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Understanding Escrow in Costa Rica Real Estate Transactions

by rpetersen

In Costa Rica, the real estate market has been very active during the past few years, attracting both domestic and international buyers and investors. To ensure transactions are secure, escrow services play a pivotal role. Understanding how escrow operates within this context can provide both buyers and sellers with peace of mind during the property purchase process

What is Escrow?

Escrow is a legal arrangement where a third party temporarily holds money or assets until certain conditions are met. In real estate, it ensures that transactions are conducted smoothly and all parties fulfill their contractual obligations. The escrow agent should act as a neutral party and work to protect the interests of all parties involved.

Benefits of Using Escrow in Real Estate

Security: Escrow provides a secure way to handle funds and documents. The neutral third party, or escrow officer, ensures that no funds change hands until all terms of the transaction are met.

Compliance with Money Laundering Laws: In Costa Rica, escrow companies must adhere to money laundering regulations. Consequently, they subject parties involved in escrow transactions to an account opening process similar to that used by banks. Typically, this involves completing a Know Your Customer (KYC) form and providing all necessary documents to verify the source of the funds being transferred into escrow. Therefore, be prepared to supply detailed information and documentation to facilitate the opening of your escrow account.

The advantage of using this process is that once the funds are transferred from the escrow account to another bank account in Costa Rica, it becomes much easier for the recipient to justify the origin of the funds to their bank. For instance, a seller who deposits the funds into their account can provide their bank with the escrow documentation, which helps in getting the funds credited smoothly.

Clarity and Fairness: Each party involved in the real estate transaction provides instructions to the escrow officer, who then executes these disbursement instructions once the agreed conditions are met. This process ensures transparency and fairness.

Efficiency: By managing all the funds to the transaction, the escrow officer facilitates a smoother payout process, avoiding delays and confusion between the buyer, seller, and other parties such as banks and real estate agents and the real estate Atttorney.

How Escrow Works in Costa Rica

In Costa Rica, the  process typically involves the following steps:

Contract Agreement:  A real estate closing Attorney drafts a property purchase agreement that is signed by Buyer and seller.  That agreement will include the terms and conditions of the sale. 

Escrow Agreement.   Once the Escrow company is engaged then they will request that an Escrow Agreement be signed between them and the Buyer and the Seller.  Here you must ensure that the terms and conditions for the deposit in the Purchase Agreement are also reflected in the Escrow Agreement to avoid conflicts.

Document and Fund Submission: Both parties submit the documents requested from them by the Escrow agent. Once instructed to do so the parties can send funds  to the escrow company.

Completion of Conditions: The escrow officer processes the transaction and coordinates with the real estate closing Attorney ensuring all conditions are met, such as property inspections, utilities, taxes, and any other items listed as conditions in the agreement.

Finalization and Title Transfer: Once all conditions are satisfied and the closing real estate Attorney has collected signatures on the property transfer deed and the fund disbursement statement they will them instruct the  escrow officer to disburse the funds.

Reputation and Experience: Choose a service with a strong track record in real estate escrow.

When selecting an escrow service in Costa Rica, consider the following:

Reputation and Experience: Choose a service with a strong track record in real estate escrow.

Legal Compliance: Ensure the escrow service complies with Costa Rican laws and regulations.

Clear Communication: Opt for a service that communicates clearly and is transparent about all aspects of the escrow process.

What happens when there is a dispute

While escrow services provide an added layer of security and trust in real estate transactions, disputes between the buyer and seller can present significant challenges. When disagreements arise and the escrow company is caught in the middle, it can lead to complications that may delay or even jeopardize the transaction.

Most escrow agreement contain a clause that allows the Escrow company to deposit the disputed funds in court so that the buyer and seller can then file their respective claims.  To avoid this be sure the language on default is clear in both the purchase agreement and the Escrow agreement since they tend to be separate documents.


Using escrow services in Costa Rican real estate transactions provides a secure and efficient way to handle a  property purchase. It safeguards the interests of all parties, ensuring that the funds are disbursed as instructed and the  property rights are transferred after all terms of the deal are satisfied.

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