REAL ESTATE PURCHASE PROCESS:

After negotiations have been finalized, and the final purchase price as well as contingencies have been agreed upon through the Offer to Purchase ( Letter of Itent ), your real estate attorney will draft a formal Purchase and Sales Agreement (SPA). Once everyone signs on the dotted line, it is time for the deposit. Earnest money deposits in Costa Rica are typically 10% of the sale price (unless agreed upon otherwise) and should be deposited within 10 business days into the escrow account opened by the buyer. The earnest money deposit is refundable to the buyer throughout the due diligence process. Once the due diligence process concludes, the earnest money will become non-refundable in the seller’s favor or returned to the buyer in the case of failure of the due diligence process.

AN ESCROW COMPANY is a third-party private financial entity authorized and regulated by SUGEF.

SUGEF or Financial Institution Superintendency, is an organization responsible for auditing financial institutions such as banks or escrow companies in Costa Rica. Their primary objective is to ensure that these financial institutions comply with both federal and international financial regulations with a main focus on preventing money laundering.

The escrow company has a standard document requirement list set by SUGEF and will inquire before approving your escrow account. And sending your wiring instructions. Their main focus is on the origin of your funds. The documents they will require include a copy of your passport, your last year’s tax return, six months of bank statements from the bank account from which you are originating funds, as well as a bank verification letter (a letter stating how long you have been banking with them and your standing with the bank). Having these documents on hand will speed up the process, which usually takes around 10 days.

It’s important to note that the Purchase and Sale Agreement will not be legal until the deposit arrives in the escrow account. Once funds are received, the property is officially taken off the market and marked as "Under Contract," and due diligence officially begins.

THE DUE DILIGENCE process usually lasts 30 days. During this period, your realtor will coordinate all inspections needed, such as hiring a topographer to verify property lines, a house inspector, and inventory verification of the house with the seller’s realtor, as well as submitting the inventory list to your attorney (if aplicable). Both the topography and home inspection reports will be sent to your attorney to include in the due diligence report, and costs are assumed by the buyer. The attorney will inquire about all legal documents from the seller’s attorney and run a legal background check of the property. The due diligence report will be presented to you before the process is over. Based on the results of this report, your attorney will recommend whether to move forward with the sale or advise you to withdraw. It is very important for your attorney to communicate with the seller’s attorney and the escrow results of the due diligence report in order for the buyer to potentially receive a refund of the earnest money.

CLOSING typically occurs within 7 business days. During this period, the buyer will need to wire the remaining funds to complete the sale. Typically, the buyer pays the closing costs, and the seller pays the real estate commission. 

CLOSING COSTS usually include legal fees, such as the due diligence report and notary fees for the deed transfer. Deed transfer and notary fees are estimated at 3.7% of the total sales price.

REGISTERING A PROPERTY in the National Registry is the final step in the purchase process. You can register the property either in your name or as a corporation. Similar to an LLC in North America, many people buy property in Costa Rica through a Sociedad Anónima (SA) or Sociedad Limitada (SRL) corporation. Buying property through a corporation can simplify the purchase process if you will not be physically present at the closing. However Owning a property through a corporation requires extra yearly obligations.

PROPERTY TAX:The first tax you will pay is the property transfer tax, which is 1.5% of the purchase price. The property tax rate in Costa Rica for properties below $214,000 is 0.25%, while the luxury tax for all properties above $214,000 is 0.55% of the registered property’s value and is paid yearly to the local municipality.