Real Estate Mistakes in Costa Rica: Seven Preventable Errors
We’ve walked through the entire Costa Rica real estate process: Letters of Intent, Purchase Agreements, due diligence, escrow, closing, and working with realtors. In each article, we’ve highlighted specific problems and protective measures.
But sometimes the best teacher is understanding how everything goes wrong when buyers ignore the fundamentals.
The scenarios below represent patterns we’ve observed across hundreds of Costa Rica real estate transactions. The mistakes are authentic. The consequences are real.
Every single problem in these scenarios is preventable. Every buyer thought “it won’t happen to me.” Every buyer learned an expensive lesson.
You don’t have to.
Mistake #1: Signing Without Legal Review
The Scenario
A buyer finds an attractive property through a realtor: 2 acres with ocean views in Guanacaste, listed at $380,000. The realtor presents a “standard purchase agreement” to sign.
The buyer reads through it. It seems straightforward. They sign it and wire a $38,000 deposit (10%) to the seller’s attorney as instructed.
During due diligence, the survey reveals the property is actually 1.3 acres, not 2 acres—35% smaller than represented. The “ocean view” exists only if you climb a tree. Worse, the municipal land use certificate shows the property is in an environmental protection zone with severe construction restrictions.
The buyer exercises their due diligence contingency to terminate.
That’s when they discover the problem: the contract they signed has no real due diligence contingency. It states they can terminate only for “material title defects.” The seller argues (correctly, under the contract) that:
- The wrong lot size isn’t a title defect (title showed what it showed)
- Environmental restrictions aren’t title defects (they’re zoning issues)
- The view being misrepresented isn’t a title defect
The seller keeps the $38,000 deposit. The buyer sues. Two years and $30,000 in legal fees later, they settle for getting back $20,000 of their deposit.
Potential loss: $48,000 plus two years of stress.
What Went Wrong
The buyer signed a contract without having an attorney review it first. The realtor’s “standard agreement” was standard for protecting sellers, not buyers.
Had an attorney reviewed the contract before signing, they would have:
- Insisted on a broad due diligence contingency allowing termination for any reason
- Required the deposit go to escrow, not the seller’s attorney
- Verified property dimensions matched the listing before signing
- Checked the land use certificate before any commitment
The Lesson
Never sign anything related to real estate without independent legal review. Not LOIs, not PSAs, not amendments, not side agreements. Nothing.
The cost of legal review: $500-$1,500. The potential cost of skipping it: tens of thousands of dollars.
Mistake #2: Trusting the Seller’s “Proof”
The Scenario
A buyer is purchasing a house in Atenas for $425,000. During negotiations, they ask about permits for the second-floor addition.
The seller produces a document that looks official: a stamped permit from the municipality dated five years earlier, showing approval for the second floor.
The realtor says, “See? Fully permitted. Nothing to worry about.”
The buyer accepts this and proceeds with the purchase.
After closing, the buyer wants to renovate the second floor and applies for a permit modification. The municipality informs them: “There’s no record of the permit you’re showing us. This appears to be fraudulent.”
Investigation reveals the seller had created a fake permit document using an old stamp from an unrelated permit. The second floor is illegal construction. The municipality requires:
- Demolition of the illegal second floor, or
- Expensive engineering studies and retroactive permitting (if even possible)
Cost to demolish: $35,000. Cost to attempt retroactive permitting: $40,000+ with no guarantee of approval.
If the buyer sues the seller and the seller has left Costa Rica, the property may be all they can recover—a house they paid $425,000 for that’s now worth significantly less with illegal construction.
Potential loss: $125,000+ in value destruction.
What Went Wrong
The buyer accepted documents from the seller without independent verification. Permits aren’t hard to verify—your attorney simply requests the permit file from the municipality.
Had the attorney verified the permit:
- They would have discovered no permit existed
- They would have known the document was fake
- The buyer could have terminated during due diligence
- Or negotiated a massive price reduction reflecting the illegal construction
The Lesson
Never accept any document from a seller without independent verification at the source.
- Permits → Verify with municipality
- Title → Verify with Registro Nacional (National Registry)
- Tax payments → Verify with tax authority
- Utility accounts → Verify with utility companies
- Survey → Hire your own surveyor
- Corporate documents → Verify with corporate registry
Trust nothing. Verify everything.
Mistake #3: Skipping the Survey
The Scenario
A buyer purchases a lot in the mountains near San Isidro for $180,000, planning to build a retirement home.
The listing states “2.5 hectares (6.2 acres) with river frontage.” The buyer walks the property with the realtor, sees the river, sees the lot markers, and it looks right.
The seller offers to save the buyer money: “You don’t need a survey. I have the original survey from when I bought it. Here’s a copy.”
The realtor agrees: “Surveys are expensive and this is a large lot. You can see where the boundaries are.”
The buyer skips the survey to save $2,500.
After closing, the buyer hires an architect to design their house. The architect insists on a current survey before beginning design work.
The survey reveals:
- The lot is 1.8 hectares (4.5 acres), not 2.5—28% smaller
- The “river frontage” is actually on the neighbor’s property
- One boundary is 40 meters different from where the old markers showed
- The planned building site is partly on the neighbor’s land
When the buyer complains to the seller, the seller says: “I sold you what’s in the title. The title description is what it is. You should have surveyed it.”
The seller is legally correct. The title showed 1.8 hectares. The buyer assumed it was larger based on the listing and old markers.
If the buyer sues, the court will likely rule they bought the property as described in the title. The listing was “marketing” and not a warranty.
Potential loss: $50,000+ in value (paid for 6.2 acres, got 4.5 acres) plus inability to build where wanted.
What Went Wrong
The buyer didn’t order a survey. They relied on:
- The seller’s old survey (worthless—could be for different property, outdated, or fraudulent)
- Visual inspection (meaningless—you can’t see property lines)
- The realtor’s assurance (the realtor has no expertise in surveying)
The Lesson
Always order a current boundary survey performed by a licensed topógrafo.
Cost: $800-$2,500 depending on lot size. Risk of skipping it: buying the wrong amount of land, wrong boundaries, encroachments, inability to build where you want.
A survey is not optional. It’s essential due diligence.
Mistake #4: Wiring Money Without Escrow
The Scenario
A buyer is purchasing a condo in Jacó for $275,000. The seller says, “Escrow just adds cost and delay. Wire the money to my attorney. When they receive it, we’ll close.”
The realtor says this is “common in Costa Rica” and “not a problem.”
The buyer wires $275,000 to the seller’s attorney.
Three days later, on the scheduled closing day, the seller’s attorney reveals: “There’s a small lien on the property—about $8,000 for unpaid HOA fees. The seller will clear it from the proceeds after closing.”
The buyer’s attorney (hired late in the process) says: “Don’t close until the lien is cleared. You’ll be buying a liened property.”
The seller’s attorney says: “The seller already spent the money paying off his mortgage. If we don’t close now, he can’t pay back the funds.”
The buyer is trapped. They either:
- Close on a liened property (the lien becomes their debt)
- Walk away and sue for their $275,000 back
They choose to close. After closing, the seller never pays the $8,000 lien. The buyer has to pay it to avoid having their condo foreclosed by the HOA.
Then they discover more problems:
- $12,000 in back property taxes
- $3,000 in unpaid utilities
- Property value declaration issues requiring $2,000 in penalties
Potential unexpected costs after closing: $25,000.
Potential loss: $25,000 plus the stress of lawsuits to recover from the seller (ongoing).
What Went Wrong
The buyer wired money directly to the seller instead of using escrow.
Once the seller had the money, the buyer had zero leverage. The seller had no incentive to clear the lien or pay the back taxes. The buyer had to choose between losing everything or closing on a problem property.
The Lesson
Never wire funds directly to a seller or seller’s attorney. Always use escrow.
Escrow protects you by:
- Holding funds until all conditions are met
- Giving you leverage to ensure seller performs
- Providing a clear path to get your money back if the deal falls apart
Escrow cost: $500-$1,500. Potential cost of skipping it: $25,000+ or potentially total loss of funds in worse scenarios.
Mistake #5: Buying Without Due Diligence
The Scenario
A buyer finds a “great deal”—a beachfront house in Nosara listed at $550,000, about 30% below market for comparable properties.
The seller explains: “I need to sell quickly for a business opportunity. Price firm, but I need to close in two weeks.”
The realtor says: “This is an incredible opportunity. These don’t come up often. If we slow down with due diligence, someone else will grab it.”
The buyer agrees to a rushed due diligence: basic title search only, no survey, no permit verification, no inspections.
They close in 14 days.
After closing, the buyer discovers:
- The house was built 50% on their lot, 50% on the adjacent lot (boundary issues)
- No building permits exist for any of the construction
- The septic system discharges directly into a protected wetland (illegal, major environmental violation)
- The property is under investigation for environmental violations with potential fines of $100,000+
- The “beachfront” is in the Maritime Zone (Zona Marítimo Terrestre) requiring a concession, not fee simple ownership—the seller never had the concession renewed
Within six months, Costa Rican environmental authorities:
- Fine the buyer $85,000 for the illegal septic discharge
- Require immediate septic system replacement ($40,000)
- Prohibit any repairs or improvements until violations are corrected
- Initiate concession revocation proceedings for the Maritime Zone portion
The property becomes unlendable, unsellable, and potentially seizeable.
If the buyer sues the seller for fraud and the seller has fled to Panama, the buyer will likely never recover anything.
Potential loss: The entire $550,000 plus $125,000 in fines and remediation costs.
What Went Wrong
The buyer skipped due diligence because:
- The price seemed too good to pass up
- Artificial urgency (two week deadline)
- Fear of losing the opportunity
- Trusting the realtor’s judgment
Proper due diligence would have revealed:
- Boundary problems (survey)
- Missing permits (municipal verification)
- Illegal septic system (inspection and environmental review)
- Maritime Zone issues (title examination and zoning verification)
The Lesson
If a deal requires you to skip due diligence, walk away. The “great price” compensates for hidden problems.
Properties priced significantly below market are cheap for a reason. The seller knows something you don’t.
Take the time to do thorough due diligence. If the seller won’t allow it, that’s your answer.
Mistake #6: Accepting Dual Agency
The Scenario
A buyer finds a property they love—a house in Escazú listed at $650,000. The listing agent is friendly, knowledgeable, and seems trustworthy.
When the buyer asks if they should get their own buyer’s agent, the listing agent says: “I can represent both of us. I’ll save you time and I know this property better than anyone. I’ll be fair to both sides.”
The buyer agrees. The agent represents both seller and buyer.
Negotiations begin. The buyer offers $575,000. The agent tells them: “The seller is firm at $625,000. I really think you should meet in the middle at $600,000.”
The buyer counters at $590,000. The agent says: “The seller has another offer at $615,000. If you want this house, you need to go to at least $610,000.”
The buyer offers $610,000 and the seller accepts.
After closing, the buyer learns from a neighbor:
- There was never another offer
- The seller’s bottom line was $580,000
- The seller had told the agent to accept anything above $580,000
The dual agent lied to drive the price higher, earning an extra $1,800 in commission (3% of the $30,000 difference between what the buyer paid and what the seller would have accepted).
The buyer overpaid by $30,000 because the agent prioritized their own commission over the buyer’s interests.
Potential loss: $30,000.
What Went Wrong
The buyer allowed dual agency. The agent had:
- A duty to the seller to get the highest price
- A duty to the buyer to get the lowest price
- Double the commission incentive
- Zero accountability for lying to either party
The Lesson
Never accept dual agency. If you like a property, work with a different buyer’s agent or directly with your attorney.
Dual agency creates unmanageable conflicts. The agent can’t serve two masters, so they serve themselves.
Mistake #7: Ignoring Red Flags
The Scenario
A buyer is purchasing a mountain property near Monteverde for $320,000. During the process, red flags appear:
Red Flag 1: Seller won’t agree to escrow. “Just wire the money to my attorney. That’s how we do things here.”
Red Flag 2: Property survey shows 8% less land than the listing claimed. Seller says, “That’s normal variation.”
Red Flag 3: Municipal records show no building permits for the main house. Seller says, “The permits were filed but the municipality lost the records. It happens all the time.”
Red Flag 4: Title search reveals a recent ownership transfer—seller bought the property 60 days earlier. When asked why selling so quickly, seller says, “I found a better opportunity.”
Red Flag 5: Seller pressures for a rapid closing. “I need to close in 10 days or I’m moving on to another buyer.”
The buyer’s attorney advises: “These red flags together suggest serious problems. I recommend walking away.”
The realtor says: “The attorney is being overly cautious. These are minor issues. If you don’t close now, you’ll lose the property.”
The buyer sides with the realtor and closes.
Post-closing discoveries:
- The house was built entirely without permits and cannot be legalized
- The recent ownership transfer was the previous buyer escaping after discovering the permit issues
- The “normal variation” in lot size meant the buyer paid $320,000 for land worth about $250,000
- The seller disappeared immediately after closing
Potential loss: $70,000 in overpayment plus property with illegal construction worth far less than purchase price.
What Went Wrong
The buyer saw multiple red flags but proceeded anyway because:
- The realtor minimized each problem
- They were emotionally committed to the property
- They feared losing the opportunity
- They ignored their attorney’s professional judgment
The Lesson
When red flags appear, investigate thoroughly or walk away. Multiple red flags together mean run.
One red flag might be explainable. Two or three require serious investigation. Five or more red flags mean the deal is toxic.
Your attorney sees patterns you don’t. Listen to them.
The Common Thread
Every scenario in this article has the same fundamental problem: the buyer prioritized closing over protection.
- Mistake #1: Wanted to move fast → signed without legal review
- Mistake #2: Wanted to believe the seller → didn’t verify documents
- Mistake #3: Wanted to save money → skipped the survey
- Mistake #4: Wanted convenience → skipped escrow
- Mistake #5: Wanted a great deal → skipped due diligence
- Mistake #6: Wanted to trust the agent → accepted dual agency
- Mistake #7: Wanted the property → ignored red flags
In each case, the buyer knew what they should do. They chose not to do it.
The Cost of Shortcuts in Costa Rica Real Estate
Let’s add up the potential losses from these seven scenarios:
- Mistake #1: $48,000
- Mistake #2: $125,000+
- Mistake #3: $50,000+
- Mistake #4: $25,000+
- Mistake #5: $675,000+
- Mistake #6: $30,000
- Mistake #7: $70,000+
Total: Over $1,000,000 in potential losses from preventable mistakes.
The cost of doing things right:
- Legal review: $1,500
- Document verification: Included in legal fees
- Survey: $2,000
- Escrow: $1,000
- Comprehensive due diligence: $3,000
- Separate buyer representation: $0 (paid by seller)
- Listening to attorney: $0
Total cost of protection: About $7,500.
The Right Way: A Success Story
Not every Costa Rica real estate transaction ends badly. Here’s one that went right:
A buyer found a property in Manuel Antonio for $480,000. They:
- Hired an independent attorney before signing anything
- Had attorney review the LOI—attorney found it was actually a binding contract disguised as an LOI, rewrote it properly
- Negotiated a strong PSA with 45-day due diligence period and escrow requirement
- Conducted comprehensive due diligence:
- Survey revealed 5% lot size discrepancy → renegotiated price down $24,000
- Permit verification revealed unpermitted addition → seller agreed to either get retroactive permit or demolish at their expense
- Inspection found roof damage → seller agreed to repair before closing
- Final title search revealed newly filed lien → seller had to clear it before closing
- Used escrow—funds only released after deed was signed and all conditions met
- Worked with realtor for access only—relied on attorney for all substantive advice
- Did final walkthrough—verified all repairs were completed
The buyer closed successfully. The property has appreciated 15% in two years. No legal issues, no surprise costs, no regrets.
The difference? This buyer followed every protective step. They didn’t cut corners. They listened to their attorney. They refused to be rushed.
Total additional cost for doing it right: $6,800. Potential losses avoided: Hundreds of thousands.
Your Choice
You’re about to buy Costa Rica real estate. Every buyer in the scenarios above was exactly where you are now—excited, optimistic, ready to invest.
Some took shortcuts. Some ignored advice. Some prioritized speed or cost savings over protection.
They’re the ones with expensive lessons learned.
Others followed the process. They invested in legal counsel, conducted thorough due diligence, used escrow, listened to professionals.
They’re the ones who successfully own Costa Rica property.
The process we’ve outlined in this seven-article series isn’t theoretical. It’s the difference between success and disaster.
The six articles in this series have given you:
- Essential PSA terms that protect your investment
- Comprehensive due diligence to find problems before closing
- Escrow to protect your funds during the transaction
- What to expect and verify during closing
- How to work with realtors without getting played
- Common Costa Rica real estate mistakes to avoid
You now know more about protecting yourself in Costa Rica real estate than most buyers. The question is: will you use this knowledge?
The Bottom Line
Every mistake in this article was preventable. Every loss was avoidable. Every buyer knew better but chose to cut corners anyway.
Don’t be them.
Doing things right costs more time and money upfront than cutting corners. But cutting corners costs exponentially more when things go wrong.
You’re investing substantial funds in Costa Rica property. Protect that investment with the same seriousness you’d protect any other major asset:
- Hire independent legal counsel before signing anything
- Conduct comprehensive due diligence regardless of pressure to skip it
- Use escrow for every transaction
- Verify everything independently
- Never accept dual agency
- Listen to your attorney when red flags appear
- Walk away when something doesn’t feel right
There will always be another property. There’s only one chance to protect this investment.
Feel free to reach us with your questions or comments.
This is Article 6 (Final) in our Costa Rica Real Estate Series
Previous: The Realtor Relationship: Working With Agents While Protecting Your Interests
Complete Series:
- Purchase & Sale Agreement: Essential Terms
- Due Diligence Deep Dive
- Escrow: Your Safety Net
- The Closing Process
- The Realtor Relationship
- Common Costa Rica Real Estate Mistakes (this article)
