Escrow

Escrow is an arrangement where an independent trusted third-party receives and disburses money and/or documents for two or more transacting parties, with the timing of such disbursement by the third-party dependent on the performance by the parties of agreed-upon contractual provisions. It is recommended that retirees and other foreigners set up an escrow account when purchasing property in Costa Rica. A deposit submitted at the signing of the purchase agreement should be held by an escrow agent. An escrow agent is basically a person who has submitted to a substantial background check by the Superintendencia General de Entidades Financieras (General Superintendence of Financial Entities, SUGEF...sort of like our SEC) and is certified to hold money on behalf of a third party. Often the lawyer of one party or another is certified by SUGEF as an escrow agent, and often the seller’s lawyer holds the deposit. This system has some obvious problems. The lawyers representing both sides in the transaction are not really neutral third parties. The idea is that, as escrow agents, they will remain honest because they have a reputation to uphold. But escrow agents are not regulated other than through a background check and authorization, so if you feel uncomfortable having one of the lawyers handle the escrow, you might want to bring in a third-party, neutral entity to do it, like a title insurance company. As far as fees, escrow agents usually charge either a fraction of a percent of the deposit or simply keep the interest accrued while the deposit is held. Either way, the fee typically comes out to a few hundred dollars.