Year: 2011

Think Outside The Box (Property in Costa Rica)

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“Innovation distinguishes between a leader and a follower.”  – Steve Jobs

I bet your wondering how that idea relates to real estate in Costa Rica?  Well, simply put… if there was ever a time for property owners and real estate agents in this marketplace to be “innovative,” it’s now.

LISTING IS ONLY THE FIRST STEP

Here’s how listing a property usually unfolds in The Zone—

  • Step One: Call up The Guys and set up an appointment to preview the property.
  • Step Two: Determine if an Open Listing or a Modified Exclusive Listing is appropriate for you.
  • Step Three: Wait for The Guys to bring you a buyer.
We all need to think outside the box...

The problem is that Step Three is taking much longer than most Sellers anticipated.

LOOKING BEYOND PRICE

We all know reducing the list price is the easiest way to increase property showings, offers, and sales.  However, if your property is in the ballpark of current market value and it is being shown but not selling, there could be other reasons limiting the sale.

Here at the Guys office, we continue to ask ourselves what can we do to speed up the sales process?  At the risk of sounding trite, one answer is: “think outside the box.”  Here’s an example of how The Guys have applied this idea.

Ben started his Costa Rica blog in 2003 (before many of us knew what a blog was)

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Real Estate Guy’s Super Powers

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A typical conversation in a-day-in-the-life of a Costa Rica real estate agent.
Visitor – Hey Ben, howzit going?
Ben – Good man. How’r you?
Visitor – Good. How are things in The Zone?
Ben thinking to himself – (Translation: Are properties selling? Are prices going up? What is this season like? What is the coming season going to be like? How much is my property worth? What is the effect of the global economic crisis on Costa Rica? I’m thinking of selling my property, is now a good time to sell? I’m thinking about buying a property, is now a good time to buy? Etc etc…)
Ben talking – Going fine. We’re not in a boom by any means, but by contrast with the last couple years, we feel encouraged.
Visitor – Sounds good. What’s selling?
Ben thinking – (or – Are prices going up? What is this season like? What is the coming season going to be like? How much is my property worth? What is…)

It is like having a super-power. Perhaps a bit overstated, but essentially true. The nature of the business of real estate does give one an ear to the ground on how things are going with the economy, social trends and by extension, the quality of life In The Zone. We all are curious to some degree about “what’s going to happen” and so we are on the watch for data, for information that’ll give us a clue as to what the future will be like.

To illustrate: Pre-Super Bowl talk shows. These popular shows are really about nothing more than guessing what is about to happen in the next few minutes. Player’s strengths and weaknesses are analyzed, their past injuries are discussed, and notable personal traumas might even play a bit into the picture. And this is all around what is about to happen with something that really isn’t going to impact the quality of anyone’s life to any appreciable degree! We humans love to speculate on what is going to happen in the future.

So, I’ll give you my read. I’ll tell you what my crystal ball says regarding what the future might look like here in The Zone. To do so however,

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Costa Rica Real Estate Closing Costs

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“Four percent of the sale price on top of your commission?!” exclaimed our client, a long time resident in The Zone. (In keeping with an old Guys’ tradition, I’ll refer to him as Mr. Zellbren throughout this article.) Ben and I first explained that we are currently dealing with a severely down market (approximately 50% off the peak value of three years ago) and an excellent time to wait for the market to rebound. Mr. Zellbren wasn’t interested in waiting, so we continued to explain the standard closing costs of a Costa Rica real estate deal. Some of the data he was familiar with; some of the finer points had to be clarified.

Traditional Closing Costs

Closing costs, when you add up the transfer tax, stamps, and legal fees, usually equate to approximately 4% of the sale price. Mr. Zellbren told us he would accept a $550,000 offer for his house equaling $22,000 in closing costs. In 99% of the deals we are part of, Buyers and Sellers split closing costs 50-50. It’s what we do here in Costa Rica. Additional costs—re-surveys, title insurance, new corporations—are typically paid by the Buyer.

Interestingly, there are a variety of stamps required to transfer a property in Costa Rica. They are– the Legal Bar Association Stamp (Timbre del Colegio de Abogados), the Municipal Stamp (Timbre Municipal), the Fiscal Stamp (Especie Fiscal), the National Archives Stamp (Timbe del Archivo Nacional) and the Agriculture Stamp (Timbre Agrario). Like everything else, your lawyer will take care of the licking and sticking of these stamps, which equate to roughly .05% of the sale price.

Legal fees, also known as notary fees here in Costa Rica, are calculated at 1.5% of the sale price. This is what is paid to the lawyer/notary for setting up the Sales and Purchase Agreement, as well as, researching and filing all of the necessary documents in the sale. These standard legal fees do not include any additional legal work (e.g., a new corporations, establishing an easement, etc.). One last point regarding lawyers that I would like to add is… you often get what you pay for.

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Exclusive Listings Revisited Part 3 of 3

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Negotiate a fee for a marketing service.

Disclaimer: This program is no longer offered by Guys In The Zone Real Estate. We have closed our doors and are working in tandem now with another company that does not recognize this method of listing properties.

This series of articles is all about options for selling a property in Costa Rica.

Negotiate a fee for a marketing service.
Decide what the marketing fee will be.

Now here, in Part 3, we are going to discuss an un-orthodox approach to selling a property in Costa Rica’s non-MLS marketplace. The incentive for doing this is the weaknesses, or flaws that were reviewed in Part 2 of our attempts to imitate the MLS of other countries.
I have been working in real estate here in Costa Rica’s southern pacific zone for years, and have always felt that the exclusive listing was a nearly sacred thing. It puts a tremendous responsibility on the agency that has the exclusive, but is also demanding on all of the agencies in that they must ignore the fact that the commission on this property is shared, when the majority of properties in their inventory are not.

I have been scratching and thinking about this topic and here is what I’ve come up with.

The Real Estate Agency’s Objective:
What we want to do is offer to sellers a better service, and in the process improve the professionalism of our industry. This is particularly appropriate when

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Talk Show – Episode 12

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Episode 12 features a candid look at life in the Southern Pacific Zone of Costa Rica. If you’re considering relocation or simply buying land in the greater Dominical or Uvita areas, we encourage you to watch and please feel free to share your comments.

Exclusive Listings Re-visited Part 2 of 3

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If you haven’t read Part 1 of this topic yet, you might want to. You can do so by clicking here.  You don’t have to if you don’t want to.  This article stands up fine all by itself.  However, to get a good understanding of the open listing, which is the most common type of listing here in Costa Rica, you’ll probably want to.  All right?

Sell a property in Costa Rica
The quandary of how to best sell a property in Costa Rica

When we last visited, we were left with the cliff hanger – “what is a seller to do if they don’t live in Costa Rica?”  The absentee owners don’t have time to go to each real estate agency and distribute photos, write-up, survey and contract with every real estate agency.  This could really mess up a family vacation.  Not to mention the follow-up-regular-visits to see how it’s going with showings of the listing.

Before going into that and satisfying the “edge of your seat” drama that I have created here with this compelling topic, I’d like to give you a glimpse inside the mind of this Costa Rica real estate agent and share with you an alternate option to what has been the standard practice in Costa Rica for the exclusive listing of a property.

We have always known that the MLS (Multiple Listing Service) market place of the US is superior to the Costa Rica open listing model.  In our (Zone real estate agencies) efforts to improve our market, and to offer a better service to both buyer and seller, we have defaulted to imitating the MLS market place, without having an actual MLS.  The reasoning is simple: the MLS is a superior model that has evolved over time in response to gazillions of problems and concerns and has resulted in what we see there now: a mature business model that offers representation to both buyer and seller of a given piece of property.  So, we try and come as close to working like and MLS without having the actual infrastructure of an MLS.

For various reasons, I’m starting to think that this premise might be flawed.  AND it may be that, if we think outside of this box we’re in here, we might even come up with a solution that rivals, or perhaps (could it be?!?) even exceeds the MLS model of other countries.  Bear with me here.

How Costa Rica imitates the MLS model…

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What People Are Buying In Costa Rica

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Who needs a pool when you have a river?

It’s one of the most popular questions we, the Guys In The Zone, field— “What’s been selling? We get this question from both buyers and sellers. Generally speaking, the answer is— great deals.

PRICE

Price is the #1 determining factor for a great deal, but there is another factor that is equally important— the living experience. Ben, my business partner in Costa Rica real estate, phrases it this way, “do any unique features of the property significantly affect the quality of the living experience?”

Who needs a pool when you have a river?
This gorgeous natural swimming hole sits below one of the nicer homes in Uvita.

There are very few remaining places on the planet where things are (1) inexpensive and (2) incredible.  During the boom years of 2004-2008, Costa Rica real estate was inexpensive and incredible.  Large farms were purchased $1.00/meter squared and nice ocean view lots were under $100,000.

Three years after the peak of 2008, property values across the border came down between 40-50%.  Many houses are now selling for replacement cost or less.  Once again, we have large farms for $1.00/m2.  The obvious reason was the global economic downturn and continual 10:1 ratio of sellers to buyers.  Basic economics tells us that price, or in this case property value, had to come down.  Our listing database is now filled with good properties in every category—houses, land, large parcels and commercial.

THE LIVING EXPERIENCE

For most people, buying real estate in Costa Rica isn’t just about getting a great deal.  You can move to Orlando, Florida if that is your only goal.  It is about the unique features that significantly enrich the living experience.  When Ben and I get a new land or house listing that has an ocean view and a trail to a nearby river…

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