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Real estate valuation in Costa Rica is complicated due to an overall lack of transparency and accurate market information. In many cases, the list prices of other properties may be an indication of over-pricing rather than market value. Given the absence of reliable data, depreciated replacement cost (DRC) is really the only viable method that buyers and sellers of single-family homes have to arrive at a fair market value. 1


DRC is based on an estimate of current market land value, plus the estimated reproduction cost of existing improvements, allowing for physical deterioration and obsolescence. There are of course a number of supply and demand factors that can influence whether a property sells at a premium or discount to DRC.


The biggest risk in the DRC approach is arriving at an accurate construction budget, however this can easily be mitigated through consultation with industry professionals. The table below provides an indication of current design/build costs for various size homes and spec levels. Actual pricing will vary depending on any number of factors.


Once a likely range of fair market value is established based on the DRC method, the next step is setting an appropriate list price. The importance of setting a competitive list price cannot be overstated given the risks involved. If it is set too high you increase the risk that potential buyers will ignore your listing. Set it too low and you risk losing thousands of dollars on the sale. Getting the pricing right thus becomes critical, particularly when the listing is first introduced to the market and has the potential of generating the most interest. Today especially, buyers expect outstanding value. Rarely are we asked to show our most overpriced listings!


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