Deposits and Escrows in Costa Rica
Let us hear what one local expert has to say about this subject: “In
Costa Rica a real estate transaction is different. I have read various Internet
articles about “crooked” real estate transactions in Costa Rica. The first step
in protecting yourself here in a real estate transaction is to realize you are in
a different country governed by a different legal system and you fall under
the umbrella of the way things are done here and not the way they are done
in the United States. For instance, real estate deposits and escrows here
are very different. Escrow accounts are virtually nonexistent unless you are
dealing with a company like Stewart Title or have a legal arrangement with
your lawyer. I will focus on deposits, since you definitely need to be aware
of how they work in Costa Rica.
“The majority of the time the deposit is going to be held by the seller.
Instead of ‘held,’ I should have said ‘given’ to the seller. I do not think many
sellers in Costa Rica hold deposits very long. Therefore, you should place as
little money as possible in the hands of the seller. Five percent is a start, with
a maximum of 10 percent. When asked how much I would like to deposit,
I usually say, ‘the least amount of money possible.’ Then, when the seller
names a figure I always say it is too much. What is the least amount possible?
It is amazing how much sellers will come down to initiate a sale.
“If you back out as a buyer, the seller who already has your deposit will
most likely keep it. I would venture to say that in Costa Rica, in many cases
the seller has already spent the deposit money. You can put a protective clause
in your contract, but the bottom line is, that deposits, once lost, are hard
to recover here. The one clause I advise clients to put in the contract is that
if the seller does not honor the contract or other unforeseen circumstances
occur, the buyer will be returned double the original deposit. I do not think
this clause scares away anyone, but it might help you in another situation. It
is not uncommon for the seller to sell the property to someone else if they
offer a higher price.
“You may think that if you lose your deposit you can take the seller to
court to recover it. The legal process can sometimes take years.
“Concerning monies, I advise clients never to use cash because there is
no paper trail and cash can do funny things to people. Certified or regular
checks from the United States can take a long time to clear. It is better to
open an account here, wire your money and get a certified check from your
bank in Costa Rica.”
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