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Why Costa Rica?
There are many reasons to buy / invest in Costa Rica. First of all, it's a tropical paradise! Where else in the world can you find a country that has Pacific and Caribbean coastlines, rainforests, active volcanoes, sport fishing, picturesque beaches, a tropical climate, and friendly people?! Secondly, the democratic political system is quite inviting. Costa Rica is a peaceful nation (there's no standing army!) and arguably, the fastest economically growing country in Central America! And it's a good investment – property values continue to increase yearly at astronomical rates!
Do I have to live in Costa Rica to by property there?
Foreigners do not have to live in Costa Rica to own property here. In fact, they enjoy the same rights as citizens do when it comes to buying and owning property.
What are my rights as a foreigner owning land in Costa Rica? Are they different from those of the nationals?
In matters of land and property ownership, foreigners and Costa Rican citizens have equal rights under the law (unless the owner bought the land as part of a government program or concession property). In these cases, the land can be traded or sold to foreigners only after the original owner has held it for certain period of time
What are the available rates and terms?
These vary from lender to lender but we are focused on constantly improving the options we are able to offer the buyer. We are actively working with a large number of investors both in the private and public sector to negotiate better rates and terms thereby making the Costa Rican market available to a wider margin of buyers. We believe we have access to the best products and terms available on the market for Costa Rica. We are committed to constantly bringing new and better products to the Market.
What kind of credit score do I need to qualify for financing in Costa Rica?
Most lenders national and international require a minimum credit score of 680. If your score is lower than a 680, please still contact us. We specialize in credit clean up and would be more than happy to help you in any way. Also, we do have some private investors that are willing to entertain strong files with credit scores below 680.
What documents do I need to provide MDO Mortgage Services with?
What is and is not required as far as this goes, depends on the lender. However, in an effort to meet the majority of all the requirements laid out by the lenders we deal with we have come up with the following list of what we will require from the client in order to get the loan application process started. Again, depending on the lender as well as things that may come up during the application process, there may be additional documents that are required. Some may say that this is ‘exhaustive' and maybe it is. However, the more we get from the client up front, the quicker the process. And remember, we are all about closing your loan as quickly as possible!
1. Purchase agreement (or earnest money contract as referred to here) A copy of the earnest money check cant hurt either – down payment.
2. Copy of passports and drivers licenses
3. Loan Application completed and signed – borrowers authorization as well
4. W-2 for 2 years - or similar government earnings form from country of residence
5. All Asset accounts statements for 6 months (checking, savings, 401k, mutual funds, stocks, etc...) to prove source of down payment
6. 2 months worth of pay stub copies
7. 2 years tax returns (as for now, these are required for Wage Earners too in Costa Rica, however, we are working to change this)
-If self employed or commissions earned by borrower exceed 25% of the gross income, we will also need:
a. Corporate Partnership tax returns with all schedules attached for prior 2 years
b. Profit and Loss Statement for year to date (signed and dated)
c. Balance sheet for year to date (signed and dated)
What if I don't have all of the documentation?
Here at MDOMS, we strive to have the highest ethical procedures and customer service standards. Costa Rica is a small country, and here, personal relationships are cherished more so than in the United States. The relationships that we have with the banks here and our other investors are indispensable. Therefore, we only want to give the banks files that are organized, complete and have virtually no reason not to close. We want the banks to see our files and know that they come with a stamp of excellence, diligence and professionalism, so that our files have first priority. So if a file is not complete we will not be disposed to send the file to underwriting until all necessary beginning documentation is received.
How long does the whole loan process take?
Our goal is to complete the entire loan process from start to finish in 30 days or less. Certain parts of the mortgage process, as in the USA, are not under our complete control, as we rely on other people. For example, with certain banks here, if a loan size is large enough, sometimes approval must come through a bank committee. Certain bank committees only meet once a week and therefore that slows the process down. However, we are committed to having the loan closed in this period due to our extensive contacts here and the personal relationships we have with the local banks. We want to fashion ourselves as aggressive as possible when it comes to meeting your needs.
Buying in Costa Rica, how does it work?
Closing Costs
It has been custom in the past for buyer and seller to split the closing costs, but the split may be adjusted up or down to fit the occasion or the buyer assumes all costs.
Costa Rican “Sales” Taxes consume a large portion of the closing costs. First it depends upon how the property is transfer from one person to another. But let just make some generalities:
There are 3 basic fees you will pay when buying property which include notary/lawyer fees, transfer taxes, and document stamps and taxes. These are fees that you are going to pay whether you are paying cash or are financing your property (one exception does exist that will discussed below).
You must buy Documentary Stamps, Agrarian, Hospital, Municipal, Bar Association, National Archive and Fiscal totaling 0.55% of sale price. You must pay a Real Estate Transfer Tax at which is 1.5% of the sale price and a Registration Fee for the mortgage of 0.5 % of sale price.
Example value - $ 100,000.00
Stamps |
% |
|
Registry |
0.005 |
$ 500.00 |
Agrarian |
0.001 |
$ 100.00 |
Law 7535 |
0.002 |
$ 200.00 |
Municipality |
0.002 |
$ 200.00 |
Lawyer Board* |
0.00025 |
¢ 75.00 |
$ 25.00 |
Treasury Department C.R.* |
¢ 625.00 |
less than
$ 2.00 |
National archive** |
¢ 20.00 |
less than
$ 1.00 |
Transfer taxes |
0.0151 |
$ 1,510.00 |
Legal fees |
0.0125 |
$ 1,250.00 |
Total about 3.8% |
0.03758
plus fixed costs above** |
$ 3,788.00 |
** Over the first ¢ 100,000.00 a fixed rate of ¢ 75.00 has to be cancelled.
* According to specific table rates, shown maximum payment in colones.
Up to ¢1,000,000.00 colones you pay 1.50% in legal fees, and 1.25% above that.
If a specific piece of property is owned within a limited liability company structure called a Sociedad Anonima (S.A./which is similar to an LLC in the USA), then the transfer tax can be avoided. By incorporating a company in Costa Rica for the specific purposes of owning land or property an investor may find the whole purchase process and ongoing ownership of real estate in Costa Rica to be simpler to manage. Furthermore, it is common for property to already be owned by a limited company and for an investor to purchase that company rather than the property directly. By doing this transfer tax can be avoided - however there is a risk involved because it is not possible for a real estate investor to ensure that the company he is buying is 100% free of debts of claims.
Summary of Costs:
Closing costs range from 3.75% to 7.25% of the value of the loan:
- Origination or Commission fee – 2.00% to 3.50% of loan amount (depending upon banks fee)
- Legal/Notary fees – 1.25% of loan amount
- Title Guaranty - 0.70-1.00% of sale price (customers are not obligated to get this due to the fact that the bank and their lawyers will make absolutely sure that there is no problems with the property to protest their interests.)
- Transfer tax – 1.5% of loan amount (avoided if transferred within a Sociedad Anonima)
- Document taxes and stamps mentioned above - 0.55%
- Appraisal - $500 (estimate)
- Escrow Services - $400 (optional)
- Trust Fund Management - $200 (annual fee, if applicable)
- Fire or Hazard Insurance – 0.023%
- Life Insurance Policy – equal to loan amount (some lenders), a standard policy down here, of course depending upon health and other related issues, for a 200,000 policy will run between 600-1000 per year in premiums.
Register The Transfer Deed
To register your transfer deed you or your attorney must bring to the Registro Publico (Public Registry) the following documents:
A. Proof of payment of all taxes and registrations fees
B. Certifications issued by: a) Finance Ministry, confirming that all seller's property taxes were paid; and, b) the local Municipality, stating that buyer and seller areup to date on municipal taxes.
C. Proof that all prior mortgages, liens and judgments (if any) have been resolved
Once all fees are paid, make sure that the attorney who drafted the transfer deed registered it in the Property Section of Registro Publico. It should be registered by the Registro Publico 45 to 60 business day after presentation. Check with the notary to make sure the deed has been properly filed.
Purchasing Property: The Process
When purchasing property in Costa Rica, proper registration of the property, and not the deed itself, is of the utmost importance (Carballo, 1995). Simply because an individual may have a seemingly "legal" title to a property in his/her name, does not necessarily mean that he/she is the legal owner.
Costa Rica has a Civil Law system rather than a Common Law system. The practical differentiation between the two systems is that Civil Law is much more rigid than Common Law, making the procedure frequently more important than the substance. Such a distinction is of utmost concern when purchasing property, for the letter of the law must be followed precisely when registering property in order to obtain the full legal title (Carballo, 1993). All property is registered at a central depository called the Registro Puiblico , and it is there that one should begin the title search for a parcel of land. The title must be checked for any liens or encumbrances, of which there are often scores. Alvaro Carballo, a Costa Rican real estate attorney, has compiled a comprehensive check list of items that should be verified before a purchase. This list is published in his book, Purchasing Real Estate in Costa Rica: A Guidebook (Carballo, 1993). If the initial background check is flawed and a problem later arises, one could unwittingly lose possession of property thought to be legally owned.
The trick to buying property in Costa Rica is to reconcile the actual property with the two documents that legally define a property. The first is the escritura , which is the title document that describes how the property is recorded in the Registro in words; the second is the catastro map (survey plan), which is the plat map of the property that is on file. The problem with defining a property arises from the fact that the escrititra may not correspond with either the catastro or a physical survey of the property. Such a discrepancy is due to the fact that when a transfer of property takes place, the transaction may not have been recorded on the catastro , since a change in one does not automatically require a change in the other (McMerty, 1995). It should also not be assumed that the catastro map accurately depicts the property itself. It is therefore necessary that an independent topographical study be conducted in order to verify the property boundaries. Any discrepancies within the two legal documents and the land itself must be resolved before purchasing. Such investigations may be a bit daunting, not to mention confusing, for the foreign investor. Due to the intricacies of resolving such issues, retired Brigadier General McMerty and Alvaro Carballo founded PropData, a company that offers property title investigations, legal support and financial information. PropData is to date the only known company of its kind of Costa Rica (McMerty, 1995).
A reputable, diligent attorney should take care of the technical procedures involved with a title transfer, but such attentiveness must not be taken for granted. Prospective buyers should beware. They must monitor and understand what is being done, as well as what is not being done. It is therefore worth mentioning the documentation needed for the closing:
- A copy of the tax receipt ( impuesto territorial ) proving that all taxes and registration fees are paid as of the date of purchase (Puleo, 1995)
- A certificate ( constancia municipal ) issued by the municipal authority of the Municipality where the property is located (Carballo, 1993)
- Sufficient funds to pay all necessary taxes and registration fees, including notary fees. Usually one half is paid by the seller and one half is paid by the purchaser (Carballo, 1993)
- Evidence that all prior mortgages, liens and judgments have been lifted (Puleo, 1995)
A notary must be present at the closing. In Costa Rica, notaries are attorneys accepted by the Supreme Court.
Many single-home investors will be faced with the choice of whether to buy a preexisting structure or a plot of land on which to build a house. While there are a myriad of minor impediments that must be scrupulously attended to, most of which are outside the scope of this paper, a few points are worth mentioning as they may alter a buyer's decision. The law requires that all applications for construction permits be presented by an architect licensed by the Costa Rican Association of Engineers and Architects. Utilizing a certified architect can be extremely costly as well as cumbersome (Puleo, 1995). Before building a house one would be well advised to speak to numerous individuals who have previously built in order to gain an understanding of the reality of the construction process, such as constant delays, necessary personal supervision, and cost overruns.
How are properties registered in Costa Rica?
Costa Rican properties are registered at the Registro de la Propiedad (Property Registry) which keeps track of all the title registrations. It is a great resource for verifying the status of a title or claim associated with a property.
If you wish to buy land in Costa Rica it is wise to either hire a lawyer or go yourself to the Registro de la Propiedad to search the title and verify that there are no liens against the property or the property owner(s).
Once you buy a property, you need to make sure the sale is properly registered at the Registro de la Propiedad, proof that you are the new legal owner.
How does zoning work?
Building and subdivision plans must be:
A. Signed by a registered local engineer
B. Approved by the local Ministerio de Salud (Health Department)
C. Approved by the Instituto de Vivienda y Urbanismo (INVU) (Housing and Urban Development Department)
How do I insure my Title?
Researching the title of the property you are buying is very important and there are a few ways to go about it. There are a few title companies operating in Costa Rica and they offer such services. However, most title companies in Costa Rica only provide title guarantees and not title insurance which can create a ‘sticky' situation should there be a question pertaining to the title arise and legal parties get involved.
As such, some buyers choose to hire a Costa Rican lawyer to review their title case personally and specifically and to insure that it is completely secure. There are plenty of lawyers in Costa Rica that specialize in this field.
Please be advised that the lender will also investigate the title in question for obvious reasons. Their investment is tied to it as well. For this reason, many buyers just rely on the lender to take care of title research. Sometimes this can be the best solution for the buyer as attacking this issue with a lawyer or title company can be time-consuming and costly!
Whatever you decide to do, MDO Mortgage Services can help you to take care of this ‘issue'.
How much are Appraisal Fees?
Appraisal fees average about $500 for the initial appraisal which is almost always sufficient. However, should appraisal revisions be required for whatever reason, subsequent appraisal fees would be extremely reduced as the lion's share of the work will have already been done.
In the vast majority of the deals we have completed, $500 has been sufficient and in some cases more than enough.
Is there a real estate listing service like the MLS in the States?
No! Not yet.
What's the pricing like in Costa Rica?
Real estate prices in Costa Rica, like real estate prices everywhere, vary according to location, amenities, the buyer's patience and the seller's panic. Here are the sorts of prices you'll encounter in Costa Rica. All prices are in U.S. dollars. Please be advised that some of this pricing might b outdated as these figures were generated in September of 2004.
San Jose
Land: $75.00US to $150.00US sq./m. ($6.97US to $13.94US sq./ft.)
Office space: $700.00US to $1,500.00US per month.
One bedroom apartments: $600.00US to $1,500.00US per month
Property values in San Jose tend to appreciate about 3% annually.
Here is a list of land and housing prices in a few of the more desirable areas of Costa Rica.
Escazu, Rohrmoser and La Sabana
Land: $100.00US to $300.00US sq./m. ($9.29US to $27.88US sq./ft.)
Houses: 2-3 bedrooms with yard, $150,000.00US to $500,000.US.
Condos: $100,000.00US to $300,000.00US
House rentals: $800.00US to $3,000.00US per month
Low income housing rentals: $500.00US to $1,500.00US per month
San Pedro/Los Yoses
This is the area surrounding the University of Costa Rica in San Jose. As you might expect, the neighborhood is chockablock with bars, restaurants, discos and other hot spots. You'll find some shopping centers and language schools here, too.
Land: $100.00US to $300.00US sq./m. ($9.29US to $27.88US sq./ft.)
Houses: $100,000US to $500,000.00US
House rentals: $200.00US to $2,500.00US per month
Coronado, Guadalupe, Tibas and Moravia
These residential neighborhoods are served by small grocery stores, malls, and shops. The weather is cool; road conditions average.
Land: $50.00US to $200.00US sq./m. ($4.65US to $15.59US sq./ft.)
Houses: 2 to 3 bedrooms, $100,000.00US to $250,000.00US.
House Rentals: $200.00US to $2,000.00US per month
Alajuela
Land in Alajuela City (near the bars and restaurants): $100.00US to $500.00US sq./m. ($9.29US to $46.47US sq./ ft.)
Land near Alajuela: $25.00US sq./m. ($2.32US sq./ft.) and up
"Quintas" (weekend and holiday houses): $150,000.00US to $500,000.00US
Houses: $70,000.00US to $300,000.00US
Rentals: $500.00US to 2,000.00US per month
La Garita/Atenas/Orotina
This area boasts of having the best climate in the world 22 C (72 F) year around. There are a number of good hotels and restaurants here.
Houses: $75,000.00US to $500,000.00US
Land: $20.00US to $50.00 sq./m. ($1.86US to $4.65US sq./ft.)
House and/or apartment rentals: $600.00US to $1,250.00US per month
Land in the rural areas of La Garita: $75.00US to $200.00US sq./m. ($6.97US to $18.59US sq./ft.)
Heredia
Land in the downtown area: $100.00US to $300.00 sq./m. ($9.29US to $27.88US sq./ft.)
Land in average neighborhoods: $20.00US sq./m. ($1.86US sq./ft.)
Land in upper class neighborhoods: $50.00US sq./m. ($4.65US sq./ft.), increasing as you get higher into the hills
Houses: Three bedrooms, $80,000.00US and up
Apartment rentals: $600.00US to $1,000.00US
San Rafael de Heredia
The El Castillo Country Club and various shopping areas are located here.
Homes: $100,000.00US to $450,000.00US
Land: $40.00US to $200.00US sq./m. ($3.72US to $18.59US sq./ft.)
Rentals: $700.00US to $1,450.00US per month
Santa Ana/Ciudad Colon
Santa Ana 2000 shopping center and Multi Plaza Center are in this town.
Homes: Mid to upper scale, $150,000.00US to $450,000.00US
Land: $50.00US sq./m. ($4.65US sq./ft.)
Rentals are from $700.00US to $1,500.00US per month.
Ciudad Cariari
This is the area between the Airport and San Jose.
Land: $100.00US to $300.00US sq./m. ($9.29US and $27.88US sq./ft.)
Rental Houses: $800.00US to $2,000.00US per month.
Luxury homes: (surrounding the Cariari Country Club Golf Course) $200,000.00US to $800,000.00US
Condos: $150,000.00US to $1,000,000.00US
Naturally, property is cheaper outside the big city than in it (the further out the cheaper).
Ranch Houses
Ranch Houses: $250,000.00US to $510,000.00US
Cartago
Land in the mountains
Land in the mountainous areas is the richest and best for farming; however, these areas are often difficult to get to, especially during the rainy season.
Farm land in the mountains north of Cartago sells for $25.00US to $100.00US sq./m. ($2.32US to $9.29US sq./ft.)
Land in Cartago and Turrialba Provinces run about $25.00US per sq. meter ($2.32US sq./ft.). Farm Land is sold by the hectare (10,000 sq./m. or 2.47 acres) or manzanas (1.72 acres). A small one or two bedroom house in Cartago costs about $60,000.00US in Turrialba it costs about $40,000.00US; three to four bedroom houses with a lot of space in Cartago and Turrialba run $80,000.00US to $60,000.00US.
Beach Houses
Houses on the Pacific coast are generally more expensive than those on the Caribbean.
Pacific Coast
Land: $25.00US and $150.00US sq./m ($2.32US to $13.94US sq./ft.)
In desirable areas, such as Jaco Beach, small condos sell for $75,000.00US. In Golfito, Beach Front houses cost from $100,000.00US to $500,000.00US.
Atlantic Coast
Land: $30.00US to $100.00US sq./m. ($2.79US and $9.29US sq./ft.)
Limon Homes: $50,000.00US to 250,000.00US
Rentals: A two bedroom apartment, $300.00US to $700.00US per month
What's the unit of measure in Costa Rica?
Table of Measurements
1 mile = 1.61 kilometer
1 km. = 0.62 mi.
1 sq. mi. = 2.59 sq. km.
1 meter = 3.28 feet
1 foot = 0.3048 m.
1 m. = 1.09 yards
1 sq. m. = 10.76 sq. ft.
1 sq. ft. = 0.09 sq. m.
1 manzana = 0.70 hectares
1 manzana = 7,000 sq. m.
1 manzana = 1.73 acres
1 a. = 43,560 sq. ft.
1 a. = 0.40 h.
1 h. = 10,000 sq. m.
1 h. = 2.47 a.
1 h. = 107,600 sq. ft.
1 in. = 2.54 centimeters
1 millimeter = 0.039 in.
1 cm. = 0.393 in.
How are real estate agents and brokers licensed? How to choose a good one?
The Ministerio de Economia (Treasury Department) issues real estates licenses on the recommendation of the Chamber of Real Estate Brokers. However, unlike the USA, real estate licenses can be issued to just about anyone. Please consult with us as we have many reputable contacts in the Real Estate market and can point you in the right direction.
Does MDO Mortgage Services broker loans in other Latin American Countries?
MDOMS has plans over time to expand operations to include Mexico, Belize, The Dominican Republic and Panama. If you have need of mortgage services in one of these countries, please contact us and let us know what you needs are. Again, we are very well connected and have contacts for mortgage services in all these places.
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