Why You Need an Escrow Agent When Buying or Selling Property in Costa Rica
If you come from North America or Europe, you are probably used to escrow companies or title agents handling every dollar when buying or selling real estate. You make an offer, transfer earnest money into a designated account, and the deal moves along smoothly.
When buyers and sellers first arrive in Costa Rica, many assume real estate transactions work the exact same way. They don't!
In Costa Rica, real estate deals used to involve wiring money directly to an attorney’s private bank account or straight to the seller before closing. Today, using a registered escrow agent in Costa Rica is not only simple—it is essential for protecting your money and guaranteeing a smooth closing.
What is an Escrow Agent in Costa Rica?
An escrow agent is a neutral, regulated third party that holds deposit funds and purchase money in a dedicated trust account. The escrow company acts on strict instructions outlined in a formal Escrow Agreement signed by both the buyer and the seller.
The funds are released ONLY when all contractual conditions are met—such as completing due diligence, verifying clear title, and signing the final transfer deed (escritura).
Why Use a Safe Third Party?
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Neutrality: The escrow company represents neither the buyer nor the seller. Their sole duty is to follow the agreed-upon written contract.
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Capital Protection: Your money isn't sitting in a personal account or an attorney's account; it stays safely locked in a government-monitored trust account until closing day.
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Dispute Safeguards: If something goes wrong during due diligence, the escrow agent follows strict contractual protocols to resolve or return earnest deposits without bias.
The Money Laundering Connection: Understanding SUGEF Rules
One common surprise for foreign buyers is the sheer amount of paperwork required to move money into Costa Rica.
To combat money laundering and tax evasion, Costa Rica’s financial watchdog—SUGEF (Superintendencia General de Entidades Financieras)—regulates all local financial institutions and registered escrow providers under Law 8204.
Why the Strict Compliance Rules?
Banks in Costa Rica cannot simply accept large wire transfers from abroad without proof of where the funds originated. If you attempt to wire hundreds of thousands of dollars directly to an attorney or seller without prior approval, the receiving bank will likely freeze or reject the wire, sending your funds right back to your home country (minus heavy wire fees and weeks of headache).
Registered escrow companies are fully SUGEF-compliant. They guide you step-by-step through the Know Your Customer (KYC) process ahead of time. You will be asked to provide:
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Proof of identity (Valid passport copies).
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Proof of income or wealth (Tax returns, bank statements, brokerage records, or property sale documents).
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The signed Purchase and Sale Agreement (PSA).
While gathering these financial records might feel tedious, it actually makes moving your funds safe and easy. Once your escrow account is approved, your wire transfers clear without delay, ensuring your funds arrive safely for closing.
A Common Local Pitfall: Giving Earnest Money directly to the Seller
Unlike international transactions that rely on third-party escrow accounts, local Costa Rican buyers traditionally hand earnest money (depósito de garantía) directly to the seller or the seller's attorney upon signing an option to purchase (opción de compraventa).
While this direct payment is a common local habit, it carries significant risk:
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Difficult Refunds: If a hidden title lien, survey issue, or unrecorded debt comes up during due diligence, recovering a deposit paid directly to a seller can be an uphill battle. If the seller refuses to return the money, your only recourse is a lengthy and costly lawsuit in the Costa Rican court system.
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Lack of Neutrality: A seller holding the earnest deposit has no legal incentive to act as a neutral party if a contractual dispute arises.
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Pressure on Due Diligence: Buyers who pay sellers directly often feel rushed to accept unresolved property defects just to avoid forfeiting their deposit.
Using a SUGEF-registered escrow agent replaces this risky local custom with a neutral, legally binding process. Deposit money stays locked in a protected trust account and is only released to the seller once all contract conditions are met—guaranteeing that if the deal fails during due diligence, your money is returned smoothly without court battles.
Big Advantages for Sellers (It’s Not Just for Buyers!)
Many property owners in Santa Ana and across Costa Rica think escrow is only meant to protect the buyer's deposit. That is a mistake! Escrow offers tremendous peace of mind for sellers as well:
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Proof of Serious Funds: You don't have to take your home off the market based on a buyer's promise. Once the earnest deposit lands in escrow, you know the buyer is financially capable and committed.
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Guaranteed Closing Funds: On closing day, you sign over the property deed knowing the full purchase balance is already cleared, verified, and sitting safely in escrow—ready for immediate disbursement.
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Smooth Local or International Payouts: The escrow agent coordinates paying out all real estate commissions, attorney fees, transfer taxes, and remaining seller proceeds directly into designated bank accounts without fuss.
How Easy Is It to Work With an Escrow Agent?
At Coldwell Banker Santa Ana, we walk our clients through the process every day. Setting up escrow is straightforward:
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Sign the Purchase Agreement: Draft and agree on terms with your attorney and real estate agent.
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Open the Escrow Account: Complete the KYC questionnaire and upload your source-of-funds documents.
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Wire Earnest Money: Send your deposit into the secure escrow account.
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Complete Due Diligence: Your attorney verifies title, surveys, and utilities.
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Close & Disburse: Once all parties sign the transfer deed before a Costa Rican notary, the escrow agent releases funds to the seller and service providers.
Don't Take Shortcuts with Your Investment
Whether you are purchasing a luxury condo in Santa Ana, a home in Villa Real, or selling a family property in the Central Valley, never send earnest money directly to an individual or an unregulated private account. Always use a SUGEF-registered escrow agent to keep your real estate transaction simple, secure, and fully legal.
Ask the escrow company for the cost of using escrow!
Have questions about buying or selling property in Santa Ana? Contact the team at Coldwell Banker Santa Ana today to guide you through every step of your real estate journey!
I am Ivo Henfling, a 37-year real estate veteran and widely regarded as Costa Rica's leading real estate authority, now with Coldwell Banker Santa Ana. Are you ready to purchase or sell one of the most beautiful Costa Rican homes now? Then contact us now. If you enjoyed this blog, don't forget to subscribe to our newsletter, share this post, and as always—we love your referrals!
