Buying & Building Costa Rica Real Estate – Who Will Protect You?
I remember putting together a seminar on crime for apartment residents.
The crime specialist opening activity was to have everyone look around the room and pick out the person most likely to be the next victim of a crime. Everyone selected another person and pointed…
You probably have figured out this activity. Everyone at the crime seminar pointed to someone else when, in fact, they should have pointed to themselves. You are as likely to be a victim of a crime as anyone else. Real estate would generally be the same. You are at risk as much as anyone to be taken advantage of in a real estate transaction in Costa Rica. So – who will protect you?
Before continuing let me explain my position. I have great respect for people in all professions and business institutions. We need banks, Realtors, lawyers, etc. I do, however, play the devil’s advocate in protecting and advising my clients and writing articles of awareness about Costa Rica real estate.
I would like to group people who have an interest in buying real estate and do a similar activity. Point to the person in the room you feel most likely will be taken advantage of in a real estate transaction. Everyone selects and points – to another person.
You probably have figured out this activity. Everyone at the crime seminar pointed to someone else when, in fact, they should have pointed to themselves. You are as likely to be a victim of a crime as anyone else. Real estate would generally be the same. You are at risk as much as anyone to be taken advantage of in a real estate transaction in Costa Rica. So – who will protect you?
Before continuing let me explain my position. I have great respect for people in all professions and business institutions. We need banks, Realtors, lawyers, etc. Etc. Etc. I do, however, play the devil’s advocate in protecting and advising my clients and writing articles of awareness about Costa Rica real estate.
Let’s first examine the Realtor and the Bank in a typical real estate transaction:
The Realtor: Unless the Realtor is a buyer’s agent, the Realtor represents the seller. The Realtor’s objective is simple – selling the property to make a commission. Unless a Realtor gets you to sign a purchase agreement and the sale is finalized, he or she does not make money. A Realtor is a salesman – pure and simple.
You are the customer. Has any salesman ever really convinced you that they are protecting you? Costa Rica Realtors can be different. Many Realtors are not licensed. There are not a lot of regulated guidelines and in Costa Rica the question of enforcement of unethical practices is always an issue.
Misrepresentation of ownership, property and prices unfortunately does occur. Your “buyer beware” mindset should be in place. As in all professions, there is the good, the bad, and the ugly gray area that occurs as a result – PROTECT YOURSELF!
The Bank: A bank is a business that lends money for a profit. It amazes me sometimes the concept that people have that a bank is a service. Please believe me when I tell you the bank is not doing you a service by lending you money. You are doing the bank a service by borrowing money and paying interest.
The friendly banker who shakes you hand is a businessman. In a real estate transaction the bank’s main focus is to protect the bank not you. But the bank will give you the impression your best interest are being cared for. Banks in Costa Rica will offer real estate loans for 60% to 80% loan to value depending on residency. That means you will need to put down 20% to 40% deposit.
The bank will do an appraisal to make sure you are not paying too much and the bank is not loaning too much and – you pay for the appraisal. Who are they protecting? Themselves! Not you …
Strange things can happen between the original purchase price, the percent of loan to value and the final appraisal. Bank lawyers will prepare all legal documents. Who are they protecting? Themselves! Not you …
Have you ever followed the flow of legal documents and paperwork that a bank does in a real estate transaction? It is sometimes very interesting to go over the initial paperwork and then review the paperwork at the end.
Closings are done by the bank and again I am amazed at the people that take for granted the bank and the bank’s lawyer have prepared all documents correctly and all figures are in order. Banks do make mistakes and many banks both here (and in the US) have failed and I advise once again – PROTECT YOURSELF!
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Let’s now examine the role of the attorney, lawyer or ‘abogado’ in the real estate transaction:
The Attorney or Lawyer: In Costa Rica it is important to have a lawyer involved in the real estate transaction. If you are dealing with an owner directly or with a bank, have your own attorney and do not share. I have personally dealt with real estate attorneys here in Costa Rica and I will give you my honest opinion – I am not impressed.
If you think the attorney can handle the paperwork, you are probably right. If you think the attorney is going to protect you and fight for you, you are probably wrong. My next article is going to deal with the lawyer issue here in Costa Rica and it is involved. A good real estate attorney will cover every detail of a contract and transaction.
The attorney should insert clauses and addendums that will protect you whether it is for buying or building. I would describe most contracts I have seen in Costa Rica very simple and generalized – almost too simple and generalized. Again, there is a flow from beginning to end that can be quite different.
I verbally debated the first real estate attorney I had in Costa Rica. His reply was, my job is to do the paperwork. My reply was, paperwork is filling in the blanks, your job is to protect me as your client. Needless to say, he is no longer my attorney.
I know all of you have already concluded that the person in a real estate transaction who will best protect you is – YOURSELF. Do not be that person that points to another or assumes the Realtor, bank or lawyer is going to protect you. Many foreigners here in Costa Rica have taken that approach and their bank accounts are not quite the same.
Here is Costa Rica you have got to educate yourself, be informed, and seek advice (hopefully from me). If you understand what the Realtor, the bank and the lawyer are doing relative to the transaction, you are a step ahead…
Buying real estate is different in Costa Rica – PROTECT YOURSELF!
Rudy Matthews has more than twenty years experience buying, selling, managing and constructing houses and apartments. As an independent personal advisor/consultant, Rudy’s main objective is to protect you, save you money and eliminate frustration. Rudy’s knowledge of negotiation, contract clauses that protect you, construction and improvements will be an invaluable service. His understanding of Costa Rica real estate will prevent you from being taken advantage of.
In the USA, Rudy served on the Board of Directors for the Tampa Bay area apartment association, subsequent President on condominium associations, vice-president of the USF area civic association which became a model nationwide for community involvement and President of the landlords council with over 5,000 rental units represented.
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Rudy Matthews – Costa Rica real estate expert
Andrew Makarik
to@welovecostarica.comAndrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.
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