Closing Costs, Taxes and Process

Closing costs for a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs typically run 5% to 6% of sales price and are usually split 50/50 between buyer and seller. The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on SALES PRICE of the property. This is an example:

Calculation Table for Transfer of Real Estate:

Example Value $ 100,000 U.S Dollars

Courtesy of Stewart Title Costa Rica

 (*) according to specific table rates, shown maximum payment in colones.

Note: The notary fees identified in the basic closing costs are for a notary/attorney services in handling the legal processing of the property transfer and written documentation and registration.

However, this normally does not include legal advise or research beyond what is involved in the basic preliminary property investigation.

The Process

Primero, first and foremost ... find the "right" property of course through an experienced real estate agent.... MAYBE ME.

When looking you should be considering the purpose and function of the property; vacation home, retirement property (now or in the future), primary residence, or investment.

The next important consideration is the "location, location, location", in terms of what is important to you.

Weather - rain, humidity, dry climate, cooler temperatures, altitude. Varying conditions exist in different regions, e.g. the Northwest of Costa Rica, Province of Guanacaste, is dryer 1/2 of the year, moderate rain 1/4 of the year, less tropical.

Terrain - mountainous, flat, dense with forest (wet/dry), road conditions during the wet season (pothole intense, passable/impassable).

Services Available - hospitals, medical/dental clinics, grocery stores, specialty stores, hardware stores, pharmacy, restaurants, gas station, churches, schools, post office, police/fire services, experienced service workers for gardening, domestic cleaning, car mechanics, professional services - property manager, internet services.

Recreation/Entertainment - swimming (pool or the sea/lakes/rivers), snorkeling, diving, sailing, fishing (onshore/offshore), kayaking, horse back riding, golf, lawn bowling, canopy tours, hiking, bicycling, bird watching, internet cafÈ, disco, concerts, restaurants, museums, galleries, shopping malls.

Transportation - Airports- Domestic and International, bus - private and public, car rentals.

Planned Communities - Gated, guarded, similar home values, association regulations, common area amenities.

Second - Written agreement between buyer and seller.

In some format (there is not a common form) the initial contract/agreement between both parties is written. It should identify the basic terms and conditions of the sale. Your real estate agent can write this agreement for you however your attorney should review it before it is delivered to the seller. There will be a final written document (in Spanish) written only by a notary/attorney which cannot be substituted by the initial written agreement between buyer and seller (refer to section below "escritura"). The escritura may incorporate the major terms/conditions of the initial agreement.

Your attorney may recommend immediate written acknowledgment of this written agreement in his protocal book. Depending on the terms stated in the agreement, a good faith deposit may be involved and the buyer and seller will need to agree on where the deposit should be held (Stewart Title Costa Rica Escrow Account, buyer or seller's trust account).

Third - Select an attorney who is also a notary.

You will save time and money if the attorney you select is also a notary. The notary can complete all legal functions and research however an attorney who is not a notary will not be able to write the final "escritura" or document the transaction in the legal protocol book. If you are paying all cash for the property, it is general practice that the buyer selects the notary/attorney and both parties share the fees. If the seller is personally financing the property (property used for collateral), the sellerwill select the notary/attorney and both parties share the cost except the buyer pays for the fees relating to the drafting and registering of the mortgage document "hipoteca".

Of course both parties may elect to have their own attorneys represent them and each would pay for their own respective fees, except relating to the mortgage as stated above. The seller's attorney would draft the mortgage document.

Fourth - Buyer's attorney researches the property information.

A title search must be conducted. All properties are registered at a central depository known as the "Registro Publico". In accordance with Costa Rican law (Civil Code Article 460), all documents relating to title or an interest in real property, must be registered in the property section of the Public Registry. Properties have a title registration number referred to as the"Folio Real Number".

Utilizing this number in your database search (or by name index), you will receive a report called the "informe Registral" which gives basic information about the property: owner/ title holder, tax appraisal , liens, mortgages, boundary lines, recorded easements, and other records that may affect the title. Other information to look for: encumbrances, escrituras, restrictions, judgments.

There is other pertinent information that should be checked as well: verification that property taxes have been paid and any separate services provided by the municipality (assessed separately), utilities (water, electric, telephone, cable, direct T.V.). It is highly recommended to obtain copies of receipts. From the municipality, request certified receipts and from the utility companies, letters confirming the balance and current status of the account.

Another document that should be included in the search is the catastro map, commonly known as the "plot map". This map will define the property (size, location, boundaries). There may be discrepancies between the informe Registral and the catastro because updated transfer information in one document does not automatically require a change to to the other. Talk to your attorney about the discrepancies which may only be due to delayed updates. If your attorney thinks otherwise, he may recommend that you obtain an independent topography survey/report to accurately define the boundaries. However, any problems should be resolved before a final purchase.

In addition to your attorney's search there is now title guaranty services available through Stewart Title Costa Rica located in San Jose. The cost for the policy is between 1-1.5% of the purchase price. They also offer escrow services. These services are offered to protect the consumer during the process of acquiring property and to indemnify them for losses that may be incurred.

Fifth - document and register the sale/transfer

A transfer deed must be written by a notary. Notaries must be attorneys but not all attorneys are notaries. This deed, signed by both the buyer and seller in the presence of the notary, is known as the "escritura".This document describes in words, how the property is recorded in the Registro and the "will" between the buyer and the seller. The "will" between the buyer and seller may have already been identified in the written initial contract which may then be included in the escritura. The notary transcribes how the property is recorded in the Registry and the "will" between the parties, directly in the Protocol book (carried only by notaries). The total information that has been "transcribed" is known as the "escritura".

The escritura (transfer deed), must then be registered at the Registro Publico. The registration should appear in the Registro Publico 45 - 60 days after the submission. It is important to verify through the notary/attorney that the deed was properly filed. If a mortgage is involved, the seller's attorney will draft a mortgage instrument which will be included in the escritura to be registered.

Sixth - The sale is final, all is registered, all happy?

Don't forget to change the name on the account the utilities are under. The utility companies require a copy of your escritura (to confirm the change of ownership). If you have purchased the property under a Costa Rica company name, you should obtain a certified letter from your attorney, authenticating the validity and current status of the corporation which will identify you as having legal authority to act on behalf of the company. If you received a telephone line as part of the purchase you should secure a special transfer form from the telephone company "I.C.E." (only company in Costa Rica and government owned). There are separate forms for transfers to corporations. This form must be completed during the sale process and signed by the seller and certified by the attorney. CAVEAT - phone lines acquired after 1995 (check this date with the phone company) are not transferable. If you elect to keep the phone line anyway, make sure the seller's attorney completes a special power of attorney document for you to be able to control the use/movement of the phone in the future.

Now ... enjoy yourself and tell a friend to join you and "Come to Costa Rica". Mi casa es su casa