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Why are many Costa Rican listings overpriced?

June 2, 2015

 

“I love that beach home for sale, but why is it so expensive?” When surfing for property in Costa Rica on a real estate website or an MLS, you will surely notice that some properties for sale are overpriced Costa Rican listings. Why does this happen?

Some prices might not make any sense to you because Costa Rican real estate is different than in more familiar markets. That is why you need to do your due diligence or hire a good realtor when you are in the market to purchase property in Costa Rica. Part of your due diligence is why you are here, reading this article, so allow me to explain.

No real MLS

Costa Rica does not have a real Multiple Listing Service (MLS) as some other countries do. In a market where there is an MLS, sellers will typically call the best realtors in their area for an interview before they list the property with anyone. With each realtor, they will be able to review a CMA or Comparable Market Analysis, which will show at what price their property should be listed at in order to sell it quickly. In some markets, properties are sold within days or weeks if the seller prices the property right.

Since there is no real MLS where ALL agents are registered and where they list their properties for sale, sellers put their properties on the market as an “open listing,” mostly in the larger cities within the Central Valley. That means that the sellers will list their property with as many real estate agents as possible, without any exclusive agreement. This opens the possibility for a seller to start listing the property with a price tag that is much too high, hence the overpriced properties on the market. Another reason for an overpriced property for sale is that the seller is not motivated at all, unless the property can be sold at a much higher price than market value. Again, real estate agents cooperate with this by just listing the property in the hope to catch a motivated buy who falls in love with the property.

Overpriced properties

In an open Costa Rican listings system, most real estate agents will just accept the price tag that the seller puts on the property, no matter if it is overpriced or not. If the agent does not accept this price tag, the agent will miss the chance of ever being able to list the property, even if the seller decides to lower the price later, because the property has not been sold.

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Exclusive Costa Rican listings

In other markets, the seller will list exclusively with one agent by signing an exclusive Costa Rican listings agreement and this agent will be in charge of marketing the property and list it on the MLS. Other agents will have that listing on their website through the MLS and when they have a buyer, they will work with the seller’s agent when they have a showing and split the commission.

An agent does not want to spend marketing dollars on trying to sell an overpriced property exclusively. If the seller doesn’t accept a suggested sales price from any of the agents, the property will take a long time to sell because the CMA is available to buyers also. This will make sure that properties are listed at a competitive price and that the price will be adjusted as soon as it is clear that the property is not selling quickly enough or a seller will first try to sell his property as a FSBO (For Sale By Owner). For a good agent, listing an overpriced property is embarrassing and highly unprofitable.

Costa Rica is different

Like I said when I started this article, Costa Rica is different. It is almost impossible to put together a CMA for several reasons. Costa Rica does not have any large communities with hundreds of homes that are all almost the same. Most homes in Costa Rica are custom built, so they’re all different. The only place you might find 10, 20 or 30 homes that are the same are in some condominium developments.

The price that properties are sold for is not public knowledge. Often, this is because the property was sold as a corporation through a share transfer and the sales price was not registered publicly. The fact is that only real estate agents, who know their area very well, have a good idea what price properties are listed for, but also what price they are sold for.

The sales price of properties in Costa Rica is not based on logic, but on what a seller feels his/her property should be listed at even though most experienced real estate agents calculate a replacement value to put a price tag on a property for sale.

Price it right

My tip for sellers is to listen to what the agents have to say about pricing the property right, so it sells fast, don’t be too greedy. My tip for buyers is to always make an offer of a property that is interesting enough for you because good Costa Rican listings agents will always get a counter offer that will either make it work or not.

Ivo Henfling is a Dutch national, resident in Costa Rica since 1980 and a Costa Rica real estate broker for over 20 years. He is the founder of GoDutch Realty, with offices in several locations in the Central Valley, including Escazú, Atenas, Cariari and Grecia. Ivo Henfling can be reached at (506) 2289-5125 / 8834-4515 or at ivo@godutchrealty.com

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