How to Buy Property In Paradise And Not End Up In Hell
In a nutshell, if you want a safe trip to your promised land, don’t take shortcuts! Here’s how:
1. Start off with a reliable agent, especially if you are relatively new to the area. These days, anyone here can call hirself an ‘agent’. That includes the boss of a friend of a cousin of the 6th daughter of the man who has lived on the property since he was born there in a little hut. If in doubt, ask to meet the agent at hir office. That could be illuminating.
Know this: If you don’t go to an established, recognized real estate office and work with a recognized, reputable agent, you cannot trust the answers to any questions you ask. You will be largely responsible for due diligence on your own. Most hellish stories you will hear are due to this one fatal decision.
2. Choose a beautiful property. This is the easiest part. Almost all of the properties in our part of the world are beautiful. Just include some common sense when you are looking and asking questions. And listen to the answers. And listen to your gut. If any of the answers don’t pass the sniff test, go back to #1.
3. Make sure the Seller owns the property, free and clear. Costa Rica has a robust national property registry, but not all properties have been registered. You really, really, really don’t want to buy a property that’s not in the national registry! And you really, really, really don’t want to buy one because someone promises you that “the registration is almost done – it’ll only be another month or so.” In our office we check all properties’ legal status before we list them, but even so things can happen between listing and sale.
Also, if the property is ‘concession’ land beside the ocean, you want to know that up front. Concession land has special considerations and requires some extra due diligence.
4. Submit an offer in writing with enough details to ensure that you and the Seller understand each other. It’s called a Letter of Intent, or LOI. Make it an offer you won’t regret if it’s immediately accepted. Is there anything worse than putting an offer on the table and having the Seller snap it up? You’ll be saying for the rest of your life, “Dang, I knew I should have offered less!”
If you’re working with the right kind of agent, shhe will help you cover the details, but your agent shouldn’t tell you how much to offer. The best shhe can do is tell you the facts of the case. For example, the agent might say, “It’s been on the market 423 days,” or “I know they turned down a $350,000 offer last week.” The thing is, there may be several factors that caused the Sellers to turn down that offer, and they just might accept a $325,000 offer from you this week under different circumstances.
5. Get a list of anticipated costs associated with your purchase. Like anywhere else, there will be attorney expenses, closing costs, escrow company fees, taxes, etc. You may grumble about them, but they are a part of doing any deal anywhere in the world and at least you won’t be surprised down the road.
6. Once an LOI offer is accepted and both parties have signed it, an attorney turns it into a Sales and Purchase Agreement, or SPA. The attorney will use the details in the LOI. That’s why #4 is so important. Of course the attorney will make it much more detailed and complicated, because that’s what attorneys do. Don’t let your eyes glaze over, and don’t rely solely on your agent nor anyone else to make sure it’s all exactly the way you want it. Read it. Read each word. Understand each word. If in doubt, ask questions. If still in doubt, ask more questions. You really, really, really don’t ever want to be in a position where someone says, “Well, this is what you agreed to” and you didn’t actually mean to agree to that or worse yet you didn’t know you did.
7. As specified in the SPA, put down a cash deposit. This is one place where things may be different here than in your home country. The cash deposit is often (usually?) 10% of the purchase price. That can be a lot of money, so a) only ever deposit it with an established escrow company, never to an agent, Seller, attorney, or anyone else, and b) make sure the SPA (see #5) included all of the conditions you require to be met. This is huge! There are reliable escrow companies here. Use one.
8. Do your due diligence. This is terribly important. You’ll have a set period of time to do it and you’ll have several people helping you, including your agent if you have a good one (see #1), your lawyer (see #5), the very smart office manager in the real estate office where your agent works (see #1) and so on.
Due diligence includes things like a survey of the property, verification of water rights, liens or other encumbrances against the title to the property, allowable property uses and so on. It’s essential that you make sure you can use the property for your intended purposes, and don’t just take the word of your agent (no matter how reliable) especially if it involves new construction. Environmental laws change, and mostly they have become more strict when it comes to forests, streams, springs, etc.
Once your time is up and due diligence has verified that your conditions have been met, your offer will go ‘hard’ and you will lose your deposit if you back out, so if there is any doubt about any of your conditions, make sure you raise the issues before your deposit goes hard!
9. Set up a corporation to own your property. There are good reasons to do this and it’s easy, quick, and not expensive. Talk to your attorney about it. Pretty much everyone sets up their own new corporation instead of just buying out the shares of the existing corporation, because that wipes the slate clean on liabilities you might not be aware of. (BTW, you’ll want to make sure all employees of the previous corporation are terminated as of closing, even if you want to rehire them as soon as you own the property.)
10. Go to closing. You’ll be nervous. You’ll feel like you’re going into a shark tank. You’ll want to say “Wait, wait, wait!” That’s all normal and it’s the same feeling you had when you bought your last new car. Just keep moving steadily forward, reading the documents that are put in front of you, looking into your agent’s calm eyes, and go through the process.
11. Go home. It’s yours now. Sit on your land or your patio with a cold drink and pinch yourself to see if that view and this climate is just a dream, or it’s what you get to wake up to each morning.