Role of the Real Estate Agent during the Purchase Process
It is important to know, for all parties involved, what the role of the real estate agent is in the purchase process. When you plan to purchase a property in Costa Rica you will probably contact a Realtor to help you find the right property. By doing so, you want to hire the best and most qualified Realtor.
As a fully bi-lingual Real Estate Attorney in Costa Rica, I am closely involved in many Real Estate Closings in Costa Rica. Therefore, I deal with local and foreign buyers, sellers and Real Estate Agents in Costa Rica. Often, it is not clear what the role of the real estate agent is, the reason for this article. The reason is that in many other countries, the role of the real estate agent is different than it is here.
Many real estate agents in Costa Rica don’t really get involved in the closing process, which is a mistake. You can recognize a good real estate agent when he/she is involved in the constant communication and coordination between the involved parties during the entire real estate purchase process. Those are the Buyer, the Seller, and the closing Attorney.
The purpose of this article is to highlight the responsibilities of the parties involved in the real estate closing process. This way, the buyer as well as the seller, can understand a bit about the closing process. I will describe the role of the real estate agent first. Then you will also find more about the necessary process in several articles for the Easy News.
The Role of the Real Estate Agent
To be able to describe the exact role of the real estate agent, we first have to find out the following:
Does the Realtor work for the Seller or the Buyer?
First, we need to know if the Realtor is the Listing Agent or only the Buyer’s agent. In many cases, the Realtor represents both, called a dual agent.
But generally the Real Estate Agent who contacts the Real Estate Attorney for a Real estate Purchase is the BUYERS agent in Costa Rica. The Listing Agent in Costa Rica always represents the SELLER.
In most cases, the seller pays the Real Estate Commission. In my view, the real estate agent should make it clear from the outset which party they are acting for.
What the Listing Agent Should do
Taking the Property listing
If the agent is involved in taking a property listing, this agent has the role of the listing agent. The agent should request from the Seller as a very minimum a current property survey map (plano catastrado) and the property and ownership information. With the Folio Real (property number) and the name of the owner (or the corporation) and based on this information, the Realtor should get a property title report before listing the property (informe registral).
This is what a survey (of a lot in a gated community) looks like:
This information is available online from the National Registry website. With this information, the real estate agent should verify that the property to be listed and sell, is free of any liens or annotations. If not, this would make title unmarketable.
This is what an online property title search in the National Registry looks like (I deleted the ownership and property number):
Check for Liens
It’s surprising how often a real estate agent comes to the Attorney ready for closing, only to discover that the property has a Lis Pendens or some other defect that foils the sale.
When this happens, all the valuable efforts in advertising and showing the property have been wasted. And worse, the buyer might have fallen in love with a property that cannot be sold or has legal problems. In this case, the Role of the Real Estate Agent has been mistaken and all effort was in vain.
The best procedure is for a Real Estate Agent to check the legal status of the property BEFORE listing and showing it. Also, the real estate agent should clearly understand the property they are listing. The agent should look at the boundaries with the plot map in hand. The role of the real estate agent is also to look at easements and other annotations like forest reserves and river setbacks.
It is quite common that an Agent takes the title information off of the property survey map and assumes that is the current title number. This might not be the case. Sometimes a property owner started with a large tract of land and then segregated pieces from that property. Each new segregation will spin off a new title number and a new corresponding survey Platt number. Then, the original survey map and title number will be out-dated.
The Agent needs to be sure to have the correct survey map and the correct property title number.
With the property title report, the Realtor can also verify the record owner of the property. The most typical forms of ownership are:
(a) Personal ownership.
This is where the property is owned in the personal name of one individual.
(b) Joint Ownership.
This is where one or more individuals own the property jointly and each has an undivided interest in the property. This is locally referred to as derechos.
(c) Corporate ownership.
This is a property that is titled in the name of a corporation. In this form of ownership, the Real Estate Agent should verify with the Seller that he/she has the authority to act for the corporation. Ideally, the Agent should procure from the Seller a copy of the corporate documents.
Check Zoning if Applicable
Is the Agent selling is raw land that will be used by the Buyer for construction? Then it is very important to obtain a Zoning Use [Uso de Suelo] from the Municipal Government where the property is located.
This will ensure that Buyers will be able to use the property as they intend. Some properties have use restrictions and construction coverage limitations. The Real Estate Agent should be aware of these so they can explain it to the Buyer. See a sample of Zoning Use [Uso de Suelo] below:
What the Buyers’ Agent Should do
Often, buyers’ agents assume they just have to accompany the buyer during the showings and nothing else. This is incorrect. The buyers’ agent has a different role than the listing agent and also has to cover a lot of ground.
Negotiate Price, Terms, and Conditions of the purchase
Generally, it is the Buyers Agent who spends most of the time with the Buyer showing properties. It is the Buyers Estate Agent who negotiates the price, terms, and conditions of the sale with the assistance of the Listing Agent.
I recommend a Buyers Agent to use a written offer. In that offer, it is important to establish an agreement on the price, terms, and conditions. Then have this Offer to Purchase signed by both parties. This, in turn, can be used as a basic information for the Closing Attorney to be used to prepare the official Purchase Contract.
Preparing the Purchase Contract
Many agents use their own particular form to set out the offer made by the Seller.
Many forms are short and modeled on a US-style purchase agreement. Agents must keep in mind that Costa Rican law is very formal in the execution of documents. Failure to comply with some of these formalities could affect the enforceability of your contract.
The two most typical pre-sale contracts in Costa Rica are the Reciprocal Promise to Buy and Sell (Promesa Recíproca de Compra Venta) and the Opción de Compra (Purchase Option). These contracts do not formally pass title of the property from the Seller to the Buyer yet. They set out the terms and conditions that must be satisfied prior to closing. It establishes the obligations of both the Buyer and Seller during the due diligence period of the transaction.
As previously indicated some agents will use their own form and only contact the Attorney to handle the actual property transfer deed. Other agents prefer to have the Attorney involved from the beginning and have the Attorney prepare a formal Buy-Sell Agreement. This is especially important when money changes hands, like earnest money.
We recommend the Agent pays special attention to transactions that include an inventory in a house. Also, those that require certain construction or repairs to be done to a dwelling prior to closing. This must be spelled out in very detailed form so that each party is clear on what to expect. We have seen Purchase Agreements that result in bickering and fighting at closing table because the Buyer expected more than the Seller thought he had to give.
As soon as the offer is accepted by both parties, it becomes important that both listing agent and buyers’ agent work together. Or if there is only one agent involved in the transaction, it’s important the following tasks are fulfilled diligently and on time. Often, real estate agents do not understand that all the following tasks are the role of the real estate agent and not the attorney:
Setting the closing date
Since the Buyers’ agent is the person with most of the contact with all parties, it should be the agent that coordinates the closing date.
The required pre-closing documents should be coordinated well before closing date between the listing agent and buyer’s agent. The agents should also coordinate the services of those professionals required to complete the due diligence and/or conditions set forth in the Purchase Agreement.
Make sure the Seller is current with the payment of all utilities, Electric, Water, Telephone, Cable TV & Internet. Be sure the Seller will leave a telephone line on the property for the Buyer if wanted, or at least as long as it takes to get a new phone line installed by the phone company.
ii. Property and other Taxes.
Make sure the Seller has paid all the pending taxes. These should include property tax, corporation tax, and luxury home tax (see below), if applicable. The listing agent should ask the seller to produce a receipt and or certificate by the Municipality that the property is up to date on property tax payments.
Don’t wait until they are at the closing table for the Seller to tell you that he hasn’t paid the taxes.
iii. Condominium Sales.
Especially in a condominium sale, the role of the real estate agent is very important. Often, condo administrations do not cooperate and this part of the due diligence is quickly forgotten.
When the sale of a condominium is involved the HOA must provide a copy of the CC&Rs or bylaws (Reglamento del Condominio). Also, the Condo Association has to deliver, indicating that the condo unit that is being purchased is current with all fees and assessments. I also like to see a copy of the financial statement of the condominium to look at its financial situations. After all, at the purchase of a condo, the buyer is inheriting the association as well. Therefore, the buyer would not want to inherit their liabilities.
iv. Home Inspections.
Often, the Purchase Agreement specifies that a home inspection must be prepared prior to closing. Then the Real Estate Agent should coordinate the inspection with the Home Inspector and the Seller to ensure it is done well in advance of closing. This way, the Seller has ample time to correct any deficiencies that would delay closing. Then a 2nd home inspection can be done if wanted before closing.
v. Review of Home Inventory.
It is very important that the Real Estate Agent properly describes and list each item included in the sale if the property for sale includes an inventory list. Prior to closing the Agent and the Buyer should inspect the home once again to ensure that the items described in the inventory list are as warranted. You would be surprised how many misunderstandings arise at closing because of a poorly drafted and detailed inventory list.
vii. Luxury Tax.
Does the property apply for the Luxury Tax? Then Realtor should request from the Seller for a copy of the last paid Tax. If in doubt if the property should pay Luxury Tax, the Seller should have an appraisal done by a qualified Appraiser.
I expect the role of the real estate agent is now clear. I work very well with real estate agents who are diligent.
Attorney Roger Petersen for The Easy Times
Attorney Roger Petersen specializes in real estate and is fully Bi-lingual English and Spanish. As a foreigner, you will feel totally comfortable using him as a closing attorney. Roger is also the author of “The Legal Guide to Costa Rica”. Feel free to contact Roger by email.
If you purchase a property in Costa Rica, using your IRA or 401K, Roger is the expert attorney on this matter. He also offers the following services:
- Real Estate Closings
- Property Title Searches
- Due Diligence
- Escrow Accounts
- Development Planning
- Residential and Commercial Leases
- Title Insurance
- IRA Investment Property Purchases
- Purchase and Sale Agreements
- and any matter incidental to your real estate transaction in Costa Rica.
Finally, feel free to leave your comments on this blog. If you like this article, please also feel free to share it on your social media.
If you like this blog, connect with me on Google+ or subscribe to our newsletter by clicking the banner below.
While we’re at it, I DO want to remind you that we appreciate any referrals you can send us. Finally, please remember the American-European real estate Group’s agents when you refer a real estate agent. Because we DO appreciate your business. Therefore, we are very good at what we do.