Closing the Purchase
Last Updated: Apr 26, 2012
Once your offer has been accepted, you must follow several steps to secure your purchase and register the sale. It is common practice in Costa Rica to purchase real estate in the name of a limited liability corporation, known locally as a sociedad anonima (S.A.). This allows you to protect your purchase, separating it from all other assets.
Before signing the final purchase papers, do a final walkthrough of the home. Review the contract in detail with your real estate lawyer, and make sure that you understand exactly what you're purchasing. Even though it is not common practice in Costa Rica, you may want to pay for a title search or title insurance, which will guarantee that the property is free of liens or other encumbrances.
Making the Payment
At closing, if you're paying entirely in cash or making a substantial down payment, be sure to bring a certified check. Your bank or lender will provide a lender's check for the remaining balance that is due on the home.
Write a Transfer Deed
This is the document that transfers ownership of the property. The transfer is made with the buyer and seller signing the transfer deed in the presence of an attorney. The attorney then drafts the transfer deed and registers the sale with the Public Registry. Custom dictates that if the buyer pays in cash, he selects the attorney to draft the transfer deed. If the purchase is financed, then the transfer can be made in various ways:
- If a large percentage of the purchase price is financed by the seller, or a mortgage guarantees the payment, the seller's attorney may draft the transfer deed upon request.
- If a property is purchased 50% cash and 50% financed, the buyer's attorney and seller's attorneys can draft the transfer deed and mortgage in a single document. This process is called a co-notariado.
- The buyer may have his attorney write the transfer deed and let the seller's attorney draft a separate mortgage instrument. Since the mortgage agreement is being drafted separately, registration fees are higher.
Register The Transfer Deed
To register your transfer deed, you or your attorney must bring the following documents to the Public Registry:
- Proof of payment of all taxes and registrations fees
- Certifications issued by: a) Finance Ministry, confirming that all seller's property taxes were paid; and, b) the local Municipality, stating that buyer and seller are up to date on municipal taxes.
- Proof that all prior mortgages, liens and judgments (if any) have been resolved
Make sure that the attorney who drafted the transfer deed has registered it in the property section of the Public Registry. It should be registered 45 to 60 business days after presentation.
Closing costs – registration fees, notary and attorney fees, documentary stamps and transfer taxes – will amount to no more than 6% of your total purchase price. The payment of closing costs is negotiable between the buyer and seller, though the buyer normally assumes these costs.
- Property Transfer Taxes: Transfer taxes are determined at 3.1% of the declared property value. In Costa Rica, the declared property value is always lower than market value, though it is your right to register the property at the declared value or sale price. Registering the declared value will net you lower property transfer fees in the short run, but this practice may have certain risks. It is important to talk with your lawyer to determine which method is best.
- Government Taxes and Fees: Along with property transfer taxes, your notary must pay a registration fee (0.5%) on your behalf and purchase a combination of fiscal stamps. Both are calculated as a percentage (0.55%) of the declared property value.
- Attorney and Notary Fees: In Costa Rica, notaries are highly trained lawyers with additional legal duties. Your real estate lawyer should also be a notary, so he or she can help you through the entire home buying process. Your notary will purchase the documentary stamps, affix the stamps to your property documents, and register them on your behalf. At closing, request that these documents be registered in either your name or the name of the corporation you established for property ownership. Your attorney should also provide you with a document receipt that proves you have paid all legal fees, that the property deed has been transferred to you, and that all property registration documents have been paid for and stamped. All lawyer and notary fees are assessed as percentages of the sale price, not the declared property value. Attorney fees amount to 1.5% of the first $1,750 (one million colones) and 1.25% of the remaining sale price.
- Mortgage Registration Fees: The borrower is required to pay all mortgage drafting and registration fees. A mortgage may be issued at the time of sale by adding a mortgage addendum to the transfer deed. This type of mortgage registration is assessed at approximately 0.25% of the sale price plus 0.53% of the sales price in documentary stamps. An additional 0.5-1.25% of the mortgage amount is due in notary fees.
Enjoy Your New Home
After all the required paperwork is completed and everything is in order, you will be given the keys to your new home. Congratulations!