Role of the Real Estate Agent during the Real Estate Purchase Process
Many real estate agents in Costa Rica dont 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 Buyer, the Seller and the closing Attorney during the entire real estate purchase process.
The purpose of this article is to highlight the responsibilities of the parties involved in the real estate closing process and for you, the buyer or seller, to understand a bit about the process. I will describe this process in several articles for the Easy News.
I. The responsibility of the Real Estate Agent.
Does the Realtor work for the Seller or the Buyer ?
First, we need to know if the Realtor is the Listing Agent or the Buyers agent. In many cases, the Realtor represents both, in others the Realtor represents the seller 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 for which party they are acting for.
What the Listing Agent Should do.
(i) Taking the Property Listing.
If the agent is involved in taking a property listing they should receive 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 on-line from the National Registry website. With this information the real estate agent should verify that the property which they are going to list and sell is free of any liens or annotations which would make title un-marketable.
This is what an on-line property title search in the National Registry looks like (I deleted the ownership and property number):
Although this appears logical you would be surprised how many times 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. If this happens all the valuable efforts in advertising and showing the property have been wasted and worse, you might have fallen in love with a property that cannot be sold or has legal problems.
The best procedure is for a Real Estate Agent is to check the legal status of the property BEFORE he/she lists it and shows it. Also the real estate agent should clearly understand the property they are listing. The agent should look at the boundaries with the plotmap in hand and eventual easements and other annotations like forest reserves and river setbacks for example.
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 have an undivided interest in the property. This is locally referred to as derechos.
(c) Corporate ownership. This is a property titled in the name of a corporation. In this form of ownership the Real Estate Agent should verify with the Seller that he has the authority to act for the corporation. Ideally the Agent should procure from the Seller a copy of the corporate documents.
(II) Negotiates Price, Terms and Conditions of the Property Purchase.
Generally it is the Buyers Agent that spends most of the time with the Buyer showing properties. When that Buyer decides on a purchase it is the Buyers Estate Agent that negotiates the price, terms and conditions of the sale between Buyer and Seller with the help of the Listing Agent. I recommend that the Buyers Agent uses a written offer to establish agreement on the price, terms and conditions and to have this Offer to Purchase signed by both parties, which in turn can be used as a basis information for the Closing Attorney to be used to prepare the official Purchase Contract.
III 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 Reciproca de Compra Venta) and the Opcion de Compra (Purchase Option). These contracts do not formally pass title of the property from the Seller to the Buyer but set out the terms and conditions that must be satisfied prior to closing and 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.
We recommend the Agent pays special attention to transactions that include an inventory in a house or 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.
(iv) Setting the Closing Date.
Since the Realtor is the person that has had most of the contact with the Buyer and Seller of the property it should be the agent that coordinates the closing date with all parties including the Attorney to insure that all goes smoothly.
Prior to closing the Realtor should obtain from the Seller all necessary documents that will be required by the Attorney at closing and coordinate with the Buyer to retain the services of those professionals required to complete the due diligence and/or conditions set forth in the Purchase Agreement.
i. Utilities. 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 in the property for the Buyer or at least as long as it takes to get a new phone line installed by the phone company. There may be areas in the country where getting a new phone service installed is difficult or impossible and as such securing at least one telephone line for the Buyer is essential.
ii. Property Taxes. Make sure the Seller has paid the property taxes and ask them to produce a receipt and or certificate by the Municipality that the property is current in tax payments. Dont wait until they are at the closing table for the Seller to tell you that he hasnt paid the taxes.
iii. Condominium Sales. When the sale of a condominium is involved the Condo Association must provide a copy of the CC&Rs (Reglamento del Condominio). Also required is a letter from the Condo Association indicating that the condo unit that is being purchase 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 when you purchase in a condo you are inheriting the association as well and you would not want to inherit their liabilities.
iv. Home Inspections. If 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 of the property to insure it is done well in advance of closing. This way, the Seller has ample time to correct any deficiencies that would delay closing and a 2nd home inspection can be done if wanted before closing.
v. Review Home Inventory. If the property being sold includes a home and an inventory list of items it is very important for the Real Estate Agent to properly describe and list each item included in the sale. Prior to closing the Agent and the Buyer should inspect the home once again to insure that the items described in the inventory list are as warranted. You would be surprised how many misunderstanding arise at closing because of a poorly drafted and detailed inventory list.
vi. Check Zoning for the Property if Applicable. If the property the Agent is 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 the Buyer will be able to use the property as they intend. Some properties have use restrictions and construction coverage limitations and 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:
vii. Luxury Tax. If the property applies for the Luxury Tax, the 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.
By Attorney Roger Petersen for The Easy Times
Attorney Roger Petersen is specialized 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
Residential and Commercial Leases
IRA Investment Property Purchases
Purchase and Sale Agreements
and any matter incidental to your real estate transaction in Costa Rica