A beautiful property, an agreeable seller, and a requested deposit can create a false sense that the transaction is already understood. What is the biggest mistake foreign buyers make? Committing to buy before independent legal due diligence has identified what, exactly, they are buying and whether the agreed terms protect them.
In Costa Rica, the risk is not limited to whether a seller appears to own a parcel. A sound purchase requires examining the legal owner, title history, cadastral information, access, restrictions, corporate authority, permits where relevant, and the contract that governs the buyer’s money and obligations. None of those questions should be deferred until after a purchase and sale agreement, or PSA, is signed and a deposit is wired.
The practical mistake is treating the early stages as informal. A reservation form, offer letter, deposit instruction, or broker-prepared agreement can create meaningful obligations. The buyer who waits for legal advice until closing may discover that the property, structure, or transaction does not match the assumptions behind the offer.
The biggest mistake foreign buyers make is committing too early
Foreign buyers often assume that a Costa Rica real estate transaction works like a familiar transaction at home. They may expect a broker, seller, closing notary, or escrow provider to identify every issue that matters to them. Each may have a legitimate role, but none replaces buyer-focused legal representation.
A broker may facilitate a sale but is not the buyer’s independent legal adviser. An escrow provider follows agreed instructions; it does not decide whether the PSA gives the buyer adequate protections. A Notary Public plays an important role in documenting and formalizing a transfer, but the notarial function should not be confused with a separate legal review conducted solely for the buyer.
The timing matters because leverage changes. Before signing, a buyer can request documents, negotiate conditions, extend due diligence periods, require seller cooperation, and structure a deposit release around verified milestones. After an unconditional commitment or poorly drafted deposit provision, the buyer may have fewer practical options.
Due diligence is more than a name search
A title review commonly begins with the National Registry record for the property, often identified through its folio real number. That record can reveal the registered owner, recorded liens, annotations, easements, mortgages, restrictions, and the legal description. It is essential, but it is not the entire investigation.
The registered property must also be compared with its cadastral plan, or plano catastro, and with the facts on the ground. The question is not merely whether a plan exists. An experienced review considers whether the plan, legal description, parcel being shown, and proposed use appear to align. A buyer should not assume that fences, roads, marketing maps, or a neighbor’s understanding of a boundary establish the legal limits of the property.
Legal access deserves separate attention. A parcel can look accessible because a road has been used for years, yet the basis for access may require closer review. The relevant issue may involve a registered easement, public-road frontage, or another legal arrangement. The answer can affect financing, construction plans, future resale, and the practical use of the land.
The scope of due diligence should reflect the asset. A condominium purchase raises questions that differ from those involved in a home on an individual lot, agricultural land, a hotel acquisition, or a development site. For a condominium, the review may include the condominium regime, applicable regulations, common-area obligations, assessments, and whether the unit described in the contract is properly identified. For income-producing property, existing leases, service arrangements, licenses, and operating obligations may be as significant as title.
The PSA should preserve time, leverage, and funds
A PSA is not a formality to be cleaned up later. It should state the parties, the asset, purchase price, payment mechanics, closing requirements, allocation of responsibilities, and consequences if conditions are not met. Just as importantly, it should address the findings that have not yet been verified.
A careful agreement usually gives the buyer a defined due diligence period and a meaningful right to terminate if material issues are discovered or required information is not provided. The drafting must fit the transaction. A buyer of an existing condominium may need different conditions than an investor acquiring land for a future project.
Deposit provisions require close reading. The agreement should clearly address where funds will be held, who can issue release instructions, what happens if a condition fails, and whether the deposit is refundable in defined circumstances. Sending money directly to a seller or intermediary without clear written protections can create avoidable uncertainty. Even where escrow is used, the escrow instructions and PSA must work together rather than contradict one another.
The buyer should also avoid vague descriptions such as “the house near the beach” or “the development lot shown during the visit.” The PSA should identify the registered asset precisely and state what is included in the sale. Furniture, equipment, vehicles, business assets, water infrastructure, parking rights, and membership interests may require their own treatment. A good contract turns the commercial understanding into obligations that can be verified.
Ownership through a corporation requires its own review
Costa Rican property is often held through a corporation. That can be appropriate in some circumstances, but corporate ownership is not automatically the best answer for every buyer. The decision should account for the buyer’s ownership goals, administration, compliance obligations, succession planning, and the nature of the asset.
Where a buyer is acquiring property from a corporation, the transaction may be structured as a real estate transfer or as a purchase of corporate shares. Those are materially different transactions. Buying shares can mean acquiring not only the property but also the corporation’s existing obligations, records, contracts, and potential liabilities. A registry review of the corporation and an examination of its authority, representation, and internal documentation may therefore be necessary.
A buyer should also confirm who has authority to sign. A seller’s statement that an individual is the owner or authorized representative is not enough. The authority of a corporate representative, the identity of the legal owner, and the capacity of all signatories should be independently verified before a binding agreement or payment is made.
Do not treat visible improvements as legally settled
Buyers often focus on the residence, pool, guesthouse, dock, retaining wall, or commercial improvements because those features drive value. Yet the legal and permitting position of improvements may need separate inquiry. A parcel can be properly registered while the structures or intended use raise questions about permits, municipal matters, zoning, environmental restrictions, or other approvals.
This is especially relevant for development land, commercial property, and coastal-area transactions. In Costa Rica, some land near the coast may involve concession rights rather than private fee-simple ownership. A buyer should not rely on a listing description alone to determine the legal nature of the property or the transferability of the interest being offered. The proper review depends on the property’s location, title status, existing use, and proposed plans.
Water availability also deserves careful attention where a buyer expects to build, expand, operate a rental business, or subdivide. A well, connection, water source, or seller representation may not answer every question about the proposed use. The legal review should identify what must be confirmed, rather than allowing a buyer to assume that an existing arrangement supports a future project.
A disciplined process before funds move
The right process begins before the buyer becomes emotionally or contractually committed. First, identify the exact property or interest being offered and obtain the documents necessary for an initial review. Next, have buyer’s counsel examine the title, registry information, cadastral documentation, seller authority, and transaction-specific issues. Then negotiate a PSA that makes due diligence, deposit handling, and closing obligations clear.
Not every transaction requires the same scope of work. A straightforward resale condominium may call for a more focused review than an acquisition involving undeveloped land, a business, several parcels, or a corporate share purchase. The principle remains the same: the scope should follow the risk, not the sales timeline.
Costa Rica can be an attractive place to acquire property, but the strongest position is established before the buyer signs, pays, or relies on assurances that have not been verified. American Law Partners assists foreign buyers with buyer-focused review, due diligence, PSA negotiation, escrow coordination, and closing support throughout Costa Rica. Early legal review gives a buyer the information needed to proceed, renegotiate, or walk away while those choices are still available.
