Published: October 25, 2018
Grupo Gap is celebrating 10 years of successful Costa Rica lending practices with no foreclosures to date!
How is this possible you may ask? The answer is simple: our lenders are not interested in obtaining property through the foreclosure process. Choosing a reputable Costa Rica lending company like Grupo Gap is important for a successful loan that does not end in foreclosure.
A successful loan is not just initiating the loan and walking away, it is about seeing the loan through the entire term. It is about renewal, or repayment of principal. On most loans, at least once there could be a problem with payments. At Grupo Gap, we work hard to resolve those issues.
We work with experienced lawyers that are fair to both lenders and borrowers. This is why we choose to work with a few select lawyers that understand this business well, and are not in a panic when a payment is late. They will foreclose if they have to, but, in all cases so far, the borrower has found solutions to avoid it.
Most of our lenders are retired or will retire soon. They are just looking for a nice return on their investments without any hassles or headaches. They lend the funds in good faith and expect to be treated fairly by receiving their interest payments in a timely manner, and have their principal returned to them at the end of the term.
Reasons to Avoid Foreclosure
Here are some reasons why our lenders do not want to foreclose: It is an expensive option to start with. Let’s take an example: on a $300,000.00 foreclosure, it would start after the 3rd missed payment. So, at 12% interest you are already down $9000.00 in missed payments.
The legal fees are roughly 5% to commence the foreclosure ($15,000.00) and 5% ($15,000.00) at the end of the foreclosure. Then, three auctions are advertised in La Gaceta and bids can go in at perhaps, not always the price you think they should be. Assuming no one shows up, the lender now owns the property.
As we all know, real estate at retail prices sells slowly in Costa Rica. If you want full value, it could take up to a year or more to sell. That will cost you another $36,000.00 in unrealized returns, because your money is tied up until the property sells.
Then you have to add another 5% commission for real estate agent commissions, or more if you want to move quickly. That’s another $15,000.00. All this adds up fast. Roughly $90,000.00, which means you have to sell the property at a minimum of $390,000.00 in order to recover your money and maintain your expected return on investment.
Many lenders would like to move their money into loans quickly, and we may appear slow at times, but it is because we take the time to find good loans so that nobody has to go through this timely, expensive process. We meet many lenders that have tried to do loans on their own and learned the hard way that foreclosures are no picnic.
One lender told us “I have $100,000.00 to invest; can you help me? I had more, but I had 3 foreclosures in 2 years. I never want to go through one again, and I’m a mortgage broker back home!” This is a quote from one of our new lenders! This is exactly what we work hard to avoid.
So, contact us now to get into Costa Rica lending!