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Cash is king, but you already knew that I’m sure. If you are looking for an incredibly good deal, you better bring cash if you want the seller of a property in Costa Rica to even think about accepting a lowball offer. Of course, if you are looking for owner financing your lowball offer will be an uphill battle.
Financing of a home purchase is so simple almost anywhere in the world. It’s really a serious pain that banks in Costa Rica do not finance a mortgage to non-residents. You cannot even get a bridge loan from a bank here. Most private lender financing starts at 12% and it is difficult to find any lenders willing to finance a mortgage a property outside the Central Valley.
So what do you do when you want to buy a house in Costa Rica before you have sold your house in New Jersey? A great option can be owner financing. But can you get that great deal you’re looking for? Let’s have a look at a scenario that will show your options.
A lowball offer
You have found that perfect home in Costa Rica, the one with the view, the great community, and the best floor plan in town; in that incredible location that fits your personality. But… You don’t like the price. You or your agent is totally sure that the seller is desperate to walk away from the property for much less money than its real value. You are looking for a steal, so you want to pitch this lowball offer without insulting the owner.
A cash deal
Is there any chance the seller will take your lowball offer if it isn’t a cash offer? Do NOT misunderstand what a cash deal means to a seller. A seller doesn’t care if you finance or not, as long as it is quick. Every deal is a cash deal to a seller unless you ask the seller to finance your purchase.
A cash offer might get a deal, owner financing will probably not
A real cash deal
If you have already sold your house in New Jersey, and you have money in the bank, it’s really a lot easier. Then you have the financial freedom to look at property in Costa Rica and throw in a lowball offer left and right. With money in your account, you can make a cash offer hard at any time. The property that does have the qualities you are looking for at a steal, can be yours if you have the cash. Do NOT bring a bag full of cash, that will only get you in trouble.
Having the cash does not automatically put you in a win-win situation when you make a lowball offer. You need to find that real desperate seller to make a lowball offer work, even with cash in hand.
Owner financing
The deal is not the same if you do not have the cash. Do you need to ask the owner to finance the property until you sell your own house? Don’t expect to get the same steal you might get if you offer cash. If you make the seller a lowball offer and you also ask for owner financing, you will insult the seller. This will definitely not help get you what you are looking for.
You found the location that fits your personality?
Creative financing
You can also try to do some creative financing, so getting that steal is still an option.
See if you can get an equity loan on your own house until it sells. Talk to your banker to see if they’re willing to finance offshore.
If you know someone who owns an IRA or a 401(k), see if they can roll it over to cover the missing funds. You are not allowed to use your own retirement funds to finance your house, but you can use someone else’s. If you know someone in your local network who would love to invest retirement funds at an attractive rate in a risk-free project, you can both have that great deal you’re looking for.
Try for private lending in the U.S. private lending market. You will find private lenders willing to give you much more attractive interest rates than you will find in the Costa Rica real estate market. Try on Bigger Pockets forum.
Cut your risk, use a self-directed IRA owned by someone else
Making a lowball offer
When you don’t have the cash and you ask for owner financing with your lowball offer, you have a good chance you’ll piss the seller off. Your offer will probably end up in the garbage.
If you have the cash or the financing in place and you’re ready to make that lowball offer, write up a clean offer. Take into account all the possible details. You will find a seller more open to a detailed buyer who offers a good plan than someone who just throws a ridiculous number at him.
Are you looking for professional assistance in buying a property in Costa Rica, with or without owner financing? Contact us now.
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