It is becoming increasingly more common to use an escrow company for most real estate transactions in Costa Rica. Costa Rican law requires that any escrow company or agent must meet the requirements set out by SUGEF for the management of third-party funds.
The Buyer and Seller in a business transaction would designate a third party, who is not directly involved in the sale or purchase, to control the funds before closing. The escrow company acts as a “safe” place to deposit your funds while the transaction is being completed and indicates your commitment and “good faith” in going forward.
The most common scenario involves a variety of phases throughout the purchase. Initially, the Buyer would advance the deposit or earnest money to secure the property. The funds are not released to the Seller until conditions in the offer are met and the closing happens. The Buyer may be obtaining financing, completing any repairs agreed upon or addressing any number of items outlined in the sale agreement. The Buyer would send the balance of funds once the conditions are complete.
The escrow company is then responsible for disbursing the funds as determined in the contract. This distribution may include legal fees, escrow fees and purchase proceeds. It will also include the commission to the agents, reimbursements for a home inspection as well as a variety of other possible expenses.
By using an escrow company in Costa Rica assures the Seller that the earnest money is on hand and secure and that the Buyer has the intention to proceed with the deal. The funds will be returned to the Buyer if the conditions in the contract are not met or are considered unsatisfactory during the Due Diligence period. Therefore it is critical that the instructions are clear as to the terms and conditions that apply, as well as the instructions for making the closing disbursements.