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When buying a property, you will want to know how much the closing cost is, right?
You just found this absolutely gorgeous property in Costa Rica and you want to purchase it. Before you start negotiating the purchase price, you would like to know what the final cost of that property will be, right?
Often, buyers start shopping around and once they have negotiated the purchase price, they learn they don’t have enough money to pay for the closing cost.
So you’ll need to know which fees are paid by you, the buyer, and what other costs are involved in the purchase.
Learn all about the closing cost when purchasing Costa Rica real estate now. Of course, when you purchase a property through any of our agents, you do not need to worry, we’ll hold your hand all the way past closing.
Who pays the closing cost?
In some countries, the closing cost is always paid by the buyer. In Costa Rica, although some agents tell you otherwise, it is customary for the buyer and seller to share equally in the closing costs. Unless it is negotiated differently!
The closing cost should be negotiated by your real estate agent when you make the offer. If you are offering much lower than the asking price, you can count on paying for the full closing cost.
In the past, buyers would just change the ownership of the local corporation (S.A.) that owned the property to save money. Now, the law obliges you to pay the transfer taxes based on the sales price, even if you are taking over the corporation. Even though there is no capital gain tax on your residence when you sell if the property is owned by a corporation, this might change in the future. So, discuss this with your lawyer before you make the wrong decision.
Cash or Financed?
There is a difference in closing cost if you purchase cash or if there is a mortgage involved. To calculate the closing cost on the Costa Rica property you want to purchase, which includes only the cost of the title transfer, visit real estate attorney Roger Petersen’s closing cost calculator. Be aware that attorney fees now carry a 13% VAT, which is not included in this calculator.
Title Transfer Fees
No matter if the purchase – sale is cash or financed, the title transfer fees involved are:
Government taxes and fees
A. Transfer Tax 1.5% – over the sales price
B. National Registry Stamp 0.5% – over the sales price
C. Documentary Stamps
1 Agrarian – ¢1,000 for every million of the sales price
2 Fiscal Stamp – one time ¢625
3 National Archives – one time ¢20
4 Bar Association – one time ¢5,000
5 Municipal – ¢2,000 for every million
The closing cost calculator shows how it is calculated.
Notary Registration Fees
Up to 10,000,000 Colones – 2%
On the following 5,000,000 – 1.50%
then, on the following 15,000,000 – 1.25%
on the remaining balance – 1.00%
Value Added Tax (IVA) – 13%
You might or not need to use escrow for your closing. There are quite a few reasons for a buyer to use escrow when buying a property in Costa Rica. Although Costa Ricans are not accustomed to using escrow, more and more local buyers are using it.
If you are a foreign buyer, you won’t be able to open a bank account that will accept a large amount of money, due to money laundering laws. The easiest way to purchase a property is using escrow.
Escrow fees are 0.25% of the purchase amount plus 13% VAT. Most will have a minimum charge of $650 + 13% VAT. We recommend using Geldstuck escrow for an easy closing without headaches. They give an excellent service.
Are you buying a property with a mortgage? It is customary for the person who is receiving financing to pay the mortgage costs.
A mortgage can be created simultaneously at the time of sale by adding a mortgage clause in the transfer deed. Or a separate mortgage instrument can be drafted.
A mortgage within a transfer deed pays registration fees of 0.25 percent in registration fees and approximately 0.53 percent in documentary stamps. The notary will also charge for drafting the mortgage instrument and that fee can range from approximately 0.525 percent to 1.25 percent of the amount of the mortgage, depending on the circumstances involved.
Ask your mortgage officer or the lender, before closing, what the total closing cost would be. Make sure they include:
- appraisal fees,
- life insurance,
- administration cost,
- mortgage cost,
- and any other cost they might charge you.
Home and Life Insurance
Banks and many other lenders will insist you take life insurance when signing for the mortgage. You can also expect to pay for home insurance that covers earthquakes, fires, and flooding.
The home insurance will not cover the cost of the land. Check the cost of these insurances with your insurance agent before you sign the closing papers. Banks generally have cheaper insurance rates as they have group insurances.
Are you buying a property through a corporation? This can be a Sociedad Anónima (S.A.), a Limited corporation (Ltda.), or a corporation of limited responsibility (SRL).
Please ask your attorney what the cost of constituting a corporation is. The most used form of corporation to purchase a property in Costa Rica is an S.A., a Sociedad Anónima even though you have other options.
Title insurance doesn’t exist in Costa Rica. Therefore, we’re not taking any cost for this into account.
We are a Real Estate Company
Some readers don’t seem to realize that GoDutch Realty is a real estate company. I get emails and phone calls like this all the time: “I’m at my real estate closing and my attorneys give me a different closing cost amount than you doing your blog. Please call me now!”
Well, I write these blogs so buyers and sellers understand we are experts in our field. This way, we attract many buyers and sellers who use our real estate service. So I’m sorry I cannot assist when you call us with questions when you are at closing. It’s too late for that.
BUT, do you insist to do it right? And you still don’t want to hire us as your buyer’s agents? Then ask your lawyer for a closing cost quote BEFORE you sign a purchase agreement.
So why do we publish articles like this? We like to share our knowledge and show you why you should hire us when buying property in Costa Rica… Contact us now.
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I DO want to remind our readers that we appreciate any referrals you can send us. Also, please remember the GoDutch Realty agents when you talk about your home in Costa Rica, we appreciate it.