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How to Avoid Foreclosure

Before the pandemic of 2020, Grupo Gap celebrated 10 years of successful Costa Rica lending practices with no foreclosures to date!

How is this possible, you may ask? The answer is simple: private lenders we work with are not interested in obtaining property through the foreclosure process. Choosing a reputable Costa Rica consulting company like Grupo Gap is necessary for a successful loan that does not end in foreclosure.

A successful loan is not just initiating and walking away; it is about seeing the loan through the entire term. It is about the renewal or repayment of the principal. At least once, on most loans, 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 who understand this business well and panic when a payment is late. They will foreclose if they have to, but the borrower has found solutions to avoid it in all cases so far.

Most of the private lenders we work with are retired or will retire soon. They are just looking for an excellent investment return without hassles or headaches. They lend the funds in good faith and expect to be treated fairly by receiving their interest payments promptly and having their principal returned to them at the end of the term.


Reasons to Avoid Foreclosure

Here are some reasons why lenders do not want to foreclose. One of them – is that it’s an expensive option. Let’s take an example: a $300,000 USD foreclosure would begin after the 3rd missed payment. So, at 12% interest, you are already down $9000 USD in missed payments.

The legal fees are roughly 5% to commence the foreclosure ($15,000 USD) and 5% ($15,000 USD) 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.

Real estate at retail prices sells slowly in Costa Rica, as we all know. If you want total value, it could take up to a year or more to sell. That will cost you another $36,000 USD in unrealized returns because your money is tied up until the property sells.

Then you have to add another 5% commission for a real estate agent commission or more if you want to move quickly. That’s another $15,000 USD. All this adds up fast. Roughly $90,000 USD means you have to sell the property at a minimum of $390,000 USD to recover your money and maintain your expected return on investment.

Many lenders would like to move their money into loans quickly, which 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 who have tried to do loans independently and learned the hard way that foreclosures are no picnic.

One lender told us, “I have $100,000 USD 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 agent back home!” This is a quote from one of the new lenders! This is precisely what we work hard to avoid.


-Co-written by Lawsen Parker (Operations Manager) and Glenn Tellier (Founder of Grupo Gap)

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