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Here is our story.
About 2 months ago a group of us were in Costa Rica and met a lady that was selling condos in the El Penon Del Sol development in Ocotal. After returning home, the group mutually decided that it was a good investment deal and that we would proceed.
Once we informed the lady that we would like to purchase a number of condos from her, she sent us a draft purchase contract that was between herself and members of our group. After a few revisions back and forth, the contract was approved by all parties involved.
Basically, the contract outlined 5 progress payments and these payments were to be wired to her personal account as the development proceeded. She indicated that she would monitor each stage of the project and only release our funds to the developer if she was completely satisfied. Upon completion of the project, if we were not completely satisfied with the end product she would refund all monies + 5%. Overall, this sounded like a decent deal. She seemed very nice, trustworthy, and knowledgeable.
After doing more research about real estate in CR, we learned more about the legal side and decided to inquire with a few lawyers.
A few things we learned from the lawyers:
– We must perform a title search on the property to ensure it can be sold and that she is the legal owner. We didn’t do this as she indicated many times that was WAS the owners.
– The contract (we sent them a copy) that she wants us to sign is NOT legal in Costa Rica.
– The land that the condo development is being constructed on is NOT divided or submitted as a condo regime at the Costa Rican Public Registry.After learning some of this information, we all decided to step back and talk this over once again. She had indicated all along that the property is owned by herself and that she has the legal right to sell it. We never did see any paperwork to support this except for wording in the contract.
Anyways, our group contacted her today and mentioned that we would like to hold off and proceed through a lawyer to ensure that everything is legit. Her response to this was an absolute “NO”. She said that we do NOT need to go through a lawyer and that we don’t need to set up a corporation until the condos have been finished. She also said that the contract that she provided is the only contract that we will ever need.
We also offered to give her a NON-refundable deposit so that she would hold the condos a bit longer so that we could consult a lawyer. She responded with a very strong “NO”. She indicated that she has other buyers ready to purchase and that we are wasting her time.
Is she trying to hide something? Are real estate deals done like this in CR?
It felt like she didn’t want any sort of legal entity being involved.Yes, we probably should have gone down the legal route in the first place but that was our mistake and have since learned from it.
The thing that is scary is that another investor and his “22” friends have all signed her contract and sent their deposits without any sort of title search or legal advice. They put their ‘trust’ in her.
Obviously we are NOT going to execute this project and will definitely keep looking and learning.
Any thoughts? Greatly appreciated.
Thanks
MikeSounds to me like you dodged a bullet! There are so many red flags in this. You don’t need a lawyer? I would recommend getting two lawyers to look at it and research it. Money into her personal account instead of an escrow account? Refund all your monies + 5%? LOL. And finally, “she has other buyers and you are wasting her time.” Translation: “I need to go find another fool.” Don’t be discouraged, there are lots of legitimate people doing business here; just take your time and do a lot of research.
Mike, your intuition about the odor of this deal is entirely appropriate. You wouldn’t do a deal like this in the U.S. or anywhere else without lots of legal guarantees. Why would you do it in Costa Rica?
CindyC is right, too, that you should have two attorneys who are unequivocally YOUR advocates, not the seller’s. One needs to do all the research, negotiate the terms of the purchase, etc. The second needs to go over the work of the first with a very fine-tooth comb. There are lots of pitfalls and things to overlook.
There are plenty of condos for sale in Costa Rica and many more on the drawingboards. This seller may have other buyers in the wings, but you have many legitimate sellers among which to choose.
Call up one of Scotts brokers or developers they have some of the best product out there. I think the project on the golf course in Tambor represents a terrific investment/price and was considering a purchase there myself. Great location and a new modern ferry in place to get you there..and GOLF!!!
Well done Mike!!! “Lightning”
If you do your homework and follow some fairly simple steps – many of which don’t cost a penny – you should avoid 99% of those very expensive “learning experiences” and make a good and hopefully very profitable Costa Rica real estate investment.
Scott Oliver – Founder
WeLoveCostaRica.comMike…. RUN…. don’t walk away from this “deal”! The Costa Rican system of real estate uses lawyers/notories in every step of the process.
ANYONE that tells you that you don’t need a lawyer is trying to get over on you. ANYTIME you’re signing a contract you should be represented. And I don’t even think I need to get into “wiring” money into someone’s personal account…. BIG no-no… I have to assume the issue of the contract was that it was NOT in spanish as I believe it is REQUIRED to be by Costa Rican law. That in itself should have been a big tip off. It’s tough to seek protections of the CR courts as it is… to have a contract that on it’s face it void makes it even tougher!
And if she did in fact own the property… presenting the plano and registry information would have been as easy as sending you a fax containing the information that you’d need to check it yourself, or at the very least if you didn’t know how, have an attorney do it.
You don’t mention if this lady was tico or not… I’m wondering about that.
Who knows… perhaps this lady is completely on the level and doing things “her” way… but with all the points you brought up… should the transaction hit a bump… or if she’s just looking to rip you off… you have been warned! It’s a train wreck waiting to happen!!
Edited on May 12, 2007 16:24
This is so helpful to read all of these posts. I am hoping I did not just lose out on $5000. I, too, have found a couple of properties that I am interested in. My husband and I only plan on buying one property but I plan on looking at two and I will have to make a decision when we take our trip to CR the end of this month.
Actually it was the agent…I guess that is what you would call them….who is working with the developer who told me about this site. I did wire money to their office in Minnesota and was told that I would get my deposit back should I change my mind. He did encourage me to have the attorney I will be using to look at the titles contact their attorney if there are any questions about anything. Unfortunately, the developer is Grupo Mapache and I am so worried now that I may have made a mistake, I just don’t know.
The properties are already built and they are supposed to be finishing up the cabinets and installing the appliances sometime this week. (Of course I know that really means next week or the week after.)
There is another development my husband and I are interested in, El Penon Del Sol, in Ocotal and I believe that is the same developer, Mapache? The agent I have been talking to regarding this property was the one who told me to be wary of any developments that involved Mapache, so I don’t really know.
Any advice? It can really be confusing trying to figure out who is telling the truth and who is not. You think you are doing all of the research and then you find out that you have overlooked something important.
Mapache are having some serious difficulties at the moment as you can see from the other thread but I don’t believe that your money is at risk.
Scott Oliver – Founder
WeLoveCostaRica.comThank you for your reply back. I do feel better after having talked to a few other people….and hearing back from you, Scott.
I got this idea about Costa Rica a little over a month ago and I have been doing so much research. Here I am now ready to take a trip to CR and possibly buy a condo. It all happened so fast, but then what am I waiting for?
It is scary, but I am excited, too.
Is there someplace I can look to see how real estate is doing in Costa Rica? Meaning should we decide to sell our condo in a few years is there enough of a market to make some profit to invest in something else? I guess one never really knows though.I do feel good about buying a condo that is under $100K and I am hoping there is some room for equity to increase. I know it certainly is not happening here in California!
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