Understanding Closing Costs When Buying Property in Costa Rica

by PuraVidaRentals on

Buying property in Costa Rica is an exciting opportunity, whether for investment, retirement, or vacation purposes. However, it’s essential to understand the associated closing costs to budget effectively and avoid unexpected expenses. In this guide, we break down the key fees involved in a real estate transaction in Costa Rica.

What Are Closing Costs?

Closing costs are the fees and expenses that must be paid to legally transfer ownership of a property. These costs typically include transfer taxes, legal fees, and registration fees. While the buyer usually covers most of these expenses, the specific distribution may vary depending on the purchase agreement.

Breakdown of Common Closing Costs in Costa Rica

1. Transfer Taxes
   • Costa Rica imposes a 1.5% transfer tax based on the registered value of the property. This tax is paid to the government and is required for the legal transfer of ownership.
2. Legal Fees (Notary and Attorney Fees)
   • Attorneys charge 1% to 1.5% of the purchase price to handle the property transfer. Since all real estate transactions in Costa Rica must be conducted through a notary public (who is also an attorney), this fee is essential.
3. Registration Fees
   • The Public Registry charges a fee to record the new ownership, typically around 0.5% of the property’s value.
4. Due Diligence Costs (Optional but Recommended)
   • Buyers may choose to conduct title searches, property surveys, environmental assessments, and legal reviews, which can add $500 to $2,000+ depending on the complexity of the transaction.
5. Escrow Fees
   • If using an escrow service to handle funds securely, expect fees of approximately $500 to $1,500, depending on the provider.
6. Mortgage and Financing Costs (If Applicable)
   • If financing the purchase through a bank, additional costs may include loan origination fees, appraisal fees, and mortgage registration costs.

Who Pays Closing Costs?

In most cases, buyers are responsible for paying closing costs, but negotiations can sometimes shift some costs to the seller. It’s crucial to clarify this in the purchase agreement to avoid misunderstandings.

How to Reduce Closing Costs

• Negotiate Fees: Some legal and escrow fees may be negotiable.
• Register at Market Value: Ensure the property is registered at its true value to avoid discrepancies.
• Compare Service Providers: Attorneys, escrow services, and notaries may have different pricing structures.

Final Thoughts

Understanding closing costs in Costa Rica helps buyers budget properly and ensures a smooth real estate transaction. Working with a reputable attorney and conducting thorough due diligence can prevent unexpected expenses and legal complications.

If you’re considering purchasing property in Costa Rica and need expert guidance, feel free to contact our in-house attorney for personalized assistance!