Buying land in Costa Rica? ☎️ Use escrow.
Using escrow when buying land in Costa Rica, is an integral part of a safe property purchase. The escrow account protects the transaction’s buyer, seller, and other parties. It can also be used to conveniently sell a property in Costa Rica and receive payment in the United States directly in your account. The escrow company acts as an agent and is the third party that manages the account. Once the land purchase agreement terms are met, the escrow agent will release the funds to the corresponding recipients in the closing stage.
What is an escrow contract in Costa Rica?
The word “escrow” comes from the French “escroue”, which refers to property titles in old French. Escrow is a business contract in which an impartial third party, known as an “escrow agent,” is designated to hold money or documents temporarily. Once the contract´s conditions are met, the escrow agent must execute the instructions set in the said escrow agreement. An escrow agreement, is an accessory to the principal contract, usually the land purchase agreement.
How does the escrow agreement work when buying land in Costa Rica?
The escrow agent holds documents or funds in an independent escrow account that he manages as an impartial third party. When the notarized purchase scripture is signed, he releases the funds to the designated accounts, as set up by all parties in the escrow agreement. If escrow is used to hold documents, he will transfer the documents to the recipient in the escrow contract once the conditions of the principal agreement have been met. This is why escrow agreements are sometimes called the “cousins” of trust agreements.
What business transactions can be done with an escrow account in Costa Rica?
Escrow, is mostly used to purchase land in Costa Rica. The buyer and seller, look for an escrow company, to be the designated agent. They all sign an escrow agreement in which all parties indicate how the moneys are to be distributed, once the land purchase agreement is signed and finalized. The buyer then deposits the purchase price in the escrow account, and is kept there by the escrow officer, pending the closing.
What are the steps to follow, to buy land in Costa Rica?
1. Due Diligence: This is the initial step. Click here to learn about due diligence in Costa Rica.
2. Set up an Escrow account: Both parties look for an escrow agent they can trust. I recommend Secure Title Costa Rica. Money is transferred to the escrow account by the buyer.
3. Purchase closing: After finalizing due diligence, the buyer and seller will set a date to sign the notarized purchase agreement. This should be done with a public notary of the buyer´s choice.
4. Once the purchase agreement is signed (this is the principal contract), then the escrow agent will transfer the money held in escrow, to the seller or to other parties that were designated as recipients in the escrow contract.
5. The notary public must register the property in the buyer’s name at the Public Registry.
6. Know the closing costs since money must be paid when registering the property in the buyer´s name.
7. Be aware of the yearly real estate taxes in Costa Rica, once you become a property owner.
8. Be aware of property theft and your rights as a property owner.
I want to buy land in Costa Rica. I am worried about hiring an escrow company. Are they regulated in Costa Rica?
The parties that receive and manage financial resources in escrow and trusts must be duly registered in SUGEF. SUGEF is the Costa Rican Financial Superintendency. This State organization audits banks and financial institutions, as well as oversight to persons that receive amounts of money and third-party funds in administration. It´s similar to the Office of the Comptroller of Currency in the United States of America.
So when you choose an escrow company, you first want to ensure it´s duly registered in SUGEF. I also recommend you select an escrow company that has been in the market for years to add another level of security. Escrow can be a secure way to transact the property, but finding a reputable escrow company is essential. I like to close with Secure Title Costa Rica, as they have been in the business for years.
Where is the escrow account? What documents does the Escrow Agent request? Does escrow in Costa Rica take a long time?
Most escrow companies have an account set up internationally for your convenience when you intend to purchase land in Costa Rica. If your money is in a US bank, the escrow company will most likely send you their account in the United States to deposit the funds in escrow.
About the documents, you can expect to show your passport identification, and you will need to sign KYC documents and the escrow agreement for the distribution of funds once the principal contract is signed. The most important thing about documentation is showing the funds’ legal origins. Escrow transactions are usually quick, so closing should not take long. Contact me as a notary public and attorney to close if you wish to buy land in Costa Rica. I will help you with all the steps of the way, to make your purchase land in Costa Rica, a safe and enjoyable experience.
Dr. Christopher Pirie Gil.
