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Suspected property fraud

Reported in AM Costa Rica by Garland M. Baker
An amazing scam unfolded in Costa Rica in the past two weeks. Events surprised the buyer as well as the owner of a unique beach view property.

Quick thinking and a nearly unknown legal maneuver locked and saved the property before the Registro Nacional closed Friday even though the institution again refused to take immediate administrative action in a suspected property fraud case.

The purchasers did not know they were buying something the true owner had no intention of selling. The intermediaries involved would have received millions in the transaction. Where the money would have gone is anyone’s guess. Scammers are scheming, crafty, aggressive and malicious people.

The intermediaries involved may not have even been aware of the manipulation in the property registry — thus they could have been innocent third parties. They were asking enough money for the excellent parcel not to send up warning flags. However, they were anxious to close the deal and wanted their money. In itself, this is not strange. Most agents and brokers push hard. They were constantly warning that other buyers were interested in the deal.

However, a California consultant to the would-be buyers with many years experience in Costa Rica did his due diligences at the national registry and read between the lines.

The paperwork looked corrrect, but there were some filings over the past months regarding powers of attorneys that led the consultant to ask the intermediaries for original documents. They agreed but did not produce them.

Powers of attorneys end with the death of the maker, unless given by stockholders in a corporation or shareholders in a limited company.

This beating around the bush lead the consultant to find the name of the owner of the property so he could make personal contact via telephone and ask for an explanation.

The buyer needed to leave the country. The consultant needed answers. What he found floored him. The owner, shocked by the phone call, explained a spouse recently died and the family company holding the land was in an updating process. The owner knew nothing more except that people had been walking on the property.

The property had been put on the market by persons who claimed to have powers of attorney enabling them to sell the land.

Studying the national registry documents in more detail showed that people knowing of the death of the spouse hurried to take advantage of some of the language in the corporate documents to make the powers of attorney for the brokers. Again, possibly the brokers were innocent to the swindle. There is no way of telling. It does appear someone in the national registry was helping the scammer or scammers.

A.M. Costa Rica regularly reports that crooks read obituaries to find properties to steal. The crooks usually look for foreign individuals who held property — not people who have died leaving legal holes in a corporation or limited company. This is a new twist.

The long-time lawyer to the family scurried all last week trying to find a solution to lock up the property before the thieves could sell to someone, anyone. The national registry sent him to the Judicial Investigating

Organization to file a complaint. Registry workers said they would not look at his paperwork without one.

The attorney got all his paperwork in order and presented it again to the national registry. The workers told him it would take days to review the documents before there would be any action to freeze the property.

Desperate for a solution, he remembered a conversation regarding freezing one’s own property in the national registry in case of an emergency. Some deep research pointed to articles 266, 267 and 268 of the Civil Code, articles 49C and 51A of the national registry rules along with Article 41F of Law 3883 of 1967 regarding registering property.

He put together a voluntary immobilization of his client’s property and filed it at 1:36 p.m. on Friday, one hour and twenty-four minutes before the institution closed. His diligence saved his client’s property, which could have been sold over the weekend.

The initial buyer went home, not leery of investing in Costa Rica but well aware of the potential pitfalls created by stealthy scam artists and the importance of his consultant’s due diligence. The consultant felt vindicated because he fought his own property fraud case for many years and satisfied that he had helped both his client and buyer avoid a long legal battle that would have left a buyer “in good faith” and an unaware owner battling for years. Both are safe after being alerted to the fraud.

The lessons here: Education, experience, and a healthy dose of skepticism are the best defenses against becoming a victim of fraud. Property owners and buyers need to know who corporate officers are. If they buy an off-the-shelf company, they have to make the needed changes in the corporate makeup. They also need to know what the rules are regarding what corporate officers can do and what they cannot. If someone dies, they need to get professional assistance to eliminate any legal loopholes.

And they can use the voluntary immobilization of a property as a legal tool to freeze real estate assets in emergencies.

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Other Scams

There are several real estate outfits that would like for you to send them a sizeable down payment without ever seeing the property.  BEWARE!  Some of these businesses are not ligitimate. Just because they are based in the United States does not mean they are credible.

You should never buy property in Costa Rica without first seeing it, then determining if the person selling it is indeed the true owner to the property.  Many people have been taken advantage of because they are too trusting of other North Americans.

Just because we are all from the US, it doesn’t mean we are all honest.  Please use the same business savvy that you would at home.  Costa Rica is full of shiesters looking to make a buck on a rich American.  By the way, the term “rich American” refers to anyone living in North America rich or not, we are all perceived as such by much of Costa Rica.
There are no golden eggs here and property that is for sale today will more than likely be for sale next week and even next month.  Take your time, do not rush into purchasing something.  If you don’t do your homework, you can get burned!

Property is very easy to buy in Costa Rica.  There is an abundance of “good deals”.  It is not so easy to sell.  You can easily overpay if you don’t know what the market price is for a place. Then getting your money back out of the place can be next to impossible.

I don’t mean to be so negative but I have heard of too many people on the wrong end of a real estate transaction with all of their money tied up in something they might never be able to sell.

LET THE BUYER BEWARE!!!

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Realtors

Often people come to Costa Rica and have no idea where they want to live or buy property.  This is one reason we strongly recommend that you rent for 6 months to a year before jumping in and buying property.  Since there is no MLS or central registry of property there is really no way to see all the properties that are available.

There are no laws in Costa Rica that require realtors to have any experience or training. Realtors here are not required to be licensed. Any taxi driver or store clerk can claim realtor status. There are no professional organizations they must join, though there are realtor associations. Anybody, at any time, can represent themselves as an expert realtor.

There is no Multiple Listing Service (MLS) in Costa Rica. Several people have tried to start one, but in order for an MLS to work, all (or nearly all) realtors must be members and reports all sales to the MLS who then maintains pricing information comparisons (comps). These comps would help both buyer and seller to assign a realistic value to a property.

There are a ton of agents here both good and bad. You must be careful when choosing a realtor as all are not looking out for your best interest and often time there is a dual pricing problem.  The better realtors act as the go-between and provide introductions to realtors and potential buyers. The right realtor can provide a valuable service. These agents often have knowledge of available properties in several locations.  Different realtors will have different properties so often times it is best to check with several realtors to see more options when it comes to finding that right home for your family.

One example of how different realtors are needed…We have our home listed for sale with 11 different realtors at the present time and in order to give us maximum exposure and it would help to list it with even more.

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Homes under 50k

I’m often asked for homes in the 50k price range like some of the books of Costa Rica say are available.  Unfortunately those books are outdated and with the real estate boom in Costa Rica prices have gone up considerably. Homes under 50k are a thing of the past in San Jose area. If you choose to live in a remote area of Costa Rica, I’m told these prices can still be found (I haven’t seen them), but what you are giving up to live there are the comforts of close medical care, close proximity to schools, shopping and other conveniences of the Central Valley. Anytime you come close to a major city, the prices will go up.

I’ve checked with several Realtors to see if these properties are still possible and get a resounding NO!  Some have gone further to say, you can get a chicken coop for that price but not anything one would want to live in.

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New Scam

There is a new scam in Costa Rica. If you are selling your home, be aware that not everyone coming to look has honest intentions.

Recently an unknowing individual placed an ad for his house for sale in one of the Spanish speaking newspapers. When a couple came to look at it offering a very good price inturn for being able to examine the property closely, the man claimed he was ill and excused himself to the bathroom while the wife distracted the owners. The man went to the master bedroom and took all of the jewelry and money he could find.

The home owners fortunately caught onto the scam as the man was leaving and got their things back but this is not always the case.

Be careful who you let into your house. They could be casing your house to come back later and really rip you off. You might be better off to use a Realtor to prevent something like this from happening instead of trying to sell it yourself with things like this going on.

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Real Estate in Costa Rica

All individuals and private companies , local or foreign, can own land and property in Costa Rica.  Potential real estate investors, and their lawyers, must first go to the National Registry for a title search, to the Ministry of the Environment and Energy for an environmental impact study, the local municipality for zoning laws and building permits, and perhaps to the other ministries and institutions for pertinent information.  There are some excellent Real Estate agents (not all agents are honest and looking out for your best interest so be mindful of this when choosing one to help you) who can find you the property you want, as well as Title Companies that can perform the necessary Title Searches.

Home prices begin around $100,000 and if you can prove income in Costa Rica, banks will finance up to 80% of the appraised value of your real estate purchase.  Monthly payments can not exceed 30% of your monthly income.

Legal residency is not a requirement in Costa Rica to own property.  Foreigners are entitled to the same ownership rights as citizens of Costa Rica.  Unlike Mexico, some beachfront properties may be purchased. However, the 200-meter strip of land along the seacoasts is owned by the government and for public use.  It is prohibited to build anythying within the first 50 meters of the high tide line.  This some is for the public and can not be turned into a private beach.

Beach front property is being bought up fast, and the price of this and other prime real estate is soaring – with much of it overpriced.  There are also condominiums, farms, lots and ranches for sale at reasonable prices, depending on the location.

There are no capital gains taxes on real estate currently so it is an excellent investment for the right piece of property.  You do have to pay yearly taxes, but they are low by U.S. standards.