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Most Costa Rican real estate developers sell pre-construction dreams by using marketing tricks! Do yourself a favor and dream with your eyes open.
In the past, I have written quite a few articles about buying a property in residential developments. Check out 9 steps to stop a developer from deceiving you and a real estate development quiz. Some real estate developers that sell pre-construction homes are full of marketing tricks.
Today, I’d like to touch base with you on what seems to be going on with residential developer “Casas Vita”. They, as well as many other residential property developers, use marketing tricks you want to know about. These tricks are quickly becoming a role model for new property sales by a few unscrupulous developers to unsuspecting buyers.
What do you think of “A new money-making machine, very little investment needed!” We all know the famous boiler room sales made during the boom by Paragon Properties and Hermosa Highlands. And the biggest scam a real estate developer has ever pulled on his buyers is Joshua Ten Brink with his Sonesta One Jaco development. These were all directed at the gringo market. Now construction companies are using the same marketing tricks to Ticos.
There are a lot of bona fide real estate developers in Costa Rica; I am just trying to make everyone aware of the fact that buyers of pre-construction condos and houses are not protected at all.
Unless they hire a real estate attorney who understands the process well.
If you plan to purchase a condo in Costa Rica in pre-construction, and you do not hire your own real estate attorney to check what is promised in the option to purchase – sale agreement, you run the risk to lose your money. You don’t want to pay attention to my words, then it’s going to be your own fault when you make the wrong investment.
If you’re smart enough and you read my articles, you will understand how to protect yourself against these bad real estate investments. I hope you’ll contact us before you make a mistake and not after the fact as many already do.
The Last Unit
Salespeople who work for a real estate developer in Costa Rica will frequently tell you there is only one unit left. It’s amazing how they get away with that, but they do.
If the salespeople tell you that you have to move quickly, because there is only one unit left, ask for more information. Tell them that you would like to talk to other customers, who have already bought a unit, to learn how happy they are about their purchase. Ask for at least 5 customer references.
A real estate developer needs to pre-sell 60% of the to be developed units, to be able to receive financing for their development. 99% of the real estate development companies don’t have their own money. Therefore, they need to sell 60% of the development in the pre-construction stage. Often, when they do this, they don’t even have the construction permits. For that reason, I have seen many developers use dummy corporations to cover some of those pre-sales. This is pretty easy to do, as a “reservation” of a unit is typically only for a few hundred dollars.
Billboards and magazines
One of them, Costa Rican real estate developer Casas Vita (Grupo Empresarial Casas Vita S.A.), used billboards and magazine ads everywhere. They were a lot more aggressive than most developers.
Their preferred advertising phrase was “reserve your condo NOW with $500”. They also used top-of-the-line marketing such as “El Chinamo” by Channel 7. Everything they did was based on renderings of what their product “will look like”.
Attorney’s accusing blog
You will be able to find more specific information on this issue online on Attorney Mario A. Valverde Brenes’s blog in Spanish. But basically, this attorney (and many buyers on his blog and many forums) are accusing the Costa Rican real estate developer, Casas Vita of marketing condominiums in pre-construction.
Grupo Empresarial Casas Vita was charging the first 20% in monthly down payments without owning the property to be developed. They started selling without having built anything at all. AND, they promised that you will be automatically qualified by the bank for financing if you used the company they recommend to get you qualified.
Some other, more bona fide developers react to this type of marketing with a much smarter solution. They do not only show the monthly mortgage payment, but also the family income needed to qualify for the purchase of a condo in their project.
A law to protect the consumer?
Although President Oscar Arias approved a law that is supposed to protect the consumer in Costa Rica against real estate scams, the Costa Rican government is not doing anything about this practice. This is why I am writing this article.
So if you think your investment is safe with a real estate developer, I have to disappoint you. Oh, and class action doesn’t exist in Costa Rica, so you’re on your own.
How long does it take to develop?
Do you realize that it takes 2 ½ years at least to receive your new home if you are buying in pre-construction? Probably not! Permitting a real estate development can take years.
Most buyers who have handed over $500 for reservation and 20% of the purchase price to the Costa Rican real estate developer, will have a different family and/or economic situation 2 ½ years down the road.
Oh, the salesperson will probably promise your new home will be delivered in a year. But I promise you it won’t!
Automatic qualification for a mortgage for 100%
The developer’s salespeople ask the buyer to sign an agreement with Expertha Consultores, owned by the same person who owned Grupo Empresarial Casas Vita. What looks in laymen’s eyes like a mortgage approval, is nothing more than an agreement to hire Expertha Consultores. This is nothing more than an agreement to pay to process the paperwork with a lender at the buyer’s cost.
Once the buyer has paid 20% of the purchase price and finally gets a hold of the lender, the buyer finds out that it is not possible to get qualified for a mortgage. And, at that point, the buyers lose the invested money because they cannot deliver the next payments. This particular Costa Rican real estate developer, Casas Vita, has at this point advertised 4 different pre-construction projects.
The owner of Casas Vita conciliated with 164 people and will now face trial with 159 victims who attribute alleged crimes of fraud to him. Of course, not every developer is dishonest or delivers a bad job. There are some really good ones around. BUT, you owe it to yourself and your family, to educate yourself about the real estate process in Costa Rica.
Real Estate Commission
Very few residential real estate developments do not pay any real estate commission to real estate agents. That way they keep knowledgeable buyer’s agents away.
Do you still decide to go ahead and purchase a property in pre-construction? Then you always have the option to hire an expert real estate agent to act as your buyer’s agent. This is commonly done at 2.5% of the sales price, plus 13% IVA. That’s cheap if you take into account that losing 20% of the purchase price can be lost if you do it wrong.
Make sure you don’t give the Costa Rican real estate developer your hard-earned money without looking for marketing tricks first. Contact us now for expert assistance with your purchase.
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I DO want to remind our readers that we appreciate any referrals you can send us. Please remember the GoDutch Realty agents when you talk about your home in Costa Rica, we appreciate it.