FOR some people, buying a home can be a stressful process. Buying a home in a foreign country can be even more nervewracking.
That’s where title insurance comes in. The industry says title insurance can provide peace of mind during real estate transactions and reduce the risk of investing in property in Costa Rica and other Latin American countries.
How does title insurance work? Those who offer it explain that it guarantees the title of a piece of property against risks the purchaser may not be aware of, such as fraud, forged deeds or mortgages, and disputes about property lines.
THE concept of title insurance was in its infancy in Costa Rica when Stewart Title opened its offices in San José seven years ago. By the time First Costa Rican Title & Trust opened an office here just over a year ago, many foreign investors were purchasing the service.
Today, Stewart Title Latin America general manager Christopher Hill estimates that 70% of foreign investors in Costa Rica purchase title insurance, and the service is becoming increasingly popular among Costa Ricans.
“In our first four or five years, we were far and away driven by foreign buyers, but the Costa Rican side is growing,” Hill said.
“Now Costa Rican clients make up about 30% of our business, versus 5% before.” Darrylle Stafford of First Costa Rican Title & Trust agreed the industry is growing.
“We think it will become an institution, just like in the United States,” he said.
ONE of the reasons for the increased interest of Costa Rican buyers is concern over fraud in the National Registry, according to Hill. In recent years controversy has grown over the possibility that names are being changed illegally on deeds and resold to third parties, Hill said.
Registry officials and corrupt attorneys and notaries often are involved in the fraud (TT, Feb. 21, 2003). Scams can also include using illicitly acquired property as collateral for bank loans.
Because of this, Stewart Title has begun to cover property titles not only for problems before ownership, but also for problems the titles may have in the future.
Hill hopes the presence of a policing force in the market such as Stewart Title may help reduce the number of scams and fraud overall.
“IT is a small market, and the presence of a title company here I think, to a certain degree, has forced some of the attorneys who may have been willing to cut corners in the past to do the right thing,” he said.
In an effort to simplify the process of purchasing property as much as possible, title insurance companies are also offering a package of services to large developers.
These developers are then able to automatically include title insurance when selling individual homes.
Costa Rica’s title insurance companies also offer their services outside of the country. Stewart Title Latin America provides services to every country in Central America and the Caribbean except Nicaragua.
And First Costa Rican Title picks up where it has left off, with plans in the works to open an office in Nicaragua. Hill said Stewart Title does not have an office in Nicaragua for two reasons.
“It is very difficult to obtain accurate property title information; it is all based on a chain history and if documents are missing it is very difficult,” Hill said. “The other issue is that the country is still seeking political stability.”
REPRESENTATIVES of First Costa Rican Title, however, think the time is right to set up in Nicaragua. Staff member Ulises Obregón, a lawyer from Managua, will facilitate their endeavor. The company already runs a non-profit education program in Managua.
Stafford said that because title insurance covers against many large risks – including problems such as illegal signatures, expired powers of attorney and deeds incorrectly signed by spouses – the cost is relatively low.
The cost of title insurance varies between .5% and 1% of the cost of the property.