Don’t Gamble With Your Down Payment!
Once again, this week we ran across a very interesting and sad scenario. A client (borrower) contacted us to go look at a potential development on one of Costa Rica’s premier beaches. The property was fully permitted, with a ton of direct beachfront property with gorgeous views, rather large and basically shovel ready. Worth its weight in Gold! We were very excited to offer financing for the project when we asked her how much money she put down on the property, she told us the amount and of course, we asked if it was in escrow, (it was not). She had put 25% down and had the other 25% in her bank account and was asking us to provide the balance in order to complete the purchase.
We felt confident that we could accomplish this so we agreed after the site visit, to meet and discuss her options back in San Jose the next morning. On December 27th, we all got together to discuss further and found out that her purchase agreement had expired on December 19th. We asked her if she had an extension and she said “no” then we asked very politely “do you still have the 25% in your bank account?” Her response was that because of the current situation, (purchase option had expired) she decided to send it to the owner of the land directly that night thinking that that gesture would buy her more time. Glenn’s head hit the table and I just advised her that she just walked into the Casino and threw the dice on craps! Without a proper extension of her purchase agreement or an escrow account, she is basically at the mercy of the landowner. Of course, she swore that he was a great man and she has the best lawyers, the best broker, etc. (same old same old with the best lawyers in CR) I told her to go find out if they were willing to do an extension on the purchase agreement. She and her partner left and within half-an-hour, I began to receive text messages stating that “there is a problem” … next text “I’m screwed.” The worst part…. the amount of money transferred to this gentleman with no escrow account and no extension on the purchase agreement was in excess of $30 million dollars (YES, you read that correctly). Now for the real surprise, she is Costa Rican.
The point is that everybody that does business in Costa Rica must use common sense, a good lawyer who works in your best interest, a broker that you can trust and does his proper due diligence. Never ever put any money down on a property unless you are sure that you will get the majority of your deposit back if you cannot complete the purchase or you are definitely going to receive the balance of the monies from a secure source, in order to complete the purchase! If she only would have come to us sooner…
Written by Steven Stewart