Five pitfalls to avoid when buying in Costa Rica, and what to do about each: due diligence, written agreements, local law, legal advice and choosing an agent.
Investing in Costa Rican real estate offers exciting opportunities, but it is not without risks. Buyers need to be vigilant to avoid pitfalls that could lead to financial loss and legal complications.
Here is a guide to what to beware of when buying property in Costa Rica, with an emphasis on thorough due diligence and legal understanding.
1. Inadequate due diligence
| The risk | What to do |
|---|---|
| Financial loss and legal problems. Inadequate due diligence is a common pitfall. Failing to research the property and the seller thoroughly can result in financial loss and legal complications. | Verify ownership and title. Make sure there is a comprehensive check of property ownership, title, permits and zoning regulations. Research property values, comparable sales and potential liabilities so you can make informed decisions. |
2. Relying solely on verbal agreements
| The risk | What to do |
|---|---|
| Non-binding agreements. Verbal understandings are very hard to rely on in a property purchase, and transfers of real estate must be formalised in writing, in a public deed before a notary and registered. Relying on verbal promises can lead to misunderstandings and disputes. | Put everything in writing. All agreements must be documented and signed by all parties. Clearly state the terms and conditions, including payment schedules, the condition of the property and expectations. Have a lawyer review the contract for legal clarity. |
3. Lack of understanding of local laws and regulations
| The risk | What to do |
|---|---|
| Legal disputes and penalties. Ignorance of local laws and regulations, including property taxes, residency requirements, environmental standards and building codes, can lead to legal disputes and financial penalties. | Gain a thorough legal understanding. Learn the Costa Rican laws relevant to real estate. Stay informed about property taxes, residency criteria, environmental regulations and building codes to ensure compliance and prevent legal complications. Our guides to taxation, ownership costs, residency and oceanfront concessions are a starting point. |
4. Failure to hire experienced legal professionals
| The risk | What to do |
|---|---|
| Navigating the process alone. Buying property without experienced legal professionals increases the risk of legal pitfalls and complications. | Engage qualified experts. Work with experienced legal professionals, including a real estate lawyer, to guide you through the legal process. A reputable real estate agent can also help in finding suitable properties and navigating the buying process. We also recommend that deposits and closing funds go through a regulated escrow or an attorney’s trust account; see our escrow guide. |
5. Overlooking the role of a reputable real estate agent
| The risk | What to do |
|---|---|
| Missed opportunities and pitfalls. Overlooking the importance of a reputable real estate agent may lead to missed opportunities and potential pitfalls in the property buying journey. | Choose a reliable agent. Select a trustworthy, experienced agent who understands the local market. A reliable agent can offer valuable insight, negotiate on your behalf and guide you away from potential risks. Real estate agents in Costa Rica are not licensed, so check experience, references and reviews, as we explain in our guide to choosing a broker. |
In summary
Conducting comprehensive due diligence, ensuring legal clarity and working with experienced professionals are the essential steps to reduce risk when buying property in Costa Rica. By being aware of these potential pitfalls, buyers can navigate the real estate landscape with confidence and make informed decisions that align with their investment goals. If you are buying with a mortgage, see our bank financing guide for the checks the lender will also make.
Buying in Costa Rica?
We can introduce you to attorneys and walk you through the process. Tell us what you are looking for.
This is general information, not legal or financial advice. Property law and practice in Costa Rica change; have a Costa Rican attorney review any title, contract or transaction before you commit.
