Mar 092016
 

March 17, 2018: This article is primarily about how to buy property in Costa Rica with a limited budget, which is a timeless topic. However, there are a few dated points regarding available properties as well as my referencing one of my Tico Times articles, which has been moved or removed.

I’ve just submitted an article to Tico Times about the time we are in right now that is favorable for spec home building. Now let’s add to this another factor that is not as obvious. Well… it is actually every bit as obvious. It’s just that it is hidden, which is a gracious way of saying: neglected. And by virtue of it being neglected, it is a bit unknown.

Little House view

View from the “Little House”

The Zone is in an expansion period. There is a strong market here for existing houses. Many of these homes are in the $400,000 – $1,000,000 market and beyond. The realtors here are doing well selling these properties. When I get an ocean view house listing in the $350,000 range, I view it as solid gold, because this price point is in high demand, and relative to our market here, is in the low side of the range. It will likely sell quickly.

There is little to no financing on the purchase of a house in Costa Rica. This means that the buyer of a house needs to be liquid starting at right around $350,000. What about those that aren’t packing this amount of ready cash?

The Hidden Market:

One of my sellers of a $60,000 property has consulted with me about how he can sell his property. This man knows his way around The Zone’s real estate market. He has been involved in millions of dollars worth of property business during his time here. Why did he feel the need to consult with me? Answer: Because I took his listing.

He can’t get any of the local real estate guys out to his property to take the listing. They are not interested. Despite being low priced, his property represents a considerable amount of listing work. The real estate guy’s perspective is that he can spend his time taking a listing for, say, a $750,000 house, or for this man’s property that pays less than a tenth of the house. Duh!

I recently took a listing on a small, 1 bedroom, 1 bath house nearby to where I live in Playa Hermosa, which is a small Tico (Costa Rican) pueblo just north of Uvita. It had been refurbished by an investor. He had found an older Tico house that he fortified, re-tiled throughout, put in a small pool and generally fixed it up. The resulting house offered what many are looking for but are having a very difficult time finding: “Ocean view home, with pool for $129,000, 7 minutes from the grocery store”. Yowza! This took me less than 3 months to sell (quick by Costa Rica standards), and I continue to receive inquiries on the property. I wish that I had another dozen of these. Alas, I don’t. But, the same (or similar) effect of this property can be achieved in other ways.

Cracking the Hidden Market Nut: Buy one of the available lots on the market, build a modest but nice home on it, and you are in it for less than $300,000. You can then live in this house, or you can put it on the market in the under $300,000 range.

In my Tico Times article, I spell out a scenario where the house is priced at $429,000. Getting a house on the market for under $300k and that is well designed and well built, will result in a line at the door.

Properties similar to the Little House I had at $129k are nearly non-existent. These are so extremely rare that, even with the buy-and-build approach, are difficult to duplicate – difficult but not impossible. And this is the Hidden Market here.

If you’re reading this and wondering how you can bring a limited budget to the table and still own a home here in The Zone, you are looking into the Hidden Market. It may be that you’ve done some searching, and perhaps you’ve even found some properties that look like they’ll work for your budget. But then when you inquire, or look a little deeper into it, you find out why the property is priced as it is. It may be way out in the sticks, or the property itself may have some problems that explain why it is priced so low.

The caveat to solving the Hidden Market problem is that currently, all of the solutions I know of require buying raw land and then building. This is beyond what many are looking for or are willing to do. However, if you’ve got a limited budget, and you really want to own a home here in The Zone, consider buying and building. Your possibilities are: 1) wait for another Little House option to come on the market, or 2) buy one of the low priced, but good, raw land options and then build on it. If you are one of those that say “I can’t build in a foreign land”, then you are going to need to go with option #1. It may be a long wait.

The purpose of this article is not to go into the ins and outs of building here. That is for another article (or post your question below). Suffice it to say that there are some good options for doing so, and that some have even had good experiences building in absentia. I’m hoping that this information will help what I feel to be a rather large segment of the buying population who are frustrated by their inability to find a property in their budget.

Let’s get started. Here are a few properties right now that I feel qualify for the Hidden Market handle:

 

Uvita Costa Rica property for sale

The upper building site.

Town Uvita River Song

Ready to build, all services in, about 5 minutes to the grocery store and 10 to the beach. Ocean view, but in a very nice area.

Click to view

Inquire about this property

Price $99,000
Type Land
Size 2 Acres
Lot for sale in Uvita Costa Rica Town Uvita One half acre of nearly all usable land. Located about 4 minutes to the grocery store. Beautiful location. The services are in.

Click to view

Price $58,000
Type Land
Size 1 Acre

Ballena building site.

View of Roca Ballena from the $83,000 spec home lot.

Town Ballena South of Uvita:

Centrally located between Uvita & Ojochal. Looking straight out to the Roca Ballena configuration. This lot is ready to build. The water will need to be run from a neighbor’s well system. The electric is at the road the runs by the property. Ocean view including the Roca Ballena formation.

Price $83,000
Type Land
Size 1 Acre+
A sort of companion article with links just posted: “Disappearing Breed: Under $100k Ocean View Lots”

If you haven’t read the Tico Times article that I reference at the start of this article, do so. You can scale down the costs outlined there for construction to calculate if you can buy one of these properties and then build on it. Ah what the heck, I’ll do some of it here. (I’ve hit my 1,000 word limit. As a blogger I’m told that you, dear reader, have a declining attention span for reading such length. Let’s prove ‘em wrong.)

Let’s find you a builder who can build your house for $85.00 per foot. Let’s say that you want to build a 1,200 sq. ft. home. Your building costs will be $102,000. If you want a pool, add $15,000. And then let’s add another $10,000 for permits, landscaping and incidentals. So your costs are right around $130,000. Add the price of your property and you’ve got your Hidden Market home.

Fiddle with these numbers. Keep in mind that we are in Costa Rica for a reason. And this reason isn’t to be sitting inside watching the tele. Build your house cheap. This isn’t to say “low quality”. Just enclose & secure the bedrooms, bathrooms and (if you like) a media room. Go ahead and have plenty of areas under roof, but who needs walls? Your kitchen can even be open-air here. What we need is a place to sit, do yoga, talk with friends etc… that is protected from the sun and the rain.  That $85.00 per foot figure can be pushed down.

Or try this: buy that $60,000 property, build a decent abode on it for $70,000, and you’ve duplicated the Little House scenario, just without the ocean view.

 

Apr 062015
 
Non-MLS versus MLS in Costa Rica Real Estate

Question: Do you have MLS there so that you can search all available properties or are you limited to your listings?

In other words, can you as a prospective buyer of real estate in Costa Rica work with just one real estate agent, or do you need to scour the various websites looking for the various properties that fit your criteria and then inquire of those agencies individually?

Short Answer: Click here

Non-MLS versus MLS in Costa Rica Real Estate

The differences between MLS and Non-MLS in real estate are numerous

Long Answer: My Costa Rica Real Estate blog (this one) speaks at length about the Costa Rica real estate market and how things work here and specifically, here in the southern Pacific zone. One of the greatest differences between the real estate market in Costa Rica and that of other countries, is the lack of an MLS (Multiple Listing Service). This “lack” has repercussions that should be understood to anyone interested in buying, or selling, a property in Costa Rica.

Over the years (I’ve been in real estate here since 2004) I’ve seen lot’s of efforts to both implement an MLS (with no success) and to imitate an MLS (with some success). The current status is that we are imitating an MLS well, and as an industry, we are growing up.

At our core, us real estate agents here in Costa Rica, are salesman/women (people? Trying to be PC here). We are paid when someone buys something. For my first years in the business, nearly all of my sales were full commission, generally 8%, with me representing both sides of the deal. There was some collaboration between agencies at that time, but not much.

However, at that time, I hardly thought in terms of “sides” of the deal. I was the guy in the middle making it happen. Also, there were rarely two attorneys.

There were some drawbacks to this system and it really required that the real estate agent be “full disclosure” to both buyer and seller. So the success of the deal depended largely on “integrity”. This quality, unfortunately, can be a rare commodity amongst us humans. So there were some (but not many) negative experiences.

One of the negatives was that sellers didn’t get the representation (read: care) that they needed. The salesman might be prone to focusing on what the buyer needed to get to “yes”.

For buyers, the challenge was in seeing all the available properties that were appropriate for their criteria. Due to the limited collaboration (at that time) between agencies, buyers would oftentimes see only what the agent knew of, and that agent may not have felt open to reaching out to his competitors for their listings since it would result in a shared commission.

Now things have changed. We still have no MLS, but the majority of sales that occur here now are shared. We have acclimated to this now and so most deals have a buy side, and a sell side, just like in the MLS. My inbox is full of inquiries from other agents asking for what I’ve got that satisfies a particular client’s needs.   You tell me (or some other salesman, er… real estate agent) what you’re looking for, and he/she will go through his/her listings first, and then reach out to the other agencies to make sure that the client’s criteria is satisfied, and that they are informed of all available options. I can report that I have observed a preference shift on the part of most of the real estate agents here in the zone (myself included) for sharing the commission and that both sides have representation. It is simply a superior business model.

So, after all that, the quick answer is yes, you can work with one agent and see all the appropriate properties available on the market at a given time.

To avoid a lengthy list of possibilities, the agent should be skillful in determining the fine grain of the buyer’s criteria, and the buyer should be forthcoming with what they are looking for. It is understood that things tend to change when one puts “feet in the ground” here and goes out looking at property, but this is typical and we agents are accustomed to this.

It is for this reason that I regularly ask the following questions of nearly every inquiry I get:

  • Are you familiar with the southern pacific zone? With Costa Rica?
  • Are you looking for raw land, or an existing house?
  • Are you looking to build a single family home with guest house? Income generating property?
  • Are you familiar with costs to build here?
  • Are you planning a visit here any time soon?
  • Will you be working with just one agent, or will you be contacting various agencies?
  • And the mac-daddy of all: what is your “purpose” in acquiring a property here in Costa Rica?

So, if you are interested in working with me in your property search, we can skip a step if you include this information in your initial inquiry.

Thanks Dan for the great question!

Jan 092013
 

This question just in from a land owner in Uvita.

I have a question about owner financing of real estate property for sale, and do not really know anyone else, besides you, to trust with a realistic, objective and intelligent answer.

We just received an email from the real estate agent who brought the buyer today, asking us what our financing terms would be. As of this moment, I do not know any details about the offer price, what the buyer’s financial position is, how much they have in cash as a down-payment, but before putting our cards on the table, I wanted to ask you about usual and customary seller financing terms in Costa Rica.

Seller financing in Costa Rica

Is Seller Financing a good idea for a seller of property in Costa Rica? Definitely. However, there are a few questions to answer first.

What would be typical and reasonable financing terms?

  • Is asking a 50% down payment, with a 7-8% interest rate, maybe a balloon payment or 2, in a year or 2, reasonable?
  • How can we make the deal air-tight as far as security of the down payment, and if buyer does not meet balloon payments, we get the property back, with no hassle.
  • Is there some sort of legal process, escrow or trust vehicle here in Costa Rica to protect us, the seller, from default?

Quick answer (based on info provided): Continue reading »

Jan 062013
 

It is common to think that you know all about how to sell because of your experience in real estate in another land. In Costa Rica real estate, this type of thinking can be a real hindrance.[/caption]

We have posted quite a bit on this blog about seller’s options in Costa Rica and in particular, The Zone. In this article I will list the pros and cons of the various Seller’s Options and hopefully help to unravel some of the perplexing issues presented by the lack of representation for the seller.

How to sell real estate in Costa Rica

Options:

  1. Open listing
  2. Exclusive listing

How to do an effective Open Listing:

For a raw land listing, here is a list of what you’ll need:

  1. The survey (plano) of the property.
  2. Information on the various fees associated with the property, ie. taxes, road dues, water, monthly maintenance.
  3. Current photos of the property and its view.
  4. Creative write-up

For a house listing you’ll also need, in addition to the above:

  1. A description of the house – number of bedrooms, baths, square footage, if there is a pool, garage etc…
  2. Who built it and when.
  3. Disclose any details about the house that the buyer has the right to know.

What you do with all this: Continue reading »

Jun 242012
 
aerial+view+building+Costa+Rica

Yes, we moved… from our office in Uvita to a new, larger space in Ballena, just a quick drive down the Costanera Highway. Ballena and Uvita are both home to the Marino Ballena National Park, an area that is vibrant with wildlife, as well as, electric green and blue hues.

Ballena is only 7 kilometers south of Uvita, at kilometer marker 169. Our new office is in the same building with the used clothing and furniture boutique Adorable and the Roadhouse 169, the hottest new restaurant and bar along the Costa Ballena. If you want to find us on a Google Earth map enter: 9° 7’23.84″N by 83°42’4.88″W.

aerial+view+building+Costa+Rica

Courtesy of JP Cudahy, Aerial Photog

Why did we move?

The landscape of Costa Rica real estate continues to evolve.  As wonderful as a prime location with big windows sounds, 99.9% of buyers do not window shop and buy.  In fact, plunking down $100,000 for an ocean view lot while on vacation (a phenomenon that was a frequent occurrence as recently as five years ago) is more rare than a Resplendent Quetzal at the beach.  The three primary ways potential buyers contact us are–

  1. Google “Costa Rica real estate” or “Dominical (or Uvita) houses for sale”, or some version thereof, and find this blog or our listing website.
  2. They view one of our property videos or Talk Shows on our You Tube channel.
  3. Visit Dominical.biz while planning their vacation Dominical and areas south like Uvita.

If you need to sell your property here on the Costa Ballena, please contact us by phone at 011-506-2786-5407 or email us at info@guysinthezone.com.  If you want a little more information on the best way to list your property, including our new Modified Exclusive program, please watch this video.

For those sellers who are already taking advantage of this service, do not worry.  We are in constant contact with the other agents in the area.  They are aware of your Modified Exclusive Listing. In fact, I am showing three of these exclusive properties today!

KM 169

If you follow the kilometer markers south out of Uvita, you will quickly arrive at km 169.  The building (pictured above) is just before the turn for the Crystal Ballena Resort; on the right (or beach) side of the highway.  So… come on down, grab a beer from the bar, and let’s talk real estate.

google+map+new+office

See you soon!

Feb 192012
 

Ben Vaughn, co-owner of Guys In The Zone Real Estate, explains the three listing options available to Costa Rican property owners. There is no Multiple Listing Service in the southern Pacific zone of Costa Rica, which expands the listing possibilities– the Open Listing, the Exclusive Listing, and the (new) Modified Exclusive Listing. Please visit Ben and Rod at www.guysinthezone.com and explore our current properties listings, our Talk Show, and general information about the greater Dominical area. Thanks for watching!

Jan 272012
 
Costa Rica real estate evaluation in progress

“How much is my property worth?”

Right from the Guys in the Trenches. Here is how we evaluate property, and where we/I think property values are going. Please note that this article is written by me, Ben, and that these ideas can vary from one real estate professional to the other, even within a single office. Rod may have contrasting ideas on these points.

Replacement Cost:

Costa Rica real estate

Appraising a Costa Rica Property.

The starting point the Costa Rica real estate professional uses in order to evaluate a property in today’s market is to calculate Replacement Cost.

Raw Land: We assign a value to the land. This value is based on market knowledge – ongoing efforts to sell, and of course, actual sales of land in the area. The value of a piece of raw land will get a surprisingly consistent evaluation amongst various agents polled. However, I’ll be putting a bit of a challenge on this point in a bit.

Construction Value: After establishing the value of the land as though there were nothing on it, we then measure the square footage of the house and assign it a price per square foot. Such is the life of a Costa Rica expat real estate agent. We live in a world where land size is referred to in metric (square meters – hectares) and houses in U. S. units (square feet).

The square foot value of a house is going to be bracketed somewhere around the $100.00 (USD) per foot. Contributing factors to this evaluation are: finishes, distance up the hill, steepness of the hill.

We are assuming that the basic foundation, drainage, and wall construct are dictated by universal laws that aren’t negotiable from one house to another. In Costa Rica you’ve got a few material choices, but the prices don’t really vary that much between them.  Concrete block is likely the most common. Cement panels are gaining some traction. Structural insulated panels are used by a number of builders. The use of wood in building is growing with Balinese architecture enjoying a fashionable presence in the market.

The construction of the roof can vary quite a bit and consequently can affect the per foot value. I know of one house in the zone that has a poured cement roof. This is cool stuff – absolute quiet during heavy duty rain storms, but we are talking HEAVY.

Less expensive roofs vary from the poured cement, to insulated sandwich layers, to tin with a dropped ceiling (the noisiest).

It is, arguably, the finishes that have the most direct effect on the value of the house. Granite counter tops – really fine plumbing fixtures, tiles and the details of the pool will push the bracket into the “over $100 per foot” range.

A pool adds $20,000 to $30,000 to the price.

Here is an example evaluation that I just did yesterday in my offce:

Raw land, $110,000

A 2,600 square foot house at $120 per foot. This particular house is located in an area that requires four wheel drive, so the shuttling of materials increased the per foot price quite a bit –
$312,000
+ $110,000
$422,000.

Pool – $30,000

Replacement cost – $455,000

So, what do we do with this number? These people have dedicated a year of their lives to building this house.  They flew to Costa Rica every 6 weeks to check in on the progress and of course, make the innumerable decisions that need to be made in such a project. What is that worth?

Merciless Market:
Well, frankly, this is the part that the Costa Rica real estate market doesn’t really pay much heed to. The big consideration at this point is, do we offer to sell your house at replacement cost, above replacement cost, or below? In today’s world, pushing the price above replacement cost is a function of the real estate Guy’s market insight. We are in a Buyer’s Market.

The agent will consider the desirability of the property. The view, the access, the privacy, the air motion and so on – the general niceness of the property are all considered.  Based on this criteria, there can be some upward movement from the raw replacement cost.

Perplexation:
Here is where it can get a bit strange. There are some houses that are priced below replacement cost.  How can this be?!? The land has an asset value, and the construction costs are fixed and don’t vary too awfully much from one source to another.

I am working on a new theory about this phenomenon in evaluating Costa Rica real estate

In my ruminations of this topic, I have come to conclude that there are two rational areas that we might have misjudged the value of a property. There is a third that can simply be explained by the seller being intensely motivated by desperation.

The Rational Considerations

Consideration #1 – The seller ran amok with making their construction and design a declaration of their personal individuality with the result that nobody in their right mind is going to want to live in such a structure. In order to buy the property and then live in it, the buyer will be taking on some serious expenses in order to make it livable for their purpose. The sale price is going to have to be adjusted down to accommodate these expenses.

Consideration #2 – I got the value of the land wrong. It’s not really worth what I said it is. This is the one that gets me, and brings about some interesting questions. Is land value here in Costa Rica really lower than what we are willing to admit? Hmmmmm…

What is NEVER factored in:
How much the seller has into the property.

I’m going to write more on the evaluation of property in our Costa Rica real estate market place. We have had some interesting discussions as of late with the vibrations of increasing buyer activity here in The Zone.

Nov 102011
 

Even though we call it Talk Show 15, this is indeed the 16th Episode of the Guys In The Zone Talk Show. This episode delves into the topic of construction in Costa Rica. Ben, the founder of Guys In The Zone, interviews Matt Callero of Mango Construction (mangoconstruction.com). Matt offers some answers to the popular questions– Is it difficult to build? How much is construction per square foot? And, what trends he foresees unfolding in the southern Pacific zone. Enjoy!

Aug 182011
 

If you as a seller are finding that an agency does not respond to repeated “nudges”, it may be time to ask the question: “do you not want this listing for some reason?  Do you feel that there is a problem with my listing or that it is overpriced?”.

Please keep in mind, dear seller, that the only way that the real estate agency makes any money for the time that they invest in your listing, is if they sell it.  The Costa Rica real estate market has recently taken a 40 – 50% reduction across the board and there are still many sellers that feel that their property is an exception.  Or they may be willing to wait until the market comes up again to sell.

Some agencies are reluctant to speak with candor about such concerns.

Interested in Costa Rica real estate as an investment. They primarily live somewhere else, but they own property in Costa Rica for the asset appreciation potential as well as possible rental income. Some just buy and hold (land-bank). For developed properties, the investor has a vacation home to visit as desired.

Migrators spend a regular amount of time in Costa Rica during each year.

Re-locators are those that are looking to move to Costa Rica from wherever they are. They will live full-time in Costa Rica.