. That could require everything from a site survey to a preliminary environmental impact study.

Though the buying process isn’t as neatly predictable as one might want it to be, here are the basic steps in more or less chronological order to help you purchase your retirement home or property in Costa Rica:
- Find a property
- Check it out by doing some preliminary due diligence
- Meet the owner and start the negotiation
- Offer and counter-offer
- Sign the sales agreement and put down a deposit or purchase an option
- Line up financing
- Complete the due diligence process
- Make any contract adjustments according to what you turned up
- Have notary draw up the document that will be the deed
- Sign the deed at closing, along with the seller
- Send the notary to the National Registry to register the deed
- Pay transfer taxes, notary fees, broker fees, and administrative fees
- Within two weeks of submitting the deed to the National Registry, the property should be registered under your name or corporation.

Some of these steps can take place simultaneously, especially on the financing end, which is something to keep in mind even before you find the property you want to buy, as lining up the actual payment can take some fancy logistics. When planning your purchase and signing sales agreement, make sure you know where the money is coming from and when it will arrive. If you’re paying cash, set up the wire transfer several working days in anticipation of the closing. If you’ll be financing the purchase through a Costa Rican bank, allow for four to five weeks of waiting and paperwork. Local financing for foreign buyers used to be non-existent, but it is becoming more common as Costa Rican banks are finally starting to wake up and smell the money. Find more details on that, see Chapter 10 on financing your purchase.

Retirees will be happy to know that there are one-stop real estate shops to facilitate the process of buying a home: companies that get you everything you need to safely buy a property, either through partnerships or in-house professionals. That means lawyer, notary, escrow, title insurance, property management, due diligence experts, and on down the line, up to and including financing. The most visible companies that provide these property-buying packages are Stewart Title and Chicago Title (in Costa Rica through its subsidiary, Latin America Title S.A.).

The downturn in the U.S. has had a positive effect on Costa Rica’s housing market. Retirement homes are more inexpensive as a result. During the international crisis of 2008-2009 home prices in some areas fell as much as fifty percent.

According to Costa Rica’s financial newspaper, La Republica and the Costa Rica Chamber of Realtors prices this year will not be any different than they were in 2010. This is a great opportunity for retirees and others since real estate prices are not expected to increase in the short term. So, if you are planning a long term investment now is the time to buy something in this “buyers market.”

The local real market is good with local rather international buyers keeping things afloat. There is now abundant financing for Costa Ricans so they are purchasing homes. Interest rates are very favorable for the local market, too. Interest rates in dollars were 9.3 percent in 2010. They are now around eight percent. The good news is that some projects are beginning to offer financing through Costa Rican banks for foreigners. One company I know of has gated communities in San Francisco de Heredia and San Joaquín de Heredia. Prices are around $200,000 but you won’t find anything better in the Central Valley. The detached homes are well built, are two stories and have three bedrooms and two and one half baths.

Also many gringos who overextended themselves financially are willing to do owner financing just to get rid of their properties.

According to La Republica newspaper, some of the best buys at this time are found along the Pacific Coast of Costa Rica where prices fell as much as 50 percent due to the crisis. Retirees and investors can find some excellent bargains in that area if they do their homework. Down the rod they are bound to make a nice profit.

Your broker’s role in the process

Your broker plays generally the same role as a broker in any other country. That is, he or she will help you with the process of checking market values and finding a property that fits your specifications. Once you find the property and meet the owner, the broker will assist in the negotiations.

Remember that though the broker earns a percent commission on the property you buy, the broker is supposed to be working for you. A broker with a history in the country and a good reputation will, in theory, have an interest in getting you the best price and maintaining that reputation. That said, there is certainly an incentive for the broker to try to nudge the price up, since the commission is a percentage of the sale price. It’s not at all uncommon for brokers to persist in showing you properties that push the upper limits of your price range. Therefore, don’t be afraid to push for good service. A good broker with good references and a good reputation to uphold will be able to give it to you readily.

A typical broker’s commission is between 5% and 6%, though brokers have been known to ask for quite a bit more (up to 10 percent on raw land on the beach). This won’t be much of your concern, since broker fees are usually paid by the seller. Occasionally, however, a broker will try to charge you a per diem. Up front fees can be merited in some exceptional situations, depending on the work you want the broker to do. Driving customers out to remote fincas on windy dirt roads every week for several months, for example, is tough work. On the other hand, the vast majority of brokers do no such thing (lots of them will ask you to do the driving), and brokers who ask for up-front fees should be avoided.

There can be some overlap between the tasks of your broker and your lawyer. Negotiations and the drafting of the sales agreement, for example, are things that can be done by a broker, but are often done by the lawyer. While that means you’re paying for it when your lawyer does these tasks, sometimes that’s exactly the point: There are fewer ambiguities about where your lawyer’s loyalty lies.
* Excerpts from “Christopher Howard’s Guide to Real Estate in Costa Rica” and the 16th edition of Christopher Howard’s “The New Golden Door to Retirement and Living in Costa Rica”

There has been a lot of talk here about inept and unscrupulous real estate agents since the business is unregulated in Costa Rica. Unfortunately, there are always a few bad apples who spoil everyone’s perception. On the other side of the coin are the ungrateful and difficult clients. Since the crisis in the States more and more of these creatures have appeared on the scene and have really screwed some good brokers.

I have a friend X who I think is one of the most hard working realtors I have ever met. His clients rave about his services and usually end up buying several properties form him. In all of the years I have dealt with him I have never heard any of his clients complain. Recently my friend had a bad experience when dealing with a couple of ungrateful clients.

Jim and Marta are a couple that came to Costa Rica to live and invest. On the surface they seem like great people – always smiling and friendly. You have to understand that they are a disfunctional couple to begin with because of the huge difference in age. Nevertheless on the surface they appeared to be very bright and well educated. As they say in Spanish, Jim didn’t appear to have “one hair of stupidity on his head.”

My broker friend took them all over the Central Valley and found them two good properties: one in a rural area and a home in one of the suburbs of San José. They purchased both properties and seemed to be very appreciative of their broker’s efforts.

A few months later my broker found an another excellent investment for them in the Santa Ana area. He got them an incredible deal for almost nothing down and a free $10,000 furniture package. Another added bonus was the right to sell the condo before it was finished.

In the mean time they sold their rural property for almost double of what they paid for it in less than a year. I’d venture say that their broker did a great job by finding them that property. They probably made $100,000 or more tax free. However, there turned out to be a minor issue at the closing and they would end up having to pay about $3,000 to clear it up.

The first thing they did was complain to their broker and insist he pay the $3000. What nerve! After making all of that money for them they stuck their broker with the small bill. How petty!

Concurrently they sold the home they bought near San José for about a $75,000 profit in less that two years and didn’t use my broker friend because of the issue I mentioned and the fact that they didn’t want to pay him a small commission ($10,000) after all he did for them.

So from both properties they probably made $200,000 or more tax free because of my broker friend’s help. As you can see they turned out to be ungrateful clients in the end.