Avoid Real Estate Scams
If foreigners simply know some basic information and facts they will be able to make it through their real estate purchase without encountering additional problems or costs. Making a real estate investment is a big deal, and making one in a foreign country is even a bigger deal. This could be one of the biggest decision someone makes in their entire life. But please BEWARE, there are con artists out there and they are waiting to find someone who is uneducated about Costa Rica, the laws, and the real estate market.These con artists come in all different shapes and sizes they may speak perfect English, they may be very friendly, they may even be from your home country. Ask for references before you commit to working with anyone.
Here is a list of tips to help someone considering investing to avoid real estate scams:
- All real estate agents are NOT the same. In Costa Rica there is no standard licensure requirements for real estate agents, anyone can be an agent. A person does not need to have to be educated in real estate, take a test, training, or experience to be a real estate agent. This can lead to problems for you if the person is under qualified, giving bad advice, over pricing properties, or selling conflictive property just to make a commission.
- Just because an agent is from one's home country does not mean that one should immediately trust them.
- There is no regulation over any real estate agents so if they do something detremental in a real estate deal there is really no recourse one can take against them.
- When viewing a property even if it seems idea, try and use a poker face and be as objective as possible.
- One CAN negotiate on a price, one never knows what they can get just for asking.
- One might find the exact same property listed at different prices from different companies depending on their commission structures, over pricing, and internal deals.
- Sometimes agents in larger deals will attach an overprice that they will split with or without the owners knowledge. This even has happened to a big Hollywood star when he purchased his property in Guanacaste.
- So far there is not a widely used Multiple Listing System (MLS) as there are in North America so there is no way to see ALL of the properties available at the same price and there is no real way to gauge prices exactly in an area.
- Due to the lack of an MLS you will never get a fair viewing of all availble properties that meet criteria from just one agent.
- All legal documents will be in Spanish. If they are in English, there is also a Spanish version double check to make sure they are identical and the buyer knows what they are signing.
- Have due diligence preformed on a property before putting any non-refundable deposit down or purchasing the property. This can be preformed by a credible lawyer or title company.
- Aviod using the same lawyer as the seller. Buyers need to have someone who is unbaised working for them and them alone. The lawyer needs to examine the property with a microscope to make sure there are no hidden risks.
- Do comparision shopping in the region to get a gauge for what types of properties are being offered at what price range. This can also help make for better negotiations by knowing what is in the market and their values.
- Know exaclty what is being bought, and pay for only the portion of the property that is useful and can be built on. For example, if a property is near a creek or river one cannot build on anything 15 meters from the creek, so why pay for those 15 meters which are useless?
- Make sure your property has all its documentation in order.
- Especially make sure that the property minimally has water & electric services, and that the municipal property taxes are paid up to date. If not the buyer once they have acquired the property will then have to pay to fix these types of issues.
- Insist on meeting the owner of the property. This will not only help to avoid scams by agents with overprices, or buying a property that is actually not owned by the person you think you are buying from. Owners are extremely helpful at telling everything about their home and can also set off red flags if there seems to be something a little off.
- Read contracts carefully. Seek out professional legal assistance if it is a significant purchase.
- Never count on anything from a verbal agreement and a handshake, things do not work like that here in Costa Rica, if it is not on paper it never existed.
- One is not guaranteed the property they put money down and until after closing. Up until closing a variety of different scenarios could pan out which could cause one to lose the property they wanted:
- If the commission was to be split between two agents and one decides to burn the other the deal could fall through.
- If an owner decides to not honor an agents commission the agent could steer a buyer in another direction.
- An owner decides that now that they have a buyer they will "invent" a second competing buyer who is offering more.
We have seen a lot in our real estate careers here. Of course as agents there have been occasions with other agents or owners who have not respected commissions. Perhaps one of the worst things we have seen are people put offers on properties thinking they can sell them to another foreigner for a higher price. For example, today John Doe puts an option to buy contract with a deposit on a big piece of development property he feels is underpriced. Then in 6 months he has to start making payments or he loses his deposit, so he looks for another buyer of the property that he can sell it for even more to you by putting an overprice on it plus a sales commission.
Please be so kind and share personal insights and experiences to inform others of potential risks!