Understanding Costa Rica Real Estate

Back in 2004 I found myself running a small real estate company in Dominical called Horizon Properties. At that time, the concept of a property listing having a value within the agency, and amongst the various agencies, was non-existent.

As the chief cook and bottle washer of the company, I pretty much expected to procure the listings. I would oversee the posting of the listing to the website, and then would hope that the agents that worked there with me would sell them. I was paid a percentage of all that the office did as well as a normal commission on any sales that I did, so there was compensation for my listing work.

Costa Rica Real Estate 101 Book
Back to basics

Prior to starting Horizon Properties I didn’t have any real estate experience.  Oddly, this fact inured to my benefit. My pre-Costa Rica career had been in the managing an art gallery for a number of years. In the art business we never talked about who represents who. I would select an artist to display in the gallery, and the sales team would do their best to sell the works. We knew what the artist wanted for a given piece and we would broker the deal. A sale would happen when both artist and buyer were reasonably comfortable with the negotiated terms.

The non-MLS real estate business in Costa Rica ran/runs essentially the same way. I was well suited to the rough & tumble Costa Rica real estate business and stepped right into it without a hitch. I did however, notice that when I would hire someone who had extensive real estate experience from North America or Europe (or pretty much anywhere else on Planet Earth), there seemed to be a difficult learning curve for them. They were of the “representation” state of mind. “Who’s listing is this?” they would ask. I’d answer “no one’s”. To which they would say: “well then who is going to represent the seller when a prospective buyer wants to make an offer?” to which I would then respond with a puzzled look and say “you will. you represent the seller and the buyer and you will do a good turn for both in your dealings.”

So to understand the real estate business in Costa Rica and the changes that it is going through, we have to understand what it is and what it is not.

NUTSHELL – The Costa Rica Real Estate Business:

Is Not: There is no central database that an agent can access to see what properties are available for a prospective buyer. By extension, there is no representation. (This is changing – read on.)

Is: The real estate business in Costa Rica is OPEN, there is no Multiple Listing Service. Each agency has their own, self-contained database of available properties. This database can usually be viewed online at the agency’s website. This is where the agent will go to look for a listing in the price range and with the features that the prospect is looking for.

Changes: Cooperation between the agencies. The pressure is towards a system more in line with what we see in other countries, more like an MLS. To have a central database of available properties, and to have an agent assigned and responsible for a given property is a superior system to what we use here in Costa Rica. As we grow and change here, we are growing towards an MLS-like system. It has not yet been achieved, but out of necessity, it is mimicking aspects of an MLS as it grows and matures.

It is a common event now to receive an e-mail from an agent in a competing real estate agency describing what a client is looking for, and asking for any listings I may have that satisfy the prospect’s criteria. It is understood that if I provide a listing that another agent’s prospect purchases, that I am inline for one half of the commission. In this construct, there is actually a buy-side and a sell-side, with both sides enjoying that elusive and oh-so-important term: representation. The positive repercussions of this construct are vast and result in a much better chance that full disclosure will result for the buyer, and that the seller’s interests will be protected as well.

You are likely asking: “why not just make an MLS for Costa Rica? The country is not that big. There could a central database of all properties that are available, along with their characteristics. Why not?” Good question. There have been numerous efforts at this. We’ll go more into that in future articles on this topic.

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