Closing costs on Costa Rica property, how to calculate and who pays
When you purchase, closing costs on Costa Rica property is quite important. Purchasing a Costa Rica property is always a good investment. Costa Rica property prices are very reasonable compared to many other countries. Also, property laws are quite clear and many locations have great potential for growth.
When you purchase Costa Rica property, besides many important facts about Costa Rica real estate, three important questions arise
- How to select your closing attorney
- How to calculate the closing cost
- Who pays the closing costs on Costa Rica property
Most buyers and sellers of Costa Rica property do not realize how important these 2 points are until it is too late. Allow me to explain.
How much are the closing costs?
In the first case, the costs of transferring the corporation to the new owner depends a lot on the attorney you choose. Some attorneys will charge you a fixed fee, others a 1% and others even the normal attorney fees that you would pay if you would transfer the title.
When you transfer the property, closing costs on Costa Rica property is totally different. Transfer taxes, a national registry stamp plus documentary stamps and duties have to be paid for a total of just over 2,31% of the sales price.
The Colegio de Abogados de Costa Rica dictates the notary registration fees:
- Up to 10,000,000 Colones a 2% fee
- On the following 5,000,000 a 1.5% fee
- Then, on the following 15,000,000 a 1.25% fee
- On the remaining balance a 1% fee
To make the calculation of closing costs on Costa Rica property effortless. Visit Attorney Property Services closing cost calculator below. Make sure you set the dollar exchange before starting your calculation.
Selection of the closing attorney
The selection of your closing attorney is the most important decision of the whole process of buying a Costa Rica property. In order to transfer the property, the buyer and seller must select a closing attorney. This closing attorney has to be a notary public, who will draft the transfer deed. This deed will register the property sale in the National Registry (Registro Nacional).
A public notary will usually not give you any discount on the closing costs on Costa Rica property. They all follow the tables used by the Colegio de Abogados. In case there is a corporation transfer, there might be a discount in the closing costs on Costa Rica property arranged. Although this depends on the attorney.
The buyer has the right to choose the closing attorney, as it is the ONLY way for the buyer to protect him/herself. It is very important to use one who has an escrow account approved by SUGEF, so the earnest money goes to this escrow account until closing. Don’t work with attorneys who will hold checks or allows the seller to receive the earnest money. And don’t give the earnest money to the seller, as is customary in a Costa Rica real estate transaction. In Costa Rica, in a cash transaction, it is customary for the buyer to select the notary/attorney who will draft the transfer deed if paying cash for the property.
With a mortgage
When the seller finances any percentage of the purchase price and a mortgage needs to be drafted to guarantee payment, the seller may request his/her attorney drafts the transfer deed or at least do the mortgage document. In many cases the title transfer and the mortgage are done in one and only document.
The buyer may insist that the notary/attorney drafts the transfer deed and let the seller’s notary/attorney draft a separate mortgage instrument. In this case, because the mortgage is being drafted separately, it carries a higher registration fee. The buyer will always pay for the cost of the mortgage registration. This should be described in the offer to purchase and not be decided at closing.
When you purchase Costa Rica property, the most customary means of transferring the title of the property from the seller to the buyer are
1. If the property is owned by a corporation like a Sociedad Anónima (S.A.) or a Limitada (LTDA), the closing attorney can either transfer the title out of the corporation to the new owner (in the buyers’ personal name or in a new corporation) or transfer the shares and powers of attorney to the buyer and change the board of directors.
2. If the property is owned by a person(s), the title will have to be transferred from this person(s) to another person(s) or to a corporation.
Who pays the closing costs?
The closing costs on Costa Rica property title transfer are usually shared 50/50 between buyer and seller, unless negotiated differently. This makes the closing costs a negotiable part of the offer process. If the purchase price is financed the mortgage fees are always paid by the buyer.
If there is an existing mortgage on the property, the closing attorney will hold the balance owed on the mortgage. The attorney will then pay it off and make sure the title is cleared in the National Register. The costs of clearing this mortgage has to be paid by the seller as it is important the buyer receives a clear title.
If you are ready to purchase a Costa Rica property, contact us now, we have all the necessary knowledge to carry you through a painless purchase.
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