Escrow accounts in Costa Rica are strictly controlled by SUGEF (Financial Institution Superintendency) for money laundering, so there are very few attorneys who hold an account unless they do a lot of Costa Rica real estate closings. According to the money laundering laws in Costa Rica, when wiring over $10,000 to a local bank account, the bank is responsible to request a proof of origin of funds. If the bank is not satisfied with the documentation presented for that purpose, the funds can get frozen and in some cases, then can also get returned to the bank of origin.
Making sure the funds to pay for a real estate transaction arrive safety to the Seller’s bank account at closing is the main reason why it is important to use an Escrow Company to take care of the transaction, because the Escrow Company will comply with all the requirements established by SUGEF in order to certify the origin of funds and avoid any delays and unexpected surprises at closing. Beware that sending funds directly to a Seller’s account could end up in the funds getting frozen by SUGEF, and it could take days, or weeks to get them cleared or in the worst-case scenario, they could get sent back to the bank of origin.
An Scrow Agent is a person or entity that holds earnest money and balance for final payment of the transaction in trust for third parties, while a transaction is finalized or a disagreement is resolved.
Title companies play several key roles in matters concerning real estate transactions. Funds are set aside in escrow accounts to ensure that the money is used only for its main purpose, namely for settlement and closing costs.
The escrow provider should be a disinterested third party with no preference about who ultimately receives funds from the account.
Non Residents or Non Citizens normally don’t have a bank account in Costa Rica, and if payment is to be made in Costa Rica, the safest way of bringing the funds for taking care of payment at closing is to use an Escrow Agent. Since Costa Rica’s money laundering laws are very strict, using an escrow makes receiving your funds much easier. That way, a bank will not freeze your funds while they investigate the origin of funds, because the Escrow company has the legal responsibility to request proof of origin of funds and for that purpose will ask for different types of documentation from Buyer, depending on each case.
Get a quote from the Escrow Agent Take into account that there will be bank charges related to any international wire transfer that you do to the Escrow Account.
Who Pays Escrow Fees – Buyer or Seller? Typically, this cost is split between the buyer and seller, although it can be negotiated that one party will pay all or nothing.
What will be initially required to open the Escrow Account in Costa Rica
- Copy of your passport.
- Copy of your driver´s license.
- Copy of a utility bill that shows your address.
- A proof of the source of your funds (They will ask to see you last year’s tax return and three months of bank statements).
- A KYC Know Your Customer form complete and signed.
In a cash purchase, without any kind of financing, Buyer has the right to choose the attorney and draft closing documentation. Seller’s attorney will be available to provide Buyer’s attorney with the necessary documentation to carry out the due diligence process. In this case, the deposit goes to the Escrow Company that Buyer’s choose.
At closing, the Escrow Agent is responsible to take care of all payments related to the transaction that come out of the money held in escrow, such as transfer tax, legal stamps, attorney fees, real estate fees, escrow fees, tax payments if there are pending taxes to be taken care at closing, etc. A closing statement must be presented and approved by both sides of the transaction before closing. Any left-over money must be returned to Buyer at closing.