Seller Financing Opens Door for Home Buyers in Costa Rica

The Downturn… (cue ominous music)

It would be easy to label the decline of the Costa Rica real estate market (since the peak in 2007) in a negative light. In truth, there is no such thing as “negative light” only the opportunity for change, and if our market has seen anything over the past three years, it is change. The shift from bank loans to seller financing is one of the primary changes that has (pardon the pun) opened the door to prospective home buyers, as well as, land and commercial buyers.

Seller Financing Open The Door in Costa Rica

Before defining the effects, basic models, and legal structure of seller financing, let me back up just a bit to clarify why we now find it present in about half of the Costa Rica real estate deals we facilitate.  Like most lending institutions around the world, Costa Rican banks are better described as “institutional holders”.  Banks are not lending for a few reasons— falling real property values, the recession, and they are not lending to each other (e.g., no credit to leverage).  In Costa Rica, the debt-to-income ratio required to obtain a loan is as ridiculous as the double-digit interest rates being charged (often twice the rates in the United States).  The banks’ parsimonious response has opened the door to seller financing, and Costa Rican property owners have embraced the new paradigm.

Sellers Get Creative

“What do I need to do to sell my property?”  We received this common question too many times to count over the past few years.  Our answer typically included these answers—

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Water In Costa Rica, Part Two

If you ask the World Bank or one of the mega-water corporations (e.g., Coke, Nestle, Vivendi), fresh drinking water is a commodity. If you ask virtually everyone else in the world (including the United Nations), fresh drinking water is a basic human right. Whether it is the encroachment of privatization or Nicaragua’s plan to divert the San Juan River[1], water in Costa Rica is an increasingly lively topic.

Water is a necessity.

One of the most popular questions for potential property owners is, “What is the water situation for this property?” Most of these new investors come from North America and Europe, areas that have hundreds of years of infrastructure development.  However, this southern Pacific region of Costa Rica is still early in the cycle of development.  We continue to see rapid growth in communications (cell phones and high speed internet), power (high tension power lines), and roads (the newly paved Costanera between Quepos and Dominical).  That being said, cell phones are a luxury, but water… is a necessity.

Property In A Development

Most quality developments have a water system that has been installed by the developer.  The most common sources for these systems are high flowing springs, and in some cases surface water (e.g., creeks and rivers).  Some developments, like Osa Estates in Uvita, even have back-up systems and extensive water storage capabilities.  The interesting thing is very few developments actually have a concession (permission to extract water from the ground).  The good news is the majority of them are “in process”.  Either way, the developer usually provides the property owner a prevista (water right document) which guarantees use of water into the future (assuming the property owner is in compliance with established CC&Rs and other laws).  Proof of a water document, like a prevista, is also required by the local Municipality before they will approve any construction project on a property.

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Do You Have to be Rich to Buy Land In Costa Rica?

I received the below e-mail last week and have been working with “Jim” (name is changed to protect…).  His situation is one that I think a lot of folks will be able to relate to.

Reading through your blog it appears that purchasing a home or property in the southern zone is now just for the wealthy. Those who have 5 or 6 other houses and for which one more is just another investment. There are those of us who would like to make Costa Rica our new home and leave the corporate hassles behind. We just may not have the $300K – $1M in cash for such a move. What do you recommend for those of us who are a little ahead in the US real estate game and are looking for a quiet, secluded, place to raise some fruit, veggies, etc. and settle down?

Money in Hand

Nicely put, and meaty. I wrote back:

I hate to do this to you, but I’m going to answer your question with some questions. Nearly all of our deals here are cash deals. What amount of cash

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A Day in the Life of a Costa Rica Real Estate Guy

A great example of how to go about buying a piece of land in Costa Rica

I thought that it might be interesting to catalogue the recent visit, well actually the current visit, of The Smiths. Their visit is very representative of what are perhaps the bulk of my presentations. From their upper budget limit of $200,000 for raw land, to their purpose for the purchase: they hope to relocate to Costa Rica in the coming years, a consideration of their experience will likely be a help to other who are looking to buy land in Costa Rica.

Using the Internet, Mr. Smith did the research on the Dominical and Uvita area real estate agencies and their listings. Mrs. Smith studied the geography of the area and what the various zones are called. They wrote to me asking for 3 references, which in fact isn’t so representative of what most prospective buyers do, but I think is a very smart idea.

To digress for a minute, all us real estate folks down here in Costa Rica are not licensed. There is no policed, nor enforced, procedure for buying land in Costa Rica. Consequently,

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Sales Process Overview Part I

Part 1 of the Costa Rica real estate Sales Process

This is the first of a 4 part series. Click for: Part 2. || Part 3 || Part 4
Down and Dirty:

If you want to know specifically about any of the above details without reading through all 4 parts, click on the bulleted point above to go directly to that information.

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Sales Process Overview, Part II:

Part 2 of Costa Rica Real Estate Sales Process

This is part 2 of a 4 part series. Click for: Part 1 || Part 3 || Part 4

Go and View Properties:

Once we have identified the purpose that the person(s) have in looking to buy land in Costa Rica, the agent will consider this as he directs them to the available properties that suit their interest.

I have always found it interesting to watch the process of land selection. I think that we all come down to Costa Rica with some preconceived notions of what we want, and for most of us, these change after we’ve stood on a few properties. Our marketplace is, for the most part, coastal mountain terrain. It’s hard to arrive here knowing what these properties are like; they are quite unique, even on a global scale.

Throughout the consultation and property viewing, the buyer is asking questions, getting informed, and making decisions. They are considering the various value-affecting features of the property such as: the view, the access, proximity to neighbors, proximity to the beach, waterfall, how much breeze there is, the jungle, and so on.

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Sales Process Overview, Part III:

Part 3 of the Sales Process Series

This is part 3 of a 4 part series. Click for: Part 1 || Part 2 || Part 4 The non-subjective concerns: The primary considerations in the non-subjective category are: Road, Water, Electric and Use of Land. A typical land transaction in Costa Rica has the water and electric run to the property, and a … Read more

Am I seeing All There Is?

How can one be sure that they are seeing all of the possibilities that fit their real estate criterion? There is no MLS here in Costa Rica. Its too bad. The MLS system in the US came about due to the needs of the customer, not the vendor of real estate. It truly is a … Read more