How Escrow Works When Buying Real Estate in Costa Rica

A few years back a buyer called me, panicked, days before closing on a house near Nosara. A "seller's assistant" had emailed her new wiring instructions and asked her to send the full purchase price directly, today, to lock in the deal. It was a scam, of course. The real seller knew nothing about it. She didn't lose a dollar, for one reason: her money was already sitting safely in escrow, and there was no world in which she'd wire six figures straight to anybody. That's the whole point of escrow, and it's why I won't run a deal without it.

What escrow actually is

Escrow is a neutral third party that holds the money in a purchase until every condition of the deal is met. You don't hand cash to the seller and hope. You send it to a licensed, regulated agent who holds it, verifies that the contract terms are satisfied, and only then releases it. If the deal falls apart for a reason your contract protects, the money comes back to you.

It protects both sides. The seller knows the buyer's money is real and ready. The buyer knows the seller can't touch a colón until the title transfers cleanly. Everybody sleeps better.

SUGEF: why "registered" is the word that matters

In Costa Rica, escrow agents that handle these funds must be registered with SUGEF, the national financial regulator, under the country's anti-money-laundering framework. This isn't bureaucratic theater. A SUGEF-registered escrow agent operates under real oversight, keeps client funds in dedicated accounts, and answers to regulators.

So the single most important question you can ask about any escrow service here is simple: are you SUGEF-registered? If the answer is anything but a clear yes with documentation, stop. Your attorney can confirm an agent's standing.

Source of funds: get your paperwork ready early

Because escrow is an anti-money-laundering checkpoint, the agent has to know where your money comes from. This is called KYC (know your customer) and source-of-funds verification, and it's completely routine. You'll typically be asked for:

• A copy of your passport and basic personal information
• A completed source-of-funds form explaining how you earned the money (salary, sale of a home, investments, business, inheritance)
• Supporting documents such as bank statements, a sale closing statement, or investment records

My advice: start gathering this the moment you're serious, not the week of closing. A clean, well-documented source of funds is the single biggest thing that keeps a closing on schedule. When it's messy or last-minute, that's when timelines slip.

How the money actually flows

Here's the sequence in a typical Guanacaste purchase:

• Your Sale and Purchase Agreement names the escrow agent and the conditions for release.
• You complete KYC and wire your earnest-money deposit, then later the balance, to the escrow account, not to the seller.
• Due diligence runs. Title study, water letter, any contingencies in your contract.
• At closing, once the notary confirms the transfer is executed and conditions are met, escrow releases funds to the seller and pays out any agreed closing costs.

Notice that the money and the title move in a coordinated way. You're never in the exposed position of having paid but not owning.

Why you never, ever wire the seller directly

Let me be as plain as I can. Wiring money straight to a seller or an agent's personal account throws away every protection escrow gives you. There's no neutral party, no regulatory oversight, no source-of-funds trail, and no mechanism to get your money back if something's wrong with the title or the seller.

It's also exactly the setup wire-fraud criminals exploit. They intercept email threads, spoof a familiar name, send "updated" wiring instructions, and pray you don't call to verify. So build these habits:

• Treat any last-minute change to wiring instructions as fraud until proven otherwise.
• Confirm instructions by phone with a number you already trust, never a number in the email itself.
• Only ever send funds to a verified, SUGEF-registered escrow account.

How much does escrow cost?

Escrow fees are modest and usually fold into your overall closing costs, which run roughly 4.5% to 6.5% of the purchase price. Your attorney or escrow agent will quote the exact fee up front. Confirm who pays it in your SPA.

Can I use a US or Canadian escrow company instead?

For a Costa Rican property, you want a locally SUGEF-registered agent that operates under Costa Rican AML rules and coordinates with your notary. A foreign escrow company isn't set up for that. Your Costa Rican attorney can recommend a reputable one.

What happens to my deposit if the deal falls through?

It depends on why. If a contingency in your contract fails, such as a title defect, a well-drafted SPA returns your deposit. If you simply change your mind outside those terms, you may forfeit it. This is exactly why the contract language matters, so have your attorney draft it.

The honest bottom line

Escrow is the safest, most normal way to move money in a Costa Rican real estate deal, and using a SUGEF-registered agent with proper source-of-funds documentation is how honest transactions are done here. Anyone steering you away from escrow is either careless or up to something. This is general guidance, so confirm the specifics and vet your escrow agent with your own Costa Rican attorney.

If you'd like me to connect you with vetted, SUGEF-registered escrow agents and a good attorney in Guanacaste, get in touch, or start exploring homes on our property search.