The picture above shows Tres Regalos, the Boutique Condo Beach Club!
5. Due Diligence will then be initiated and generally takes from 1 week to 10 days, only rarely does it take two weeks or longer. The DD will include complete Title and Corporation research, performed by your Lawyer, and a complete investigation into the Registro Nacional. In Costa Rica, all notaries must be attorneys and are registered with the Bar Association, (Colegio de Abogados).
6. CR Beach always protects you by giving you up to 72 hours from receiving the Due Diligence report, to decide if you wish to continue with your purchase. For any reason, if you decide NOT to continue with the purchase, you will be charged only the $500 for the Lawyer’s legal fees, and be required to provide a banking address for your refund if other funds were submitted. You must send an email stating your intentions!
7. Closing will then occur after you have seen & approved the Closing costs detailed by the Escrow company; as well as the receipt of the final transfer of funds. Then you’ll receive the time and date as to when & where the closing takes place. That is when you will receive the complete explanation of all documents, in English or Spanish or ??; including the execution of the transfer deed, and if the corporation is being transferred to the Buyers, there will be a ritual for the Sellers to sign over to the Buyers, their endorsement of shares.
8. In the infrequent case where the Seller is financing a portion, there will be a mortgage deed and the complete list of the future required payments, with all the prearranged banking details.
These days both the Sellers or the Buyers have the option to be or not be present in Costa Rica for the closing, but they will have to pay for the Power of Attorney for someone who will sign on their behalf.
These documents authorizing the POA are signed first in front of a Notary Public in the country where the Buyer/Seller resides, then scanned back immediately and later sent by Fedex or UPS to Costa Rica.
9. Your lawyer will submit all paperwork to the Public Registry (Registro Nacional) and then in about 9-12 weeks, you will receive the official title. CR Beach will ensure that you are protected, every step of the way!
How Much Are The Closing Costs?
1. The old custom was for the Buyer and Seller to share equally in the closing costs, because to reduce legal fees, the buyer & seller used the same attorney. For the years up to 2013, if the Seller was providing a clean, easily transferable corporation, the Buyer was responsible for paying all the closing costs, because the Seller had provided his “value” or financial contribution to the transaction. NO MAS!
2. This all changed in 2013 in different Municipalities: The 2012 Costa Rica Property Transfer Tax Law stated that all new real estate transfers would be subject to a 1.5% transfer tax of the property’s sale price with almost zero EXCEPTIONS! In addition, when the property is transferred and recorded in the National Registry, additional fees for registration and “stamps” will be added to the closing costs as well, .08%. This means that if you want 100% complete “peace of mind” you can pay $550-$900 for a new corporation, plus the extra .08% of the selling price to the National Registry and place the property into a brand new legal entity! This is the #1 method to protect yourself from any legal liabilities that might be the responsibility of the prior corporation.
Thus, the total cost of a real estate closing transaction used to be about 2.3% of the selling price for the BUYERS & about 2% for the Sellers (plus Sellers pay the real estate commission + 13% VAT TAX ON the commission). The laws can change quickly here, so meet with a couple of recommended attorneys, ask a bunch of questions, and choose one.
First Question: Do I need to put my property in a corporation?
Up until a few years ago, 90% of the BUYERS bought the corporation for piece of mind–especially if the purchased property earned rental income but didn’t report it. It’s getting harder to hide this these days. Plus there are new taxes regarding corporations that are active earners or those that are inactive. Ask your lawyer about the advantages or disadvantages of having a corporation!
3. BEGINNING IN 2022: Most realtors here at the beach, and many in the GAM (San Jose &
& surrounding areas) started to make the Purchase price offer that included the BUYERS paying 100% of all the Closing fees! Why? Because another new law came about called the Capital Gains Tax law. And here the laws have changed so fast that you really need to consult a lawyer to get the latest versions. Right now you can: Prove you lived in that residence x amount of days, and you don’t pay any new tax. Prove you bought the property before 2019, and didn’t live there a lot, you pay 2.25%, or option C? Don’t prove anything and pay 15% of the selling price as your Capital Gains tax. (If this has not yet been revoked!)
So now this is part of the reason why the SELLERS are almost demanding that the BUYERS pay all the closing fees, But another caveat, if you have miraculously found a Seller who will offer you some financing (requiring more paperwork for the official Mortgage found in the Registro Nacional) that LENDER/SELLER will not only insist on your paying high interest, and all the closing fees, but you have now lost your Bargaining power:” need a loan, any amount, you’re paying my asking price.”
Thus for the BUYERS, to get the best possible price, we strongly recommend making an all cash offer, as this can save you from 10-25% off the purchase price!
How Is Title Transferred?
What Legal Documents will the Buyer receive? When buying property in Costa Rica, property is transferred from seller to buyer by executing a transfer deed (escritura) before a lawyer-notary, except when merely transferring shares of a corporation, which has become the norm.
However, this all changed in January 2013. Unlike common law countries, such as the United States and Canada, where the role of the notary is limited to authenticating signatures, in Costa Rica the public notary must be an attorney! They have extensive power to act on behalf of the state as they draft and interpret legal documents, and authenticate and certify the authenticity of documents. Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry within 25 to 60 days after presentation.
Your completed transaction package will be provided to you by your attorney and will contain: Due diligence B) Transfer deed c) Corporate books and by-laws d) Certificate of incorporation e) Escrow disbursements) New title certificate. Please note, that as required by Costa Rican law, all documents (except the Due Diligence report), will be in Spanish, But However you can pay extra and your lawyer can get those documents translated into English (or French, German, Mandarin, or Portuguese )
THIS COMPLETES PART 2. STAY TUNED FOR PART 3 NEXT WEEK.
Jeff Fisher
Email: [email protected]
Owner-Broker CR Beach Investment Real Estate, Cell Phone: USE WhatsApp:+1 (506) 8388-5055 )OFFICE NUMBER +011 (506) 4700-1010
Jaco, Garabito, Puntarenas, Costa Rica 611012023 International Realtor ® Cert.Membership #061212737
Costa Rican Real Estate Member since 2004
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