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To FSBO or not to FSBO in Costa Rica: that is the question. Well, we’ll get to that. First, what is FSBO (pronounced fizz-bow)? FSBO stands for For Sale By Owner Costa Rica, which is precisely what it sounds like: a property owner trying to sell their property in Costa Rica by themselves, without the assistance of a Costa Rica real estate agent.
Second, what are the disadvantages and advantages of using For Sale by Owner Costa Rica from a buyer’s perspective? Why on earth would a property owner want to do that? And why on earth would a buyer want to purchase a property in Costa Rica directly from a seller? Let me spell it out for you.
While this method can offer significant advantages if you speak Spanish and understand how real estate functions here, it also comes with certain challenges that buyers must navigate carefully.
Advantages of buying FSBO property
1. Potential Cost Savings
One of the most appealing aspects of buying FSBO is the potential for cost savings. By eliminating real estate agent commissions, the seller and buyer may have more room to negotiate a better deal. Traditional real estate transactions often include agent fees of 5% plus VAT, which can add up significantly on high-value properties. There might also be more flexibility in negotiating terms, including price, closing costs, and contingencies.
2. Direct Communication with the Seller
Purchasing FSBO allows buyers to communicate directly with the property owner. This can lead to a more transparent transaction, as buyers can ask detailed questions about the property’s history, maintenance, and potential issues without going through an intermediary.
3. Access to Unique Properties
Many FSBO properties are not listed on major real estate platforms. Instead, they are advertised through local listings, community boards, or word-of-mouth. Buyers who conduct thorough research may find hidden gems that are not widely available on the market.
Challenges of buying FSBO property
1. You’re not saving money
The seller pays the real estate commission, not you, the buyer. Also, a real estate professional will likely be able to negotiate a better deal than you can. Even if you see an FSBO property ad, it makes sense to ask your real estate agent to contact the FSBO seller (who will likely agree to pay a real estate commission and allow the agent to show the property).
2. Find the right area first
Looking at property in Costa Rica is more than determining whether you like a specific home for sale.
A real estate professional will work with you to find the right property and, first, the right area for you. You must consider your needs for medical attention, entertainment, shopping, transportation, the right microclimate, etc. A good real estate agent will want to find the right properties in Costa Rica for you that will suit ALL your needs (showing you both the good and the bad of an area and property), whereas an FSBO seller wants one thing only: to sell his home at any cost.
3. Spot problems
Many FSBO properties in Costa Rica have problems. A property owner will sometimes choose to sell FSBO to try and hide a problem. A good real estate professional will thoroughly check out a property in Costa Rica before they even list it (making sure it has a clear title, no liens or claims, etc.). Also, they will likely be able to spot physical problems (easy to spot by a real estate professional in Costa Rica but not an out-of-town buyer) of a house and make sure the seller fixes them (at least before a closing).
4. Legal and Bureaucratic Complexities
Costa Rica has specific real estate laws that differ from those in other countries. Without a real estate agent guiding the process, buyers must take extra care to protect the buyer’s money. An agent will hold your hand throughout the process and do much of the due diligence your lawyer won’t even consider.
5. Due Diligence is Essential
A real estate agent will introduce you to the right professionals and organize home inspections, surveyors, accountants, escrow companies, and other services to avoid potential pitfalls and protect your investment.
6. Market Knowledge and Pricing Risks
Real estate agents typically provide market knowledge to help buyers determine whether a property is fairly priced. In Costa Rica, we don’t have historical property values, so pulling comps is impossible. When buying FSBO property, buyers must conduct their own market research to ensure they are not overpaying. Comparing similar properties in the area and consulting with local experts can help mitigate this risk.
7. Risk of Scams or Fraud
While Costa Rica is a popular destination for real estate investors, it is not immune to scams. Some unscrupulous sellers may attempt to sell properties with disputed ownership or without proper documentation. To safeguard against fraud, buyers should verify ownership with the National Public Registry and never transfer funds without legal oversight.
8. Emotional buffer
Using a real estate agent in Costa Rica provides an emotional buffer between the buyer and seller both in viewing/discussing the property for sale and in the negotiation process (so you’re not directly intimidated by the seller). Without an experienced real estate agent, buyers may find negotiations and closing procedures more complex. Coordinating with banks, lawyers, notaries, and other parties requires careful planning and patience.
Who will hold your hand?
A good real estate professional will “hold your hand” BEFORE showing properties for sale (helping you decide which area is best for you), DURING the showing of properties for sale (helping you make the right decision on a specific property), and, more importantly, AFTER the purchase (providing whatever assistance you need to get started on your new life, from helping you set up utilities, showing you where to shop, helping you with banking, etc., which an FSBO property seller is not going to do for you).
This is one reason why a high percentage of those who DO go directly to an FSBO seller return home within two years of moving here: They didn’t have the assistance of a real estate professional in Costa Rica to “hold their hand.”
This is part 1 of Patrick Mulheren’s blog; feel free to also the 2nd part of Patrick’s blog.
2 Comments
Well explained Ivo.
Thanks Jogi, I appreciate you.