Real Estate:

Angela Jimenez with film crew of House Hunters
HGTV

House Hunters asked around for a buyers broker in Costa Rica and sent this
crew and director down to film Angela at 3 locations (Avalon, Vivicon at
Lilia, and Prados Oeste)

Angela uses her experience of 22 years to make sure the buyer understands
the market in Costa Rica and does not overpay

COSTA RICA NATIONWIDE REAL ESTATE

FOR SALE BY OWNER

CERTIFIED APPRAISALS
BUILDING INSPECTIONS

BUILD YOUR OWN HOUSE

HOUSE, APT, CONDO RENTALS

COSTA RICA TITLE INSURANCE

A.M. Costa Rica

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          San José, Costa Rica, Monday, Nov. 2, 2009,  Vol. 9, No. 216

Luxury home tax fine can be 10 times the tax
By Angela Jimenez Rocha*
Special to A.M. Costa Rica

Foreign nationals should be especially carefull about the new lluxury home tax (casa de lujo in Spanish) because Tico attorneys and accountants have expressed confusion about how this new law affects owners.  The penalty for not filing is 10 times the tax and five times the tax if the declaration is not within 10 percent of what the Hacienda determines.

Particularly complex is valuation of a condo.

There are three different steps to value a condo, inside construction of each unit, the common area improvements and the land.

In order to address the issue of condo owners it is unclear in the law who is to determine the value of the common area improvements and the land which is separate than the improvements.  The safest way is for the administrator to hire a certified appraiser who has no vested interest as an owner to make two separate appraisals, one for the improvements like swimming pools, streets, elevators, walls, etc. and another for the land.

Any condo unit which meets or exceeds the 100 million colon threshold, which includes each individual condo’s percentage of the improvements, also must then must determine the percentage of the land value as step three.

We have had administrators of several high profile condo associations asking my advice on what they should do.

My opinion is there is a huge risk if the adminstrator of each condo does not assume responsibilty to make this valuation so each owner uses the same value for common areas.  The reason is if each individual owner does this and there are many different valuations, Hacienda may start an investigation against any owner.
The next step is determing which type valuation to  use of the many listed by Hacienda. This is very complex for those who are not versed in the techincal language of construction and architecture.  There are different types for single-family houses, condos, hotels, etc.   There are various valuation directions just for the different types of construction of concrete blocks and beams, window types, luxury bathrooms and similar.

In order to make the declaration, each owner must
file this digitally with the Hacienda and list the number of the plano catastrado, escritura constituion which list each condo units percentage of the finca madre or larger project, and be inscribed in Tributacion Directa as an taxpayer. They also must list from which bank the owner authorizes Hacienda to deduct the tax.

The values for the land are listed for some municipalities but not all of them so far as can be determined now.  For instance in setting the Escazú land values, the agency has the Muliplaza area listed as approximately $1,000 per square meter but Cerro Alto as $256 per square meter, which may be considered low versus current values.

The typical charge required for an appraisal by a licensed member of the Colegio de Architects and Engineers for 100 million colons is approximately $1,028.  This is required every three years from reading the Hacienda information, so owners should not have to pay for a new appraisal every year.

One of the most important items is the official depreciation chart which helps owners pay less tax by lowering the declaration required of the construction value, and it is vital to understand how this affects the values.

* Angela Jimenez Rocha is a licensed architect and has worked as an appraiser for banks and individuals for the last 23 years and can be contacted by visiting www.orbitcostarica.com/certifieda.htm She has written this explanatory article at the request of A.M. Costa Rica becasue of her special knowledge.

Sharp buyers will consider tax when making offer
By the A.M. Costa Rica staff

What is hard to determine now is the effect Costa Rica's new luxury tax law will have on real estate values.

The law went into effect Oct. 1 at a time when real estate experts thought that the troubled national real estate market was showing signs of recovery.

The law assesses a special, non-deductible tax on homes worth more than 100 million colons based on a complex system established by the Dirección General de Tributación, the tax collector. The computed values have no relationship with sales price or actual value. Tributación followed the law and is using replacement cost new less depreciation. This is a system that usually is used to determine estimated value for unique structures for which the comparison method cannot be used.

When a knowledgeable real estate customer looks at a property he or she will want to know the tax value computed for Tributación. And that amount will have an impact on what potential buyers are willing to pay.

A home with a computed value including law of about $225,000 will be subject to a $562.50 annual tax in addition to the taxes levied by the municipality.

A home computed to be worth $300,000 will be subject to an $800 tax. And a luxury home
computed to be worth $650,000 will be subject to a $1,900-a-year tax.

The taxes are not deductible for income tax purposes in Costa Rica, but they might be deductible in other countries. The luxury tax does not apply to vacant land or structures that are not used as dwellings. The tax goes with the home so that if a naive buyer obtains a home on which the tax has not been paid, he or she probably will be required to pay the outstanding amount, perhaps with a fine.

A savvy real estate seller will want the person closing the sale to prorate the tax so that the seller gets a refund from the buyer for the unused portion of the tax. The tax is payable every January, although this year, the tax collectors are expecting four months worth of tax from 2009 because of the date the law went into effect.

Tributación has not made any effort to educate the public about this tax, even though fines can be 10 times what should have been  paid but was not. In the case of a $650,000 home, a foreigner who is unaware of the tax could be assessed a $19,000 fine for failing to file the required papers and making the payment.

A.M. Costa Rica has created a special page where readers can see immediately prior stories on this topic. Editors plan to add to the summaries and links as other news stories are published.

From:Angela Jimenez Rocha
To: A.M. Costa Rica
Sent: Monday, Aug. 24, 2009
Subject: Despite funk, country well situated for rapid, positive upturn

Since Henry Kaufman is back in the United States, I have had some time to reflect on his constant use of the term black swan.

This concept was made famous by the well known Nicholas Nassim Taleb, professor of risk at New York University, who has made a great impact on the financial gurus around the world.  He predicted while speaking at the Royal Society of Arts in England extreme scenarios which can easily lead to hyperinflation. He was quoted as saying "Give me a regulator, and I'll show you a way to make money." "Regulation is not a panacea, its dangerous."

After being in meetings with Kaufman and many of the large developers in Costa Rica for the past several months, I have tried to understand why most of them are having such a hard time finding liquidity.  Of course the normal sources of finance have tightened the purse strings and many never say no to borrowers just never say yes.

There are so many uncertainties in the world outside of Costa Rica that we may wake up one day and find we are one of the few places in the world disconnected from most of these problems.  I know that many in Costa Rica are in a blue funk wondering how they will ever become liquid again, but there may be a rosier future ahead than most believe for our tiny country.

In my business of appraisal of property over the last 23 years, I cannot afford to be a Pollyanna since I am responsible to the banks for the values I write on these reports.  However there is one tried and true way to determine fundamental values: Add up all the living spaces in the country and determine how much rental income this will produce.  Determine a value for inflation and discount the cash flow.

Now to the rosier picture.  Imagine serious unstable conditions in the rest of the world like war in the Middle East or global warming having a drastic effect or the aquifer in Florida becoming too salty to function.  A small fraction of those people coming to Costa Rica could create a serious shortage of rental properties driving up the values overnight.  In some minor aspect this has already occurred with the exodus of Venezuelan rich. Some of whom have bought property they keep vacant as Plan B.

I keep a constant eye on the rental prices especially in Escazú and Santa Ana as an index of how to access current values. Rents have softened in the past few months and I believe a large reason for that is that the influx of retired persons from North American have put off making decisions.  Any change in the psychology of these people can have a dramatic effect very quickly in this small market.

From:Your daily English-language
To: A.M. Costa Rica
Sent: Wednesday, Jan. 14, 2009
Subject: Most of real estate market does not involve Gringos

Dear A.M. Costa Rica:

With all due respect to your readers opinions sometimes they forget 95 percent of the real estate market is not made up of fancy houses in Escazú and Tamarindo nor luxury condos in Santa Ana or these new projects planned by the Forum and the Sabana Park.

The fellow who wants to know sales data at the national registry will find it very hard going since most people still do not declare the real values. Local municipalities are now making a greater effort to pressure owners to declare real values for their properties.  I recently assisted my own attorney in visiting the muni to check to see if he had to declare his house.  He was overjoyed that he still had a year before he needed to do so. The rule here in Escazú is you are required to file a declaration every five years.

Now in order to judge an overall change in prices, it would be best to start at one of the two government authorized mutuals whose function is mandated to assist in housing loans not commercial loans.  Since I handle many appraisals for one of the mutuals I can tell you that things are slower. The upscale housing market represents just a tiny fraction of the entire real estate market in Costa Rica.  Most of these properties are cash deals or some mixture of owner financing at this time.  I have written in the past that there are many ways to value property, but in my opinion the best one and most realistic is the cash flow analysis.

Take a condo that rents for $900 month and whose owner wants to sell it for $100,000.  Does this gross return of 10.8 percent make sense in a market where U.S. 30 year treasuries are yielding very little.  I watched in amazment when a local private bank makes an appraisal on an almost identical unit at $176,000.  Does this gross return of 6.14 percent make as much sense to you, given the fact that we cannot assume prices will continue to go up? 

I have been asked to do a valuation on some land which includes a hotel in Guanacaste next week.  The lender is interested in the land values, but I tend to look at cash flow potential not just comps, which is where too many real estate agents live in their heads.

Before everyone gets depressed, our strategic analysis of the future of Costa Rica over the long term is very bright.  The wave of baby boomer retirees will one day make people very happy.  There are only a few places in the world they can go, and Mexico is not one of them. So all of you owners who are not overextended, just wait.  Incidently, we discussed this with someone who owns 30 percent of downtown Tulsa, Oklahoma, recently who agrees with us.

Angela Jimenez Rocha
certified appraiser
orbitcostarica.com
Escazú

From: rohailey
To: Harold - Orbit Costa Rica
Sent: Saturday, December 11, 2004 12:12 PM
Subject: costa rica trip for retirement relocation residency

Being the son of a world renowned author I have been told I have a good command of the English language, but adequate descriptive words escape me when I try to portray for you the incredible assistance Harold has provided me in becoming comfortable in Costa Rica. Let me put it this way, not only does Harold know everything you will ever need to know about Costa Rican tourism, but he is also a genius when it comes to knowing the ins and outs of Costa Rican customs, law, and just about everything else. Also his wife Angela is well known architect, builder, and certified appraiser of real estate licensed by the Costa Rica Board of Engineers and Architects

So whether you are considering a visit to Costa Rica for a few days or contemplating Costa Rican residency, Harold is without a doubt the most important person you will ever get to know and trust in Costa Rica. His assistance and expertise was off the charts, and I couldn’t feel luckier for having met him. Harold is one special character and someone you definitely need to know. I am now proud to call him my friend as well as my advisor.


Roger Hailey

TEL 305- 6062575 FLORIDA

MOVING TO COSTA RICA SOON SO WILL HAVE TO LIST NEW NUMBER



ORBIT OPINION: THIS FELLOW IS SON OF ARTHUR HAILEY THE AUTHOR OF AIRPORT AND LOTS OF OTHER BOOKS.

WE APPRECIATE HIS EXUBERANCE AND HOPE WE CAN LIVE UP TO THIS PRAISE.

Hello Angela We had a wonderful time with you.

Thanks for all of your help. You gave us so much to think about. We are interested in having you take a look at the properties in Punta Uva. I have all of the contact info, and will send it to you shortly. If you could look at the hotel on the beach and take a quick glance at the house and plot of land next to the hotel, as it is also for sale.

We are also quite interested in the plot of land on the beach. Just send us the account info and totals so we can send you some money. I will be in touch soon.

Thanks again, J.T

E-mail: realestate1@orbitcostarica.com

DO YOU KNOW WHAT A PERITO IS?
by lic. angela jimenez rocha

For those not native to Costa Rica it is not a dog but an inspector.

Banks and other lending institutions usually do not trust their own in house employees to do valuations so they hire outside peritos to value any hard assets from real estate to diamonds to cars etc. before they will make loans.

The most common job of a perito in Costa Rica is valuation of property and it takes not only the eye of an engineer but also that of an architect and real estate agent rolled into one person to create the most informed valuations.

For an existing house the perito will take the land value per square meter and the square meter house values less the official College of Engineers and Architects depreciation schedule based on the type of construction and age. Where the real art of appraisal comes into play is the so called L curve that most lenders use here. The L curve has to do with demand for certain areas and the eye and nose of the perito about potential resell values if the lender is forced to take back the property.

Unlike the U. S., red lining seems to be common here and many lenders avoid certain areas.

In Costa Rica, there are 3 main types of lenders for property.
1. Private Banks
2. Government Banks
3. Mutuals and Coops

There are numerous private lenders who charge much higher rates than the above and often non residents use this type service since the requirements of the 3 main lender types are much stricter than the U. S.

One interesting item is the Mutual Lenders in Costa Rica are not allowed to sell properties for more than the outstanding loan value. This is called lucre in Spanish meaning they are not allowed to profit from foreclosures. This is because the government authorized Mutuals (Savings and Loans or the old building society as we know them in the U. S.) are for purpose of helping the public rather than acting as profit center.

Today there are only 3 main Mutual Lenders left after much consolidation thru the years as the government has tightly regulated the Mutuals who also offer some of the same deposit services like banks and are fully guaranteed by the government. The Mutuals typically make much smaller more tightly controlled loans with far less default rate than almost any other type of financial instituition.

What does this mean to a borrower? If you get a loan from a Mutual you can almost be certain you did not overpay for the property.

Angela Jimenez Rocha has been a perito for 17 years after graduating as an architect, first starting with the government of Costa Rica to inspect projects the government was funding. After that she worked with several Mutual and Coop Lenders. She has done over 8,000 valuations and thousands of inspections for government Bono programs where any person under a certain income can qualify for a free grant of cash to approximately $5600 if they own a piece of land that qualifies for the Bono program.

Angela has very strict guidelines on how this money is used and it is parceled out as the work progresses. Her job is to make sure that the house is built according to code and that no budget over runs occur before the last payment is made.
Given the problems many foreigners run into with cost over runs this may be of interest in understanding how to keep within a budget here.

Angela has also built upscale housing and was the designer for the expansive vistors center for the famous Cathedral in Cartago. She is especially skilled in prefab construction to keep costs down and what most people do not realize is prefab construction can actually be stronger than regular brick and mortor.

Recently she has done a couple of appraisals where the asking price was about 60% more than her appraisal. When the surprised non resident buyers wanted to know why, she went over each item in a comprehensive 2 page report and simply tried to explain buyers must be cautious in a market when that old adage cavaet emptor (buyer beware) really means that in Costa Rica.

Angela can be contacted at 8330-1035 or 88271314or check her web site
www.orbitcostarica.com/certifieda.htm

From: "Paul Avalone" <paulie603@hotmail.com>

To: <mail@orbitcostarica.com>

Sent: Tuesday, July 03, 2007 10:33 PM

Subject: RE: costa rica

I recently retired to Costa Rica and rented sight unseen by email a wonderfull condo in Avalon in Santa Ana from Angela and Harold of Orbit Travel. They did exactly what they promised and their advice thru the months has led me to the paradise I hoped for in Costa Rica. Angela especially is an expert in all aspects of real estate and is a well know certified appraiser for the banks in Costa Rica. They referred me to an attorney who handled all my needs in obtaining all the documents I needed to live here. If you need any more info you can call me at 203-4028. Best time to call is afternoon or night since i spend my mornings in the pool at the condo.

Paul Avalone
former unhappy resident of New York City retired from the rat race at 56.

REPRINT FROM AM COSTARICA OCTOBER 30,2207 VOL 7, NO. 215
COSTA RICA'S ENGLISH ON LINE NEWSPAPER

From: Tomtwoshoe@aol.com
To: mail@orbitcostarica.com
Sent: Sunday, November 16, 2008 7:49 AM
Subject: costa rica real estate prices 2008

First, thank you for your hospitality and advice. Also the coffee is a hit. Got back alright but had an 8 hour lay over in Atlanta. The guy who is selling at a 60k discount in Sonesta bought in over 2 years ago and selling at that price if he does, he will still make a big profit., aprox 70k. He can easily afford to sell at that price. He is lucky.My partner at another lot I have got out of his contract with Ramada with all his deposit back as he was involved in sales there so they worked with him. He is also lucky. I'm sure a lot of people are taking it in the rear these days. Again thanks for your sharing knowledge , Things will work out for me fortunately. Have a great day. See you in the future.

Tom Dicoco

Angela Jimenez Rocha is an independent appraiser and licensed architect and Red Orbita Viajes S. A. (Orbit Travel)

 is not in the appraisal, architect business nor involved other than advertising as a service to her.

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