The use of escrow services when buying Costa Rica real estate
Did you know that you can use escrow services when buying Costa Rica real estate? Costa Rica doesn’t have escrow laws as the United States has.
So why should you use escrow services when buying Costa Rica real estate?
If you are not a Costa Rican resident or citizen, you probably don’t have a bank account in Costa Rica. Costa Rica has pretty tight money laundering laws and the use of escrow makes receiving your funds much easier. That way, a bank will not freeze your funds while they investigate.
The Escrow holder does have the legal obligation to request proof of where your funds are coming from.
There are many foreign buyers of real estate in Costa Rica. Therefore some real estate attorneys, as well as some title companies, offer escrow services. Most call it a trust account.
Are you planning to purchase a home in Costa Rica? You don’t already have the amount for the purchase in a Costa Rican bank account?
There are two opportunities to use escrow services for Costa Rica real estate transactions:
- Deposit the earnest money.
- Deposit the balance of the transaction.
There are 12 steps that I can recommend that will make your purchase easier on you.
1. Rather than using anyone, deal with a real estate agent in Costa Rica who knows what escrow is and where to find escrow services.
2. Or use a real estate closing attorney who offers escrow services and has a good reputation.
3. Your real estate agent should write up the offer, that includes all the necessary details. Once you and the seller agree, your real estate attorney to write up a reciprocal purchase-sale agreement. This agreement should have all the details of the purchase – sale, including the escrow services.
4. When you wire the earnest money to the escrow agent, make sure you have all the data on the escrow account right, so the money won’t get lost on the way. Don’t bring cash, Costa Rican banks will not accept more than a couple of thousand dollars in cash from you.
5. Most wires involve several banks; beware of wire costs charged by all banks involved. If you plan to write a check drawn on a US bank, be aware that the check will take 10 days to clear. This will make the agreement of no value for another 10 days and the property will stay on the market.
6. Another tip, don’t send more money into escrow to purchase furniture, home inspections and other things, without asking escrow agent.
7. In addition, the purchase – sale agreement says how much earnest money goes into escrow. The usual amount is 10% but it depends on what will make both the buyer and seller feel comfortable.
8. The purchase-sale agreement should VERY clearly describe who gets the earnest money when the purchase – sale goes sour. Most agreements carry an arbitration clause that will allow both parties in case of disputes, claims or differences a pre-agreed on arbitrators like the Chamber of Commerce or the International Center for Conciliation and Arbitration of the American-Costa Rican Chamber of Commerce (“CICA”) to take the decision which party will get the earnest money in case of disagreement.
9. Many sellers insist on receiving the earnest money at the signature of the purchase –sale agreement themselves. It’s how Costa Ricans do business. When I just started selling property in Costa Rica, I allowed for this as at the time, it made sense to me. Then, a seller passed away before closing and the earnest money had disappeared. I will leave the rest to your imagination. Since then, I insist the earnest money goes into escrow.
10. If the purchase is all cash (without owner financing), the buyer has the right of attorney. Therefore, the earnest money should go to the buyer’s choice of escrow. If the buyer and seller cannot agree on the escrow agent, a title company’s escrow service is a decent enough solution.
11. The escrow agent can cut all the right checks for closing, paying him/herself for closing fees, escrow fees and the real estate agent(s) involved.
12. Also, make sure that at closing, the escrow agent will disburse the right amount to everyone, together with a closing statement. Ask for the leftover monies right away.
Our recommendation is to use escrow services for every Costa Rica real estate purchase. Even a seller can take advantage of escrow services by having disbursed the money to escrow and from there to its final destination.
Contact us now to purchase or sell property with our assistance.
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