How many times do you purchase a property in a lifetime? Not very often, right? You wouldn’t know which real estate contingencies you should consider when making your offer. Unless you are a Costa Rica real estate investor.
Even when you have bought and sold real estate in other countries, you’ll find that everything functions differently in Costa Rica. Here, we don’t have a title company that will take care of everything, from start to finish.
Maybe you’re dealing with real estate agents who don’t have a clue of what they’re doing or just care for their commission check. You might deal with a lawyer who specializes in everything that comes across their desk and doesn’t know much about real estate transactions.
Depending on the type of property, there are different contingencies that can be included in your purchase offer. Find out why it is so important to include real estate contingencies in your offer. Let’s check them out.
Depending on the type of property, there are different contingencies that can be included in your purchase offer.
8 Real estate contingencies
1. Attorney approval
A title check is one of the most important real estate contingencies. Your attorney should be able to do a full title investigation before you approve the purchase. Are there any differences in property size between the National Registry and the survey? Any liens or annotations on the property? Pending legal disputes? Easements not registered? Is the seller the rightful owner?
There are many legal issues that can stop a purchase from happening. This you can get out of the way by making it a contingency to attorney approval.
2. HOA Financials
Make your purchase subject to your approval of HOA financials. You want to see the financials of the condominium to find out if the HOA is healthy or not. You want to know if there are any debts or any pending legal issues. How many employees does the HOA have, is the overhead acceptable? Any legal issues pending with past and present employees? Are homeowners up to date or are there many behind and what is the reason for this?
Keep in mind, that once you have closed your purchase, any problems with the HOA are a burden on the unit you are buying.
I suggest you get the home inspection out of the way before you sign the option to purchase sale agreement.
3. Bylaws review
Most condo owners do not have the bylaws or condominium rules & regulations handy. Make your offer contingent to review of the bylaws, so you know the rules and regulations in the community.
Some bylaws do not allow for pets, more than 2 visitor’s vehicles, and other rules you might not agree with.
All bylaws have a regulation to remodel and schedule to remodel, which can be an issue for you.
4. HOA, tax and utility payments
It is necessary to make a contingency for all utilities, property taxes and HOA fees to be up to date at closing. Any debt will stay with the title when the property is transferred.
It is necessary to certify the HOA fees and property taxes and not only show the last paid invoices. Old debt can exist and having a certification of being up to date is the only solution to this.
5. Home inspection
Even though you buy “as is” in Costa Rica, a home inspection is a “must” for buying a property in Costa Rica. A home inspection is considered a great investment.
A home inspection of a condominium is very different than one on a single-family home, where there are no common areas to inspect. There are many ways to describe in the offer what contingencies you’d like to include. Here are a few:
- Roof
- Sewage
- Retainer walls
- Pests like termites (Find out if there are signs of termites)
- Foundation and structural
- Pool
- Gym
I suggest you get the home inspection out of the way before you sign the option to purchase sale agreement. That way you will not get involved in any disputes over the earnest money deposit.
In some cases, a termite inspection might be necessary
6. Mortgage
It is not customary in Costa Rica to make a purchase contingent on a mortgage approval. The reason is that the mortgage pre-qualification and qualification process function differently than in most countries. A bank needs an option to purchase sale agreement for 3 months to fully approve the loan to the buyer. This is too much time for a seller to take a property off the market and then have the bank reject the mortgage. That does not mean you cannot try to make your purchase contingent on a mortgage approval.
It is also important to note that banks in Costa Rica only lend to residents and citizens. BUT, if you’re a US national with a credit score of 640 or higher, with a verifiable income, you can get a bridge loan while you become a resident. Click on the banner below to learn more.
7. Building permits
When you buy a home site or building lot, it is recommendable to include a contingency for building permits. To be able to get a building permit, you need to complete a set of legal documents that you or the seller might not be able to deliver.
A very important document is the water letter, to be supplied by the Water Company or Asada. There are quite a few locations and situations in Costa Rica real estate that this is impossible to accomplish.
When you plan a serious remodel of the home or adding a structure such as a pool is another reason to add the building permits to the list of your contingencies.
8. Tenant’s notice
If the property for sale is an income property, you will want the tenant to stay. In case you need the house for your own occupation, you need to check if it is possible to give notice to the tenant.
Make sure your attorney recommends how to handle the notice. And make the sale contingent to the property being unoccupied.
It is not customary in Costa Rica to make a purchase contingent to mortgage approval.
Final thoughts
Quite often it is a lack of concentration of the buyer, the real estate agent or the attorney that creates unnecessary problems at closing. If you have paid good attention to these 8 Costa Rica real estate contingencies to consider in your purchase offer, you’ll have a closing without any headaches.
Thank you for your business as always and please make sure you and your friends and family request the assistance of our affiliate agents for your next Costa Rica property purchase.
Contact us here.
If you like this blog, connect with me on Google+ or subscribe to our newsletter by clicking the banner below.
I DO want to remind our readers that we appreciate any referrals you can send us. Please remember our agents when you meet someone who wants to purchase property, we appreciate it.
