There still are opportunities in real estate and real bargains for those people with patience and tenacity.
One possibility is the judicial auction.
The Boletín Judicial publishes information on properties going to auction in almost every edition. Buying real estate at auction is easy. One just needs to know the rules and have persistence. It is common to go to 10 or more auctions to find a deal.
Any creditor can exercise rights under the law and go to public auction when a borrower fails to pay.
A lawyer for the creditor files a collection lawsuit against a debtor in default. If the paperwork is prepared correctly, a date for a public auction is set. Collections are executive type cases and are expedited by the courts.
Anyone can bid at an auction. This includes foreigners as well as locals and companies. Often, few bidders participate in auctions because most people do not know where to find the details regarding them and that they have the right to bid.
Bidders must deposit 30 percent of the base in cash, cashier’s or certified check to bid. In the case of an Instituto Nacional de Vivienda y Urbanismo, Banco Hipotecario de la Vivienda, or savings institution auction, 40 percent is required.
The base price of an auction is the amount due the creditor. Creditors can increase this amount to cover the legal costs and expenses of the collection. The winning bidder has three business days to deposit the balance of the winning bid. Losing bidders have their deposits returned on the spot.
Auctions can fail after the bidding. For example, a winning bidder may not show up to pay off the balance. If that happens, another auction is scheduled with the base reduced by 25 percent. The base is successively reduced until there is a successful auction.
When a winning bidder decides not to follow through, the deposit that has been made is taken by the courts. Some 10 percent goes to the creditor as damages, and the remainder goes to decrease the amount owed. This means that a subsequent auction will take place at a lower price.
In any auction, a creditor is always entitled to take the asset at auction in payment of the debt. Most credit institutions do not do this and count on the bidding process to get the most for the asset, so they can get it off their books. Creditors that are banks or credit lending institutions are not in the business of speculating on assets, they are in the business of lending money.
There is another advantage to an auction. The winner at auction gets a property with a clean slate. All other liens and mortgages extinguished. Then the winner's ownership is made clear by a judicial decree that is filed in the Registro Nacional.
Court auctions happen every single business day in every part of Costa Rica. Public court auctions hold great buys on real estate for those with determination.
Article first published in A.M. Costa Rica on January 22, 2007.
