Why is a price-cutting trend rare in Costa Rica real estate?
Why is a price-cutting trend so rare in Costa Rica real estate? There are several reasons.
Scott Oliver’s wakeup call in his We Love Costa Rica newsletter about sellers of properties in Costa Rica who need to get “real” about their sales prices is one of many. Scott is not the only one who complains about the real estate prices in Costa Rica. Prices are not coming down as people expect when there is a buyers market. In all my years as a real estate broker, I have never seen a price-cutting trend, no matter how bad the market is.
Our Heredia real estate affiliate partner Xinia Salazar had a discussion she had with a “motivated seller” about this price-cutting trend. This made it even more obvious there is a need for an explanation of why the prices of Costa Rica real estate, stay the same as they were before, even in a buyers’ market.
High real estate prices
Let me explain. Scott Oliver, in his article, is telling the sellers of Costa Rica real estate, that they should adjust their pricing to the reality of a world crisis. While buyers are not standing in line to purchase property that is not a bargain, sellers still want real estate agents to take the listing at high prices. Scott is telling the sellers in his article that if they are not motivated, they should not list their property.
Xinia Salazar, your Heredia realtor
Xinia Salazar, our affiliate realtor who has sold Heredia real estate for over 10 years, also finds that sellers are not really motivated. And on top of that, are not willing to cooperate with the realtor to invest in dressing up their property so it shows as best as possible to a seller. Xinia tells the sellers who want her to list their home for sale in Heredia, that a garden in Costa Rica is a potential jungle. In other words, if you don’t keep up with the maintenance of your property, you will never sell it. Sellers do NOT want to keep their property ready to show at all times, meanwhile, they still expect high sales prices for their property.
Costa Rica real estate history
First of all, I allow myself to give you a bit of background history on Costa Rica real estate. So you will understand the behavior of our sellers better and why there is never a price-cutting trend.
Before 2006, Costa Rica real estate was moving along at a pretty normal speed and as fast as the local market would allow for. In fact, real estate developers were running behind in construction and couldn’t keep up with the demand. Costa Rica was receiving retirees from many parts in the world. Too many people were looking to retire or buy a 2nd home in Costa Rica.
By the time the end of the boom was in sight, there were enough large international companies getting installed and giving great jobs to the locals who could now afford those many of these same homes. This created a totally new market that never existed before. As young couples before would live with their parents for years. Now they are both professionals and earning a good income. Of course, this qualifies them for a mortgage much easier, which creates a huge market for residential real estate developers.
Condos and townhouses are hot
Therefore, while foreigners are sitting on the fence, thinking about retiring to Costa Rica or not, the local real estate market is booming and properties are selling. Condos and townhouses in gated communities between $85,000 and $200,000 are selling to the Costa Rican younger professional crowd as “hot cakes” like there is no world crisis going on.
Costa Rica mortgages
During the boom, in Costa Rica, banks did not go easier on the requirements to those needing a mortgage. Although the system allowed for some incorrect and dishonest appraisals. Most properties sold to foreigners from 2004 – 2008 was mostly sold either cash or with equity loans on a property back home.
Banks are now lending to young professionals at mortgage rates that are much higher than they are in other countries. Nonetheless, lending is now wide open for the local real estate market.
Need to sell?
Most property sellers fully paid for their property or they are up to date in their payments. So they are not in a hurry selling. Besides the fact that Costa Rica real estate pays VERY low real estate taxes. So there is no pressure on them to get rid of properties that they cannot afford to keep.
Yes, the flow of real estate buyers in Costa Rica has definitely slowed down. But the local economy is still pretty strong as more large companies decide to move their operations to Costa Rica. For this reason, I think that those properties that are priced right will sell.
What is the right price anyway?
The right price is what a buyer is prepared to pay for a property. So eventually, sellers who are really motivated will adjust their sales price until the property sells. And sellers who are not motivated enough will eventually find the realtors not willing to list the properties anymore because real estate agents do not get paid until the real estate closing. Why would a realtor want to spend money, time and effort on a property that is overpriced? Are you hunting for a good deal? Then contact an American European real estate group’s affiliate realtor, because it is not only about getting a great price. You want to make sure you don’t buy a cat in the sack and depend on a price-cutting trend either.
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