In order to understand the housing purchase process in Costa Rica, you need to know what is required of you and everyone else you need to associate with to insure your real estate transaction is completed properly.
In Costa Rica, things that can cause stress and end up costing you more money are not predictable problems a foreigner could have anticipated based on the knowledge they may have acquired elsewhere.
The following guidelines will help you understand much of what you need to know and help you determine how much you can afford and things you should look for in Costa Rica.
If you prepare your own list from the following options, you or your agent will be able to locate the most suitable residence in the least amount of time.
The amenities you require in your new residence will determine the type and price of the housing you should be looking at. Consider the following:
- Gated community or free standing property
- City or rural area
- Golf course
- Country club
- Nature preserve
- Public water & sewer
- Public water
- Internet access and velocity
- Cable TV
- Swimming pool, spa
- Tennis court
- Kids play area
- Gardens & landscape
- Security walls & fencing
- Guest or employee housing
- Separate garage or storage
- Office complex proximity
- Shopping proximity
- Kid’s activities
Building Materials and Installations
The building products and installation procedures included in a dwelling are the first step to determine its value. Custom built, architecturally designed homes that are up to international standards have much more value than basic structures completed according to Latin building standards.
In order to locate adequate housing that contains the exterior installations, architectural design and interior finishes you desire, consider the following:
- Architectural design
- Interior finish materials
- Floor coverings
- Wall coverings
- Plumbing fixtures
- Security system
- Plumbing installations
- Electrical installations
- HVAC installations
Remodeling Existing Housing:
If you are looking at older residences, that currently may not be up to the standards you’re accustomed to, remodeling may be an option to consider. In order for you to make an intelligent decision and a reasonable offer, a construction inspector with local remodeling experience will need to inspect the property you have found, in order to estimate the costs to bring it up to the standards you require.
In order to determine the square footage or meters you will need, write down the dimensions of the rooms you require and calculate the total. Additional dimensions should be considered for handicapped accessibility.
- Living room
- Dining room
- Family room
- TV room
- Laundry room
- Hobby room
- Guest bath
- Master bedroom
- Master bath
- Master closet
- Bedroom #2
- Bedroom #3
- Bedroom #4
- Employee bedroom
- Employee bath
As soon as you have made the decision to purchase housing, you need to make certain that financing will be available if you need it. Before you contact a mortgage broker, familiarize yourself with the typical mortgage terms you will need to discuss with your broker.
Principal = The repayment of the original amount borrowed on a monthly basis.
Interest = The cost of borrowing the principal amount, repaid on a monthly basis.
Taxes = Real Estate taxes paid to a local government agency.
Homeowners Insurance = This is paid to protect your home and its contents
Mortgage Insurance: Sometimes required by the lender to protect the mortgage company.
Types of Mortgages Fixed: A fixed term (for example, 10, 15 or 30 years) as well as a fixed interest rate.
The interest rate and term are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will not change during the term of the mortgage.
Adjustable: Often referred to as an ARM (Adjustable Rate Mortgage).
The interest rate on your mortgage will be adjusted up or down according to current interest rate levels. The monthly amount for your principal and interest payment will go up or down with these rate changes.
Mortgage Application Process:
If you are pre-approved for a mortgage, you will have a clear picture of how much you can borrow. This will simplify the process and save everyone a lot of time.
In Costa Rica, real estate agents are not required to be licensed by a governing association as in other countries. You need to do your own homework to find agents that have proven experience in the area where you want to live. Ask for written disclosure of the broker’s company policies pertaining to listing, deposit, escrow, commission and closing.
In Costa Rica, square footage or meter measurements are usually taken from gutter to gutter, so most of the measurements advertised for housing are the total dimensions under roof, including the roof overhangs. In other countries, people are accustomed to the measurements of enclosed interior living areas that can be air-conditioned.
At the current costs of construction per square foot or meter, you need to make sure you are receiving all that you are paying for. Moreover, there is much less attention paid to finish details by the local contractors and architects. The average Latino feels that many of the amenities foreigners include in their homes are extravagant and unnecessary. Therefore, amenities that foreigners take for granted, may not have been installed in the properties you are looking at.
It’s always wise to have a professional inspection completed for the property you want to purchase prior to closing, to insure the residence is up to the standards you expect. Additionally, with an inspection report, you will be able to easily organize your punch-out list, as you will know the current condition of the construction, including electrical, plumbing and mechanical details, actual living square footage, life expectancy of the roof as well as all defects.
Costa Rica Living Video Interview: To watch this short video, please click on the small white triangular Play button in the middle of the screen below and allow a few seconds for the video to begin.
Find an inspector who is qualified to determine and estimate the costs to repair defects that currently exist in the dwelling. Furthermore, it would be wise to hire an inspector who speaks your language as well as Spanish. If your inspector has building and remodeling experience from North America, he will understand the type and quality of construction you are accustomed to.
Take your time when you’re completing your final walk-through inspection. Try to be as calm as possible. Many buyers are busy dreaming about their furniture placement and neglect to take a good look to insure that important items, contracted to be completed prior to closing, have been installed properly. Take a copy of your sales contract, building specifications and final punch-list with you, so that you can review any items that should be included in your new residence.
Plan your legal strategy before you invest here. Make sure you fully understand and accept everything you will need to conduct business in Costa Rica. Do not do anything you wouldn’t do in your hometown.
Many foreigners seem to believe they can outsmart the system when they come to a less developed country. The legal system in Costa Rica is Napoleonic, not Common Law, so legal matters here are different from North American and European laws
Always hire your own attorney and never use the seller’s attorney. Some folks, who are trying to save money, avoid the work of finding a qualified attorney to represent their best interests. There are 17,000+ attorneys in Costa Rica and several of them will be recommended to you by others.
You can find a wide range of attorneys; those who work at big law firms, with USA type hourly fees, to solo practitioners. Once you’ve made your decision, call the Costa Rican Bar Association and inquire if the attorney you like is in good standing. Finally, ask the attorney to provide a document that describes all the services to be provided and the method that will be used to charge and pay the legal fees.
The Actual Closing:
This is your final opportunity to make certain that everything related to the purchase of your new residence is correct. You should have an experienced lawyer and a detailed property inspection report to properly complete your purchase. This way you will know that the property you are acquiring is in acceptable legal and physical condition and there won’t be any expensive surprises after the closing. If need be, your lawyer can escrow sufficient funds at closing to cover any expenses for repair or replacement of missing or defective items.
In closing, regardless of your previous experience, when you purchase property here, you should always hire your own legal advisor and construction inspector, who have proven experience in Costa Rica.
Written by Tom Rosenberger. With more than 25 years of homebuilding experience, 15 of which have been in Costa Rica, construction consultant Tom Rosenberger knows the ins and outs of building and remodeling a home in the Central Valley area of Costa Rica.
Are you into beautiful Costa Rica?
All interesting things you want to know about Costa Rica are right here in our newsletter! Enter your email and press "subscribe" button.