A young Costa Rican man approaches you in a coffee shop, speaking in terrible English about a home his Uncle is selling “with a gorgeous view” and “at a meager price.” You’ve already made up your mind to relocate to Costa Rica. He says you’ll save “many dollars” by bypassing the middleman and dealing with the family directly.
This must be a joke, right? Tell this tale to any ex-pat gringo in Costa Rica, and you’ll be greeted with knowing nods and smiles.
This, or a version thereof, plays out every day in Costa Rica, and the worst aspect of the story is that most buyers don’t find out until months or even years later that they overpaid for their home.
The scenario above is so far-fetched that it’s almost funny. After all, who wouldn’t strive to collect the most money possible for their property if a gang of wealthy aliens suddenly moved in next door? Almost everyone who reads this knows that buying or selling property in Costa Rica is not restricted by laws or ordinances. It’s a free-for-all where “anything goes” and “CAVEAT EMPTOR” apply. To put it bluntly, you’re all by yourself.
This is not to say that there are no trustworthy real estate agents in Costa Rica; there are. The question is locating such a person while maximizing your investment. Even though properties in Costa Rica can be some of the most stunning in the world, nobody enjoys the feeling of having been taken advantage of.
Most foreigners looking to buy property in Costa Rica tend to believe:
First, the real estate market in Costa Rica is highly comparable to that of the United States and Canada.
Two, homes are easy to come by in Costa Rica, and despite their little differences, they may be remodeled to suit your needs.
Third, if there are American and Canadian-style real estate companies like ReMax and Century21 in Costa Rica, how different can they be from the United States and Canada?
Real estate listings and prices in Costa Rica that you see online are reliable and accurate.
Five nearly everywhere in Costa Rica has easy access to modern conveniences, including electricity, telephones, the internet, and running water.
It is simple to acquire title insurance and safeguard yourself from fraud. The sad truth is that none of the preceding is true.
In all honesty:
The Costa Rican property market is “wide open” 1.
Second, you can never tell if you’re getting a good deal because there are no relevant prices to use as a basis for comparison.
Third, you have almost no recourse to deceit or deception in Costa Rica.
Renovating an existing home is more expensive than building a new one, and unless precautions are taken, homeowners have little protection from contractor fraud.
Five, unlike in the United States or Canada, real estate franchises in this country are not subject to rigorous regulation. Here, they serve only as a promotional tool.
Sixth, not everything in the country has easy access to utilities, ancillary services, and basic infrastructure. Power and water can go “out” for several hours three or four times a week, even in the wealthiest neighborhoods in Costa Rica. It could take years for specific places to get phones. Some localities deny building licenses because they can’t handle the influx of new residents. Some coastal communities may never be able to issue building licenses again because of an inadequate infrastructure to accommodate the influx of “gringos.” TAKE NOTHING AT FACE VALUE; DO NOT ASSUMe Anything!
About 40% of all Americans who go to Costa Rica leave within five years, and over 55% of those who live in coastal communities all year do so.
Even with title insurance, real estate fraud is frequent. 8. Assume you’ll need another lawyer to vet the first one. (Seriously…)
I’m listening to you now. How can I know if I’m not paying too much for a home?
Unfortunately, there is no way to know if you are obtaining a fair price. Most real estate agencies advertise a property at the owner’s asking price. But the most crucial fact to remember about Costa Rican property is a distinct pricing differential between Ticos (locals) and Gringos (foreigners). (foreigners).
That begs the question: “How can a gringo like me get Tico prices?” OR “Why should I trust you? You want more money for yourself.
Let’s start with that last query. My firm only serves a tiny fraction of Costa Rica’s territory, at most just 5 percent. There’s too much demand for our services.
Several “scouts” from our company in Tico are always out meeting with prospective landowners. Because nine out of ten houses and another real estate we look at are priced too much, we do not list everything we see. Remember that the adage “almost everything is for sale in Costa Rica at the right price” is not entirely without truth. (think about it this way: if someone offered you twice as much your house was worth, you might think about selling it and using the money to buy another house and pocket the difference). Since we view so many homes, we have a good sense of market value and fair pricing. Locals and tourists alike are in the minority; few are.
You can find hundreds of houses and other properties for sale and references to a Multiple Listing Service (MLS) if you look at the various websites advertising real estate sales in Costa Rica. This means they have taken listings from other sources and presented them as their own. In Costa Rica, very few listings are being offered exclusively. These companies deny contacting any references listed below, yet they take credit for them. In reality, most property deals in Costa Rica continue to be closed like they have for decades: mainly through personal recommendations.
What should we do now? Where can I locate the home of my dreams at an affordable price?
All real estate in Costa Rica is overpriced, so that should be your starting point.
The second step is to look around until you find a place you adore and “feel right.” Stay there for a while. Discuss the cost of living, accessibility of public services, and other aspects of your “checklist” with the ex-pat community in the area. They make their home there. They should give you an honest assessment of the benefits and drawbacks of living there.
The following steps are the most challenging: WHAT, WHERE, and HOW MUCH?
Within your “chosen area,” you’ll undoubtedly find some locations that are far more expensive than others. For instance, did you know that in Grecia, there is a neighborhood called San Isidro de Grecia where foreigners live in the majority and where home prices are at least fifty percent higher than in the rest of the city? Why?…
Who knows. It’s not worth the trouble, in my opinion. The takeaway is that you should look at the big picture and not just one small piece while making decisions. No “well-known” or internet-advertising real estate agencies also speak English in many places. (remember that “everyone” is a realtor in Costa Rica or, at the very least, knows someone selling property). But you need SOMEONE who understands the area and can at least ferret out good bargains if you want to find the most excellent pricing.
Several points of significance:
The majority of Ticos want a home that is conveniently located near a major thoroughfare. They don’t need all their automobiles and typically opt for more compact properties near public transportation. (smaller properties, i.e., those under 5000 sq. meters, can only be legally purchased if on a primary or principal road).
Two, a typical Tico family’s monthly income is between $500 and $700. While many Americans may be able to afford a home in Costa Rica, most Ticos cannot. This should go without saying, yet most Yankees don’t factor it in a while making a purchase decision.
3. Ninety-five percent of non-natives favor homes that provide seclusion while being close to necessary amenities and safe havens. And no less than a couple of acres! Create a detailed wish list. Please find out how much it will cost to build a new road or run electricity to your ideal home. It must be taken into account. After realizing how difficult it would be to find an existing home in the area, my wife and I hired a local tour guide to assist us in our search for a new place to call home. We paid nearly double the asking price for the house, which we didn’t learn about until later. Whoever pocketed the difference between the sale price and the true price SHOULD have is still a mystery to us. Still, at this time, it hardly matters except as an example and a warning to others who might find themselves in a similar situation.
Do not rush into a purchase. Get to know the neighborhood by renting, if possible.
Fifth, you will eventually have to pay someone to assist you in your property search. However (and this is very important), make it clear that you understand the seller will likely pay “your employee” a commission and that you need to be able to verify the final sales price independently. You can even mention that your lawyer needs to review the price before you sign anything. Your staff member must be completely confident that you understand the system’s functions. However, it will help reduce the likelihood that games will be played.
Ask some of the foreigners around town for advice. Find a couple of lawyers in your area and hire them. Contact the head of the bank in your area. Your understanding of the local cost of living will develop over time. You should employ locals as your “scouts” unless you happen across a real estate agency in which you have complete faith. You must remind them that the vendors must not be made aware that a foreigner (a “gringo”) is interested in purchasing. (if you employ more than one “scout,” the price difference between gringos and Ticos will become immediately apparent. If you don’t notice it, your scouts must have gotten their information wrong.
Just a few more things to remember: it will be significantly more challenging to discover decent pricing and value if you intend to settle in an area with a large Gringo population or near a famous beach. There has been a meteoric rise in demand and pricing. Finding an actual “value” close to the coast or in a more expensive gated community will require either luck or effort. This is mainly for the acquisition of undeveloped land. When purchasing a property that already has a house on it, the following should serve as a basic guideline:
Included in the total price of construction are the following:
Prices in the Central Valley range from $38 to $42 per square foot.
Between $48 and $60 per square foot along the ocean or the beach.
In planned communities or gated neighborhoods, the possibilities are endless.
Only you can decide how much of an annual premium you can afford. Remember that when estimating the size of a building for replacement purposes, Ticos count ALL tiled space. Do not do that. (for example, a tiled outside porch area does not cost as much as an inside portion of the house…figure roughly a third as much). If you find the home of your dreams at the end of your search, CONSTANTLY REFER BACK TO YOUR CHECKLIST. Finally, it’s essential to hire an experienced lawyer. (and ensure that he or she is bilingual and that you have all documents translated). Inquire with other Costa Rican experts or the ex-pat community for recommendations. And if you’re still worried about fraud or accuracy, you can always engage a second lawyer to double-check the first’s work. It could be well worth the additional $50.
Feel free to contact us via email or call if you have any questions or want more information, including details about our home-buying and construction experiences. We consider ourselves a valuable resource for anyone considering buying land or property in Costa Rica. Everyone deserves to know the whole story—the good, the terrible, and the ugly.