In some cases, a property buyer for property in Costa Rica may want to make a down payment or buy an “option” on a piece of real estate. The final deal may depend on some outstanding details to be worked out or obligations to be met, but both the buyer and the seller will formalize a provisional agreement.
Examples might be that the property needs to be re-measured to verify boundaries or that the seller offers to make improvements before closing. Option money can be given directly to the seller or be held by a neutral party in escrow, depending on the circumstances of the deal. Option contracts must be notarized by an attorney but are normally not recorded in the Costa Rican National Registry. Therefore, it is recommended that the buyer put down a minimum amount in case the deal goes awry. Going to court is a lengthy, arduous and often illogical process and not worth the effort unless large sums are involved. Terms of the sale should be written in the option contract including settlement if the deal does not transpire. Typically, the buyer forfeits the option money if he backs out of the deal without good cause.
The real estate transfer tax (Impuesto de Traspaso) is 1.5% of the value indicated in the transfer deed or the registered tax value of the property, whichever is higher, and will apply when the title of a property is transferred from the seller to the buyer. It used to be that the transfer tax could be avoided when the real estate was owned in the name of a corporation. You could buy and sell the stock of the corporation, which would include the home and land, being careful, however, to verify that there are no surprise obligations associated with that corporation. Recently, the Costa Rican government passed a law that is designed to apply and enforce the transfer tax on share transfers as well. This property transfer tax loophole has been theoretically closed.