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How Realtors in Costa Rica Make Money

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Hello Everyone,

 

Many of you have bought property or are looking to buy property in Costa Rica. When a real estate professional is involved in the transaction they will make money.

 

The question is how should they get paid?

 

Since there are no regulations or an organized MLS system in Costa Rica, the real estate agent has no standard payment protection for their business. This can lead to some unsavory practices.

 

First, it is important to note that your real estate agent in Costa Rica has a much more difficult task than their counterparts in North America.

 

Finding properties to market is their first challenge. Without a MLS, the agents must cultivate their own listings. Next, the agent must market to and communicate with buyers who may not be familiar with Costa Rica. This step can take up to a year to familiarize a potential client with the laws and characteristics of a given area.

 

Only when the client comes to Costa Rica does the agent take on the traditional role of showing their listings. If the buyer is interested in a home the agent then leads them through the maze of red tape to protect the buyer during their closing. Finally, a good agent will translate everything and help the client establish utilities for the property, bank accounts, post office boxes, and all transitional needs.

 

I think we can all agree this person deserves to be paid for these services, perhaps more so than the agent in the US simply showing an MLS property.

 

There are two main ways agents get paid when they sell a home in Costa Rica - the ‘mark-up’ approach and the ‘commission’ approach.

 

It is not uncommon for a Tico seller to say to an agent “This is what I want for my property and anything you can collect over that price is yours”. The seller is actually in agreement in the ‘mark-up’ of their property. You don’t have to be a genius to imagine the problems that occur with this method.

 

You may see the same property listed for different prices on multiple sites. Sometimes the mark-up exceeds 50% - 100% of the actual asking price. The agents that use this method are not looking out for the seller and they certainly are not looking out for the buyer. It is a lose/lose situation for everyone but the agent. Also, the seller may need to sell the property and it is not doing him any favors by marketing the home at twice the asking price.

 

Luckily the agents who use this method are in the minority. These agents make a quick buck but also make two enemies with each sale, unless all of the parties are in agreement with the agent making such a huge fee. Usually in these cases the agent’s take is not reported to either party. Even though word travels quickly about these brokers, unsuspecting clients arrive in Costa Rica every day for these agents to prey on.

 

The “Board of Real Estate Brokers” is the only government recognized association in Costa Rica. They prohibit the practice of “sobre precio” or “net pricing” which has been described here as ‘mark-up’ pricing. It is their recommendation that their brokers charge 13% commission.

 

You are probably thinking 13% - that is crazy! I’m not paying that. Well it is a bit high, but these brokers have a code of sharing as opposed to the cut-throat methods of brokers that try to hide their fee.

 

The most common way that agents get paid is a sliding scale commission method. This method is based on price and primarily used by buyer agents. After all, your agent should be representing and protecting you, the buyer.

 

The sliding scale is based on price and is as follows:

Commission Rates Scale:

Purchase Price Rate

$1.00 - $100,000 10%

$101,000 - $200,000 9%

$201,000 - $300,000 8%

$301,000 - $400,000 7%

$401,000 - $500,000 6%

Over $500,000 5%

 

Honest agents will market properties at their actual asking price and notify the buyer of their commission. Also, these agents should state in their marketing of a home if the seller has agreed to pay a seller commission. In the case that the seller has agreed to pay a 5% commission, then the buyer will only be responsible for the amount on the sliding scale minus this 5%.

 

For example: If you buy your dream home for $200,000 from a seller paying a 5% commission to the agent, then you would only be responsible for 4% or $8,000. Your total cost would be $208,000.

 

Some buyers from North America and elsewhere are not used to having to pay more on top of the negotiated purchase price. However, you should be aware that no matter how the sale is structured only one person is paying the agent’s commission and that is you, the buyer.

 

The alternative may be an agent asking $250,000 for the same property and not disclosing anything. When you negotiate the price down to $235,000 you may feel that you did well in the deal, but clearly the agent is the only one who did well in this example.

 

You should always have an experienced real estate professional represent your interests when buying a property. Just be sure to ask – How do you get paid?

 

Good Luck! Pura Vida!

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No offense, Jeff, but I, for one, would not want to deal with such as you. How can you all possibly think that you have justified charging on both ends of the deal? Are you sure that you aren't some kind of lawyer (OK, bottom feeders, jump in here)? If I was either a buyer or a seller, I'd be suspicious. How could I believe that you are working for me as either party, when it is clear that you are playing both ends against the middle, with you realtors being the middle?

Thanks all the same, but I will stick to the CR that I know, where I will find what I want as either a seller or a buyer, through my Tico contacts, and make sure that my CR lawyer represents MY interests in the deal.

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OMG! Now that's just funny!

 

Folks, I pray none of you buy that bs. I am in process of negotiating the purchase of a house found through a Tico real rstate broker. Our contract states _very_clearly_ that the _seller_ is responsible for _all_ fees due to the real estate broker. I frankly don't care if it is $1.00 or 99%. That deal is between the broker and the seller.

 

 

Make sure this phrase is in your offer to purchase:

 

"La comission de bienes raices sera pagada por el VENDEDOR."

 

 

Meanwhile we have decided how much we are willing to pay and when negotiations (we are in our third round of counteroffers) no longer meet our price we will remove our offer and place an offer on a different place with the owner.

 

Do yourself a favor. Go look at at least 5-10 places. Measure the boundary line of the property and the outside walls of the house. Figure out what the square footage or sguare meters is of both the house and property.

 

Do the arethmitic on at least the square foot and/or square meter value of the house is. If the houses you are looking at are of similar quality then make an offer on the one with the lowest square foot/meter ratio with the ratio that you feel is fair to YOU, not to the broker.

 

For instance we have been looking at places that range from $300/M2 to $1,400/M2. We are in the middle of a transaction that we are willing to pay no more than $400/m2. If and when I feel that the owner and/or broker just will not meet my price ratio I will walk away and start bidding on number 2 on our list. No big deal.

 

 

Also: You should ALWAYS have an EXPERIENCED real estate LAWYER who ONLY represent YOUR interests when buying a property. You should also be convinced beyond any shadow of a doubt that this lawyer is based in San Jose and will personally go to the registro nacional and thoroughly comb the books related to your property to assure that there are no liens or encumbrances. If s/he says they can just do it online get up and leave and find another lawyer.

Edited by MiamiDavid

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Hello Everyone,

 

No offense taken! I'm glad that you found good people to represent your deals.

 

I knew this would draw some conversation and some controversy. The main point that I failed to make is that the scale is what is used Primarily with buyer agents that also facilitate transitional services.

 

There are many people using the mark-up method and people need to be informed that this does happen and that they need to ask how their agent is getting paid.

 

Of course everything should be clearly stated in the purchase contract. And certainly a good lawyer is imperative to handle every purchase. Also, I would suggest that every buyer request to speak to the seller directly about price and terms and if the agent is hesitent to make that happen then you may have a problem. The agent should have nothing to hide.

 

Further, some sellers do not offer a seller commission. The buyer needs to be notified when such a house exists and the buyer is charged the 5% commission.

 

I apologize if I offended the honest agents who work with a code of ethics that work off of a shared 5% seller commission. This was not my intent.

 

Good Luck!

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I can't believe no one is mentioning that if you seek out a Realtor who is a member of the Camara Costaricense de Bienes Raices, then you will have a legal recourse if that realtor is not completely honorable in his practices. Not to mention that this is the only recognized organization in Costa Rica that regulates the action of it's member agents. Why would anyone risk using a pig in a poke (so to speak) when they can just look for recognized CCRBR members in good standing. Not to mention they have been educated in the practice of real estate and ethics and law etc.

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Camara Costarricense de Corredores de Bienes Raices.

 

This is an association. They provide memberships, but cannot issue Official R/E

licenses.

No real legal jurisdictions to my knowledge.. correct me if I am wrong...

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I can't believe no one is mentioning that if you seek out a Realtor who is a member of the Camara Costaricense de Bienes Raices, then you will have a legal recourse if that realtor is not completely honorable in his practices. Not to mention that this is the only recognized organization in Costa Rica that regulates the action of it's member agents. Why would anyone risk using a pig in a poke (so to speak) when they can just look for recognized CCRBR members in good standing. Not to mention they have been educated in the practice of real estate and ethics and law etc.

 

I beg to disagree. As I understand it there is no law guiding the ethics of people who sell real estate in Costa Rica. None!

 

As AG said the organization you refer to is just a group of people who make some claims. There is nothing legally requiring them to act as they say they will.

 

Your only "safe" recourse here is to have a great lawyer and for you to listen to him/her every step of the way.

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Might I add that I am a REALTOR in the US (Florida). That is the only board that actually has an ethics policy that you need to abide by. The CCRBR does not have 'an ethics code'. I could probably say there are only about 10 or so agents in all of Costa Rica who are members of NAR (National Association of Realtors) and are licensed in a state in the USA. I never charge mark up the properites I sell to benefit myself. That is considered illegal (in this case you are only screwing the buyer and definitely not looking out for his/her best interests). Typical buyer agent commissions are 5% to the buyer unless they are higher priced properties (as stated above). At least that is what I have been used to at the beach. Believe it or not, there are some Agents, present company included, that do a great service for my clients. My last client who purchased a property through me: I handled all the contracts, closings, hooking up the electric to his name (it was a new construction), went shopping with my client for furniture, etc. I always aim to go above and beyond because that is what I feel I am paid to do--provide outstanding service.

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Might I add that I am a REALTOR in the US (Florida). That is the only board that actually has an ethics policy that you need to abide by. The CCRBR does not have 'an ethics code'. I could probably say there are only about 10 or so agents in all of Costa Rica who are members of NAR (National Association of Realtors) and are licensed in a state in the USA. I never charge mark up the properites I sell to benefit myself. That is considered illegal (in this case you are only screwing the buyer and definitely not looking out for his/her best interests). Typical buyer agent commissions are 5% to the buyer unless they are higher priced properties (as stated above). At least that is what I have been used to at the beach. Believe it or not, there are some Agents, present company included, that do a great service for my clients. My last client who purchased a property through me: I handled all the contracts, closings, hooking up the electric to his name (it was a new construction), went shopping with my client for furniture, etc. I always aim to go above and beyond because that is what I feel I am paid to do--provide outstanding service.

Lawyers, Lawyers, Lawyers........but find the right one. The is only one Law firm elected to Officially facilitate the purchase of a Real Estate between a Costa Rican and a foreignor.....However I will say that this is a third world country and their ducks are not all in a row. The BEST thing to do when purchasing is to involve a Reputable Title Company. Due to the rules of this website I will not post their information. However, you will recognize the name when you find one. And of course the title company will do a complete search to make your land purchase safe.

 

As for the Money situation......the market is flooded with so many organizations......I associate my development with reputable companies to gain more exposure and you will not see a change in price from my site or theirs. I simply have a commission structure that I offer other companies and it is the seller's responsibility to provide these comissions.......take it or leave it is my motto when dealing with third parties. If you like the "third party" and want to help them with their comissions simply look for that same property on other websites..... Try to find the source. You can get a lawyer involved to find this information but you will need the "Folio#". If a company is not willing to give you a Folio # then more than likely they are "marking up prices". Their is a lot of them but it is necessary to find out if that company is reputable and honest. My experience lately is has been that most "third party" MLS companies do not use the "mark up strategy". Your biggest dangers are companies who have not received all the necessary "stamps" to make a document legal. Like I said GET TITLE INSURANCE.

 

The problem with this country is simply growth. The Government cannot keep up with the developers demands to make their lands legal to sell or subdivide. It just simply takes to long for all the different municipalities to "approve" everything. Some of the smaller towns are still using file systems!! This causes major developers to "pay off" or develop with out permission. I will quote what one developer admitted to in the Tico Times: "It's better to ask for forgiveness than to ask for permission".

 

I hope this information has helped everyone. Then again, who am I and how can you trust me........I'm a Realtor......but a reputable realtor from the US and CR. I invite you to research the above information.......Actually, I request that you do so if you are truly interested in investing in on of the top five foreign real estate markets.

Edited by jfield007

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Like I said GET TITLE INSURANCE.

I see this a lot, but there is something wrong in this advise I think. As you all know, I am not a realtor, but I DO know that title insurance in Costa Rica is really a sham (and many believe to be questionably legal).

 

The government of Costa Rica guarantees all titles here, so third party title insurance is just a waste of money.

 

Saying that, the largest title company here may provide valuable assistance in financing... but for the insurance itself? Why waste big bucks?

 

TG

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My “perception” is that realtors exist in Costa Rica primarily to meet the expectations of the uninformed American consumer. Americans are conditioned to think that they NEED a realtor to assist in the purchase of real estate because that is the mechanism we have back in the states to handle these transactions.

 

What you absolutely do need here is a good attorney to represent your interests. In my humble opinion, if you have a good attorney, one that is experienced in real estate transactions to represent your interests, then the real estate agent is more or less redundant. The government does not regulate the real estate agencies because here the custom and practice in Costa Rica is to rely on attorneys (not realitors) to process these transactions.

 

Personally, I have a hard time understanding exactly what service a real estate agent can perform for you here in Costa Rica that you can not do for your self with the aid of a knowledgeable taxi driver or a Tico friend that knows the community.

 

The nice thing about attorneys is they charge by the hour rather the sliding percetage scale that our friend CRFirst is promoting for his business.

Edited by Kahuna

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To Kahuna (and, with all respect to Mediatica) may I just say, "Amen!" I couldn't agree more. For my purposes (I am not a business person, and have no intention of being one when I get to CR - we're just lookin' to be pensionados) a Tico friend or two, and our CR banker, along with a Tico lawyer are more than adequate to make us feel safe in any major transaction involving property.

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To Kahuna (and, with all respect to Mediatica) may I just say, "Amen!" I couldn't agree more. For my purposes (I am not a business person, and have no intention of being one when I get to CR - we're just lookin' to be pensionados) a Tico friend or two, and our CR banker, along with a Tico lawyer are more than adequate to make us feel safe in any major transaction involving property.

 

 

 

U are so right. I found my home through my manicurist who knew a house for sale... My attorney handled it all... If you looked on a realtors web site my house was found to be 50 to 70,000. more...

 

The thing about common sense today is that it ain't very common anymore. Use a good attorney and have good Tico friends...

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U are so right. I found my home through my manicurist who knew a house for sale... My attorney handled it all... If you looked on a realtors web site my house was found to be 50 to 70,000. more...

 

The thing about common sense today is that it ain't very common anymore. Use a good attorney and have good Tico friends...

I am looking for property on the atlantic coast (Puerto Viejo area) and while there last time met an american, working as a real state agent, that showed me a property or two and is looking for others while I am getting prepared to return. If she finds one, and I buy it, I would gladly pay her a commision, but we have no contract to do so. I certainly can look for myself apon my return, but obviously, getting a good lawyer is of the utmost importance. My question is.... How do I find one? Who can I trust for a recommendation?, and is there a reliable database of lawyers with a track record ??? thanks for your help

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I am looking for property on the atlantic coast (Puerto Viejo area) and while there last time met an american, working as a real state agent, that showed me a property or two and is looking for others while I am getting prepared to return. If she finds one, and I buy it, I would gladly pay her a commision, but we have no contract to do so. I certainly can look for myself apon my return, but obviously, getting a good lawyer is of the utmost importance. My question is.... How do I find one? Who can I trust for a recommendation?, and is there a reliable database of lawyers with a track record ??? thanks for your help

 

 

The best suggestion that I can give is to give your self some time and not be in too big of a hurry. Focus on building a life before building a house. You can make friends here! If you make the effort, it will be reciprocated. I think of hiring a realtor as "rent-a-friend". It is an expensive short cut that will not lead to integration into a community. Who needs that when there is a better alternative?

 

Take baby steps; build a network of people that you trust first before making ANY major purchases. Shopping is fine, but don't buy until you have your network in place to the point where you feel 100% comfortable.

 

A house is just a house and there is lots of property for sale. Focus on friends first and the rest will take care of itself. Relax and enjoy life. Living is good here. Pura Vida Sister .........

Edited by Kahuna

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