Archives for June 2020

We are getting more real estate leads from wannabe expats than ever before. I can only guess it’s due to the upheavals in the U.S., as well as other parts, stemming from the COVID-19 pandemic and, more recently, the George Floyd protests and riots.

So, let’s say that you’ve found the perfect property and you’re ready to pull the trigger and do your Costa Rica deal during COVID-19…

Now, I would never recommend buying something in a foreign country, site unseen, but hey, you’ve got to do what you’ve got to do. Right now it’s impossible to enter Costa Rica as a foreigner and we really don’t know how long it will be that way. And I realize that some of you out there just don’t want to wait any longer. Due to what I’ve seen on the news from back home lately, I can’t really say that I blame you.

There’s also a financial rational in making a move sooner than later. I’ve written about my opinion that when things do open back up, Costa Rica will see an influx of demand that could stabilize, or even lead to higher, real estate prices. Therefore, there is some logic in taking advantage of the uncertainty that still exists with the hope that perhaps it will lead to a better deal and/or better terms.

I’m going to assume that you the buyer are buying the property sight unseen in the scenarios below. The seller might be in Costa Rica, or he or she might not. We’ll cover both of those situations below…

Scenario 1 – Seller in Country – Buyer NOT in Country

If you’re doing your Costa Rica deal during COVID-19 site unseen you will of course want to pay special attention to due diligence. Many realtors are doing “virtual tours” with their buyer clients, trying to give them as close to an actual on-site viewing of the property as is technologically possible.

Things that you won’t be able to see, however, are the surroundings of the property (i.e., neighbors), its specific location, and the access to get to it (dirt road, paved road, 4×4, helicopter?). Hopefully, you have a good agent who will accurately fill you in on all of that, since those are very important considerations.

Perhaps you have seen a property online you like, but aren’t sure if that general location of Costa Rica is the right one for you. Well, in my opinion the “general location” choice is perhaps THE most important decision you’ll make. I would never let a particular property drive that location decision, but rather carefully choose the location first. Only then should you narrow down what specific places within that general location that you like and what properties are the best fit. You might want to check out my 4 C’s of Costa Rica expat living, which offers a simple framework for deciding on location.

OK, so you’re sure about optimum location, you’ve found the perfect property, gone through your due diligence and you are ready to purchase…how do you accomplish that?

Note that as far as “the money” is concerned, the deal would be handled through escrow the same way it would be if all parties were present in Costa Rica. However, that could be different if the parties to the deal agreed to transfer money outside of Costa Rica. Nevertheless, the closing costs, commission, due diligence costs, and any other expenses that would need to be paid in Cost Rica, would have to be transferred to and handled by escrow in Costa Rica.

There are essentially only two ways to do your Costa Rica deal during COVID-19, while not present in Costa Rica. First, you can set up a corporation (or LLC) to take title. Historically, most expats have done this, although more recently, due to the increase in “red tape” surrounding owning a corporation in Costa Rica, some expats have begun opting to take title in their individual names.

However, if you aren’t here and indeed can’t possibly even be here to close, then setting up a corporation will facilitate the transaction. That’s because you can sign a simple document your Costa Rica attorney will prepare called a proxy letter, which authorizes your newly formed Cost Rica corporation to grant a power of attorney to someone in Costa Rica to sign at closing in your stead. The proxy letter need only be notarized by a regular U.S. notary, then scanned and sent to your closing attorney.

In this scenario we are assuming the seller is in Costa Rica. He (or she) will therefore be present at closing to sign…no problem!

What if you just don’t want to set up a corporation to do your Costa Rica deal during COVID-19?

Well, in that case you’ll have to make a trip to the nearest Costa Rica consulate, where you can sign a power of attorney in front of a Costa Rican notary. Your attorney can prepare the document and once prepared you will send it to the consulate of choice in order to set up a meeting. There are only a handful of consulates scattered across the U.S., so this is likely to entail you getting on a plane.

As you can see, the option of setting up a corporation will definitely simplify the situation of you not being able to be present for the closing of your Costa Rica deal during COVID-19.

Scenario 2 – Neither Seller Nor Buyer in Country

As far as the buyer is concerned, the same issues arise as were addressed above. But now we have the added wrinkle of the seller not being present, or even being able to be present, as well…

If the seller has the property in a corporation, then he or she can use the same proxy letter process as was described above. However, if it is not in a corporation, then the “trip to the consulate” option is going to be essential in order to close the deal and record the transaction in the National Registry.

It should be noted that getting a meeting with a consulate can be a time consuming endeavor, especially in the midst of a pandemic. So, be prepared for a potentially lengthy closing process. It is vital to begin work on getting the power of attorney properly executed and returned to Costa Rica, in order to be present at closing, as soon in the purchase process as possible. Don’t leave it for the last minute!

With regards to powers of attorney executed out of country, they have to be returned to Costa Rica in order to be registered and valid for use at closing. Attention to detail is vital. The language of the power must be crystal clear about what powers are granted. I believe it is best to use a special power, which is granted only for a specific purpose, such as to sign at closing. General powers are tricker and problems can arise when the attorney tries to draft a general power, but then limit it by language in the document. If the National Registry deems it unclear, they will refuse to register it and you’ll be right back to square one! There has been a history of fraud associated with the use of powers of attorney in real estate deals in Costa Rica, so any power will be carefully scrutinized by the government before it is allowed to be registered.

Of course, there are nuances of doing your Costa Rica deal during COVID-19 that are not addressed in this short blog post. If you’d like to discuss your particular situation, please don’t hesitate to contact me.