Closing Your Dream Home in Costa Rica
Buyers come to Costa Rica with a dream in mind, finding their dream vacation home! At Krain, we help them find their dream home, we help them make on offer, and ultimately finalize a contract to purchase their home. What we want to help everyone understand today is the process that occurs between the accepting the offer and the final closing day!
After you find your dream home and the offer is accepted, there is a lengthy process that takes place and it happens in a pretty steady order that is NOTHING like a closing process in most parts of the World. I want to explain this process in a short but meaningful way. We will take this journey together step by step:
- Offer acceptance by the seller begins our journey.
- Selecting a lawyer is the second step and Krain works with several trusted lawyers that we have worked with for both buyer and seller.
- One of the first steps a lawyer in Costa Rica takes is whether a buyer or seller will be in country for the closing or not. If a buyer is not in country, then they will sign a Power of Attorney for their lawyer to sign for them under specific circumstances and with certain powers. This varies from most of the modern world as the buyer and seller need not be present for a closing on a home in Costa Rica.
- Escrow must be created (typically within 5 business days) to show good faith that the buyer is going to purchase the property. An escrow Company in Costa Rica will require a copy of the buyer’s passport, copy of their driver’s license or state ID, a copy of a Utility Bill proving their address at home, at least one year of tax returns, and most importantly “proof of funds” which is typically a bank statement showing the funds that will be used to purchase your dream home. Don’t worry the proof of funds can be gathered during the buying process and the bank statement sent just days prior to closing. The escrow process is completed with both buyer and seller signing an escrow agreement that outlines the payment splits that were agreed upon in the contract.
- In this step both lawyers will do what is called “due diligence” on a home and the property involved in the sale. During the due diligence period the lawyers ensure that there are no past due taxes owed, that ALL utilities are paid in full up to the closing date, the property is surveyed and that the property being purchased is legally registered in the Nacional Registro, and lastly the lawyers will follow the “chain of title” back as far as possible to ensure that the seller is legally authorized to sell the property. All this is done to protect the buyer and ensure they are legally purchasing the property.
- After due diligence is completed, the escrow funds deposited are no longer refundable to the buyer and we move into the final phases of purchase
- The buyer’s lawyer will now verify with the buyer whether they wish to “purchase” the corporation that the property is currently registered in or whether the buyers wish to form a new corporation and transfer the property into that new corporation. The difference is that a new corporation limits liability of any unknown legal problems with a corporation and also allows the buyers to name their new corporation and home whatever they please. With a new corporation comes a shiny new name of both corporation and home but also comes with a typically shiny price tag of about $1,000 U.S. so that is a decision the buyers should consider in their closing process.
- Once all the legal entities are satisfied and the due diligence period has expired and the corporation decision is made, all parties will receive a closing statement from the escrow company. This outlines the entire payment including escrow and final funds necessary to pay all closing costs by both parties. The closing statement will also outline all parties that receive commissions or payments to legal fees or sales agents. Every penny of a transaction is accounted for in the closing statement and both buyer and seller are required to sign the statement after all lawyers and interested parties approve the statement.
- The next to last step of the buying process is the wire transfer of remaining funds to the escrow account and this typically must be started “five” days prior to the closing date. This time frame allows plenty of time for the funds to typically arrive for closing.
10.Upon closing day, the interested party’s lawyers gather together with the paperwork and sign the required documents of which they provide to everyone. This process typically takes about 30 minutes and for the buyers it marks their last step in the buying process and their first day as official homeowners! However, there is a bit more for the lawyers and escrow company to do.
11.The last few layers of closing in Costa Rica involve the depositing of commissions and legal fees and the beginning of the process to file the paperwork with the Nacional Registro.
12.About 3 to 6 months after the “official closing” the lawyer presents the new homeowners (or their legal representative) with their corporation paperwork and “books” in their names. This is the day that most buyers truly get excited because they can see their names on the legal papers or registry in Costa Rica!
I really want buyers in Costa Rica to be comfortable with the buying process and I hope that each of you “loosely” utilize this guide to help with any questions that you have. While not every home buying experience follows the exact steps above, we, at Krain, do want you to know that we will be here every step of the process to represent your best interests and to answer any questions that you may have.