Lawyers! Lawyers! Lawyers!
What an interesting last week. We had a lawyer, representing a new lender, tell us that a traditional mortgage loan is better than a loan in a trust. Lawyers here have very different opinions on that statement.
This was a large law firm that apparently had little understanding of the difference between a trust and a mortgage.
Generally, we do traditional mortgages rather than a trust — however, there are valid reasons for using one or the other. For example, if the property in an area where the court system is much slower than in the Central Valley (Gran Área Metropolitana – San José urban area). It would also depend on if the borrower is deemed likely to be a reliable payer. Also, the ability of the borrower to make his balloon payment at the end of his loan term, or a partial payment with room for refinancing, matters. This could be because he is waiting for something else to happen before he can repay the loan. Something like the sale of a property or proceed from an awarded contract that must come due, things of that nature. All these factors determine which mechanism to use when making a loan.
Trusts are expensive for borrowers and lenders since on a take-back you have to pay the full transfer tax upfront to take the property out of the trust and into the lender’s name — this is one reason to use traditional mortgages.
On the payback of another loan this past week, we had to wait for over two hours for them to show up and that was after they could not complete the documentation the night before. Our lender was with them the night before to receive his check and spent nearly 3 hours waiting! Yes, they were the bank’s law firm, but the inefficiency was inconceivable. They still managed to screw up the check amounts by a few hundred dollars! It was corrected in time for the closing.
There are competent lawyers in Costa Rica, and most specialize in specific areas of practice. Our recommended lawyers understand loans. We work with a few simply to complete our loan documentation and review the properties in the registry. They also follow up within 4 weeks to make sure the loan was submitted properly in the registry office. Believe it or not, many loans are not registered properly due to errors, and the lender is not even aware of this. This is why Gap Investments takes the extra steps to protect our lenders.
Our recommended lawyers, for the purposes of completing the loan, become your lawyers. They can represent you throughout the loan process. We recommend them because they understand the loan process better than most, as they have been doing many loans for our lenders, for years. Our recommended lawyers are professional, speak English perfectly, and represent some of our biggest lenders. They cannot afford to make mistakes because we can change our recommendation at any time. We have never had a complaint to date about their performance.
You may love your lawyer, and we are not saying in any way not to use them for many things. Our recommended lawyers are just specialists in executing the paperwork for a perfect loan!