The motivation for this post is a deal I just completed that has now been memorialized by the agents involved as the “deal from hell.”

Most of the Costa Rica real estate deal SNAFUs mentioned below were encountered in the course of that deal. The good news is that we were able to get it closed despite them (psst: that’s a pic of the home to the left…don’t let the beauty deceive you).

I thought I’d write this post as a warning as to what you might be faced with doing a Costa Rica real estate deal…

1. Water Issues – It’s not so much that Costa Rica has severe water shortages (although that is true in some areas). It’s that access to a legalized (via water concession) water source is not always guaranteed. In fact, it’s often not the case, especially in the remote jungly and beachy areas that expats like to buy properties in.

So, what do you do about it? Well, it depends on whether or not you want to build and how quickly. The lack of a legal water source is a curable problem, usually, either by drawing from a water course (river or creek) or spring on or near the property, or digging a well. However, getting a concession from the Costa Rica government to do that legally takes time and can turn into a bureaucratic nightmare. And most municipalities these days are requiring a concession as a condition to obtaining a building permit.

Bottom line: Know clearly what the water situation is early on in due diligence.

2. Power of Attorney Issues – More often than not our buyers (and/or sellers) are not present during closing. That means some form of power of attorney will have to be given to someone who can sign for the buyer at closing in Costa Rica. There are various kinds of powers of attorney in Costa Rica and I could write a complete blog post on that topic.

If you are buying through a corporation you’ve set up for that purpose the whole thing is made easier. The attorney will draft a proxy letter that you can simply sign and have notarized in the U.S., then scan and email back. Then the attorney can have the corporation grant a power of attorney to someone in Costa Rica who can sign.

If you’re talking about personally giving a power of attorney to someone within Costa Rica things can get a bit more complicated. If it’s a special power, then you’ll have to have it notarized and then sent off to the Secretary of State for an apostille in order for it to be valid in Costa Rica. However, sometimes closing attorneys can demand a general power. For that you will actually have to go to the nearest Costa Rica consulate in the U.S. (or Canada) and execute it in front of a Costa Rican notary. On top of that, the general power is only valid after being registered in the Costa Rica National Registry. All that can take quite a bit of time and effort.

Bottom line: Know ahead and time what type of power of attorney you’ll need and take steps early on to have it in place well before closing.

3. Transferring Money Issues – This is dealt with more thoroughly in the section below on escrow. Suffice it to say that it can be complicated transferring large amounts of money from another country into Costa Rica. Banks in Costa Rica are required by law to know the source of those funds. This is part of an anti-money laundering law that was put in place some time ago. Most use escrow to deal with this.

4. Setting Up Escrow Issues – As was stated previously, most use escrow to deal with transferring large sums for real estate purchases. However, the process of setting the escrow up is time consuming and most real estate buyers find it overly cumbersome and intrusive.

Bottom Line: Escrow is the way to do a Costa Rica real estate deal and you just have to suck it up and do it they way you’re told. Saying over and over again that “we don’t do things in the U.S. (or Canada) that way” won’t change a thing.

5. Survey Issues – You will usually want to have the current survey updated, especially if it is over 10 years old. And if you’re buying a large tract you might even want to have a completely new survey done. This takes time and can expose boundary discrepancies that can take even more time to remedy.

6. Home Inspection Issues – You will want to have a home inspection done and most areas have decent inspectors who will look at things with an eye to U.S. (or Canada) standards of construction. Your sales and purchase agreement should definitely give you an out (with full return of deposit) if major problems are discovered. Usually the seller is given an amount of time to cure.

Bottom line: The survey and home inspection are key components of your due diligence and you should make sure to take the time to do them correctly and then take the time to cure any problems discovered before closing.

7. Personal Property Title Transfer Issues – Often a vehicle or some other “titled” form of personal property is being purchased along with the real property. Another commonly encountered one is an ATV, since many expats like to use those to get around. These can present title transfer issues that should be dealt with ahead of time so that closing delays are not experienced.

8. Mortgage Cancellation Issues – If a mortgage is held by a third party against the property that person or corporation will be part of the closing. They will have to, of course, be paid and execute a mortgage cancellation in order for clear title to be conveyed. This became a major issue in the “deal from hell” since the mortgage holder was not present at closing and steps had not been taken to make sure someone had a power of attorney to sign on his behalf.

And that brings me to my next SNAFU…

9. Incompetent and/or Lazy Attorney Issues – There are some really good attorneys in Costa Rica. However, there are also some really bad ones. Sure there are the bad ones who operate as crooks. But what I’m getting at here are the ones who neglect to dot the i’s and cross the t’s, either due to incompetence, or laziness, and those failures tend to show up at the closing table in the form of unnecessary and stressful delays.

Bottom line: Stay on top of your attorney to make sure he’s getting it done…at least until you’re sure that he’s in fact getting it done.

10. Getting it All Done on Time Issues – How long does it take to close a deal in Costa Rica? As a general rule due diligence will take around 45 days with another 15 days to pull all the documents together, as well as fully fund escrow with the purchase price, to finally close. However, any SNAFU’s encountered can add considerable time.

It pays to try to avoid surprises by anticipating the potential Costa Rica real estate deal SNAFUs and dealing with them well ahead of the scheduled closing date.