Process of Buying Property in Costa Rica

Buying property in Costa Rica can be an exciting adventure, but it’s important to understand the process to ensure everything goes smoothly. This guide breaks down the key steps involved in purchasing property, making it easy to follow and packed with all the details you need.

See an essentials list of items expats often wish they packed to bring to Costa Rica.

So you found the property you dreamt of and you want it. Now what?

Step 1: Get the Property Number

Before starting the buying process, it’s essential to get the plano or property number for the property. With this information, your lawyer can access the national property registry system in Costa Rica to verify the property’s legal status. Here’s what they will typically check to ensure the title is clean and free of issues:

• Liens and Mortgages: Verification that no outstanding debts, mortgages, or liens are registered against the property, which could affect ownership transfer.

• Encumbrances or Restrictions: Any legal restrictions, encumbrances, or servitudes (such as easements) that could limit your use of the property.

• Boundary Accuracy: Confirmation that the property’s boundaries and measurements match the registered plano (property survey) and that there are no disputes with neighboring land.

• Ownership History: Review of past ownership records to ensure the title has not been disputed and is not mixed with any “grandfathered” properties or older title claims that might complicate ownership.

• Property Use and Zoning Compliance: Checks to confirm the property’s zoning and legal usage, which affects whether the land is suitable for your intended purpose (e.g., residential, agricultural, commercial).

• Environmental Restrictions: Investigation for any protected areas or environmental restrictions, such as maritime zones, which could limit construction or use.

• Pending Legal Cases: Any pending lawsuits or legal challenges involving the property or its current owners.

A thorough review of these factors will help your lawyer confirm that the title is clean and safe, allowing you to proceed with the purchase confidently.      

Step 2: Draft a Purchase Agreement

Once you’re sure the title is clean, it’s time to create a purchase agreement (or offer). This document should include:

• • Date of Closing: When you plan to finalize the sale.

• • Offer Amount: The price you’re willing to pay for the property.

• • Financing Details: Whether you’ll use a mortgage or pay in cash.

• • Deposit: Typically around 10% of the purchase price, but this can be negotiated based on what the seller prefers.

Both you and the seller will need to sign this agreement to make it official.

Step 3: Understand the Escrow Process

Next up is escrow. This step is crucial for making sure the money involved is legitimate. They will ask you to complete forms with personal details and request one or more of the following documents to verify the origin of your funds:

• Proof of Regular Income: Typically, income statements for the last six months or longer, depending on the source and nature of your income (e.g., salary slips, freelance invoices, dividends).

• Sales Documentation: If you’ve sold a property, business, or other assets, you’ll need to provide official records from the sale showing the amount and relevant details.

• Inheritance Records: Documents proving inheritance, such as a will or inheritance distribution statement, if your funds come from family assets.

• Loan Agreement Documentation: If you’ve obtained a loan to fund your purchase, provide records detailing the loan terms and disbursement.

• Investment Liquidation Proof: Statements or confirmations from financial institutions if you’ve withdrawn from investment accounts, stocks, or retirement funds.

• Gift Letter or Documentation: If you received funds as a gift, often from family, a notarized gift letter detailing the amount and relationship to the giver is typically required.

• Trust Distribution Records: If your funds come from a trust, documents outlining the terms and distribution are essential for validation.

• Insurance Claim Payout: If funds originate from an insurance payout (e.g., life insurance or settlement claims), you may need to submit claim statements as proof.

Once all documents are verified, your escrow agent will hold your deposit and manage the transaction, ensuring compliance and that each party meets its commitments.

Step 4: Transfer Funds to Escrow

After you’ve agreed on the details, you’ll need to send your funds to the escrow account.

When purchasing property in Costa Rica, the typical closing costs involve several key fees, totaling about 4% of the house purchase price. 

• Transfer tax: A 1.5% fee, applied to the property value or the fiscal value, whichever is higher.
• Documentary stamps: Approximately 0.86% of the transaction price, required for registration.
• Legal fees: The notary public or attorney charges 1.25% to 1.5% of the property’s value for handling the transfer.
• Additional stamps: Fees for National Registry stamps, municipal stamps, and other documentary stamps may also apply.
• Corporation-related costs: If purchasing through a corporation, additional costs may be incurred for altering the corporation’s shareholders, which tends to be a lower-cost option compared to buying as an individual 

These costs should be considered when budgeting for a property purchase in Costa Rica.

Keep records of all transactions to protect yourself.

Step 5: Pay Taxes and Fees

To register the new title in your name, the lawyer will ensure that all relevant taxes, timbres, and legal fees are paid. These costs are typically calculated in advance and sent to Escrow before the closing. Once everything is in order, your lawyer can proceed with the property transfer registration..

Step 6: Travel to Costa Rica to Sign

After securing your funds in escrow and settling all fees, it’s time to travel to Costa Rica to sign the property transfer documents. This is when you’ll officially finalize your purchase!

Once you’ve signed, the documents will be scanned and sent to the escrow agent, who will then release the funds to your lawyer, the seller, and any agents involved in the transaction.

See a list of essential items expats wish they packed when moving to Costa Rica.

Step 7: Register the Title

After everything is signed and fees are paid, your lawyer will register the new title under your name with the local property registry. This process usually takes about a week to complete, after which you’ll officially be the proud owner of your new property