Real Estate General Questions (Buying in Mexico)

Q. I'm thinking about buying a home in Mexico. Is it a safe country to live in?
Q. There is a specific location that I am interested in purchasing but there are no real estate signs on the property, how do I find out if any units are for sale?    
Q. What is the usual Real Estate commission paid in Mexico?

Legal Procedures and Taxes

Q. We know that foreigners are welcomed in Mexico, but are there any laws restricting foreigners from investing in land or property in Mexico?    
Q. How is the Closing Procedure?
Q. How long does the Closing Process takes in Mexico?
Q. What type of fees can be expected when purchasing a property in Mexico?

Mortgage

Q. We have been living in Mexico for almost a year now, and we are thinking about buying a home. Is it easier to get a mortgage?    
Q. I am looking to purchase a pre construction unit, what type of payment schedule can I expect?

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Real Estate General Questions (Buying in Mexico)

Q. I'm thinking about buying a home in Mexico. Is it a safe country to live in?

A. You're not alone in your quest; the answer is YES MEXICO IS A SAFE PLACE TO LIVE IN. Seven million North Americans travel to Mexico every year, the U.S. State Department estimates that there are 385,000 Americans living permanently in Mexico, almost twice the number of a decade ago.

 
Many people are buying in new waterfront resorts in popular destinations like Playa del Carmen, Riviera Maya, Puerto Vallarta, Los Cabos, Cancun, and the Baja Peninsula.

Q. There is a specific location that I am interested in purchasing but there are no real estate signs on the property, how do I find out if any units are for sale?

A. Some locations do not allow real estate signs on the property so it is hard for one to know if there are any units available for sale in these particular properties. The best way to source available units would be to contact your Real Estate Professional. Sales Associates have access to a wide variety of information which allows them to look up the availability of units in certain complexes as well as what may be available in similar complexes or properties in or around the same area.

Q. What is the usual Real Estate commission paid in Mexico?

A. The average real estate commission ranges from 5 to 10%. Almost every listed property has a real estate commission built into the sales price. If the listing Sales Associate sells it, then he or she keeps the entire commission. If another person sells it, then the commission is split. Since the commission is already included in the sales price, there is no need for the buyer to pay additional fees even when the selling agent is representing the buyer.

Legal Procedures and Taxes

Q. We know that foreigners are welcomed in Mexico, but are there any laws restricting foreigners from investing in land or property in Mexico?

A. The most important restriction is contained in Article 27 of the constitution which states foreigners cannot own property within 100 kilometers (60 miles) of the border and 50 kilometers (30 miles) of the coastline." The government, however, provides two ways to get around this restriction - through the use of a Trust (Fideicomiso) or a Mexican corporation.

The Trust (Fideicomiso)

Three parties are involved in the trust: The trustor (the owner of the original property), the trustee (which is the bank) and the beneficiary (the person who will receive the benefits of the trust).

The Trust (Fideicomiso) does not give direct ownership to the foreign beneficiary. Instead, it establishes the legal basis by which the bank holds legal title to the property in order to act on the foreigner's behalf. This trust deed assures the foreign buyer of all rights and privileges of ownership. The trust can be established for a term of 50 years and is renewable any time during its existence, forever. The costs to establish a Fideicomiso trust vary from bank to bank. However, the range is approximately $450 to $1,000 U.S. dollars for the trust set up and about $400 to $800 U.S. dollars for each year's maintenance of the trust.

The purchaser is the beneficiary and has all rights of enjoyment of the property including the ability to remodel, lease, mortgage, pass to their heirs or sell the property at any time.

Bank trusts are established by a Mexican Notario (Notary), following the receipt of a permit by the Minister of Foreign Affairs. This procedure is routine due to the large number of foreign property owners. The forms are standardized and the entire process is usually completed by the notary as part of the closing procedures.

Beneficiaries are allowed to modify their property. Construction, in accordance to local zoning regulations, is permitted at the owner's expense.

The Corporation

Ownership of property through a Mexican corporation is an interesting and potentially lucrative alternative. First of all, as long as there are two or more parties to the corporation, a Mexican corporation can be wholly owned by foreigners - a Mexican citizen no longer need be part of a Mexican corporation to be valid. Secondly, a Mexican corporation can own property outright, eliminating the need for a Fideicomiso trust and their respective fees. This means that you, as sole owners of the corporation, own the property essentially in "fee simple," similar to the U.S.

Finally, by establishing the property in a corporation, you can then legally rent out the property, thereby generating attractive income if you are in a prime vacation destination. Mexican corporations are set-up similarly to those in the U.S., with by-laws, articles of incorporation and the issuance of stock. You should discuss the pros and cons of forming a Mexican corporation with an attorney in Mexico who is familiarized with the process.

Establishing a Mexican corporation for the purpose of purchasing real estate is relatively simple and can be accomplished within 6-8 weeks and generally costs from $1,500 to $3,000 USD, depending on the complexity and number of partners involved.

Q. How is the Closing Procedure?

A. Once your Offer of Purchase and Sale has been accepted, the closing process begins. To validate the Offer of Purchase and Sale, a deposit (normally 10% of the purchase price) is required. The money is held either by your attorney, Notario, real estate Office, or placed in an escrow account. These funds are held during the time needed to close. The balance is payable upon the signing of the trust deed or deed at the office of the Notario. Most real estate Offices have one or two Notarios with whom they usually deal with.

In order to obtain the trust deed or deed, the Notario will:

• Ensure the property is free and clear by checking the Land Registry Office. This is guaranteed by obtaining a non-lien certificate and tax statement from the treasury. Additional checks are made for outstanding utility bills and municipal taxes.
• Obtain a permit from the Minister of Foreign Affairs to establish the trust deed.
• Prepare all documents for both buyer and seller.

Q. How long does the Closing Process takes in Mexico?

A. In most cases, a real estate transaction in Mexico can be closed in 60 working days for a cash transaction or 90 working days for a transaction involving financing. However, due to Mexican Holidays, permit delays, the Trustee Bank, etc., delays can occur. These delays are not considered defaults by Buyer or Seller as they are events beyond their control.
 
Q. What type of fees can be expected when purchasing a property in Mexico?

A. Closing costs are determined by the declared value which is usually the same as the sales price. The value becomes the basis for all related taxes and fees. Generally, the seller pays for real estate fees; the buyer is responsible for the transfer tax and the cost of establishing the bank trust (if it isn’t already in existence), notary fees, registration fees, tax appraisal fees and trust permit fees. The purchaser’s total closing costs average between 4% - 8% of the purchase price.

Municipal Fees

• Acquisition Tax - 2% to 6% of the sale price
• Appraisal Permit Fee - Approximately 0.3% of the sale price
• Public Registry Fee - 0.3% to 0.5% of the sale price
• Certificate of no Liens/ no tax debt – $25 to $100 U.S. dollars

 
Bank Fees

• Foreign Affairs Permit & Registration – Approx. $1,600
• Trust Initiation Fee – Approximately $450 to $1,000 U.S. dollars depending on location
• Bank Annual Fee – Approximately $400 to $800 U.S. dollars depending on location

 
Legal & Transaction Fees

• Notario Fees – Approximately 0.4% to 2% of sales price. These fees vary depending on the Notario
• Transaction Fee – Approximately $500 to $ 1,000 U.S. dollars

 
Escrow & Title Insurance Fees

• Escrow Fee - Approximately 0.1% to 0.8%
• Title Insurance Fee – Approximately 0.3% to 1.5% of the sale price.

 
Q: How much will I be charged for property taxes?

Mexico’s annual property taxes (Impuestos Prediales) are 0.25% of the assessed value for tax purposes. These municipal taxes are published at the end of January and must be paid at the local tax office. If payment is made by the end of February, you may eligible to benefit from a 10% discount.

Mortgage

Q. We have been living in Mexico for almost a year now, and we are thinking about buying a home. Is it easier to get a mortgage?

A. Mortgage financing is now available in Mexico, financing is available for single family residences and condos with a 10 and 20-year mortgage.

Traditionally, real estate purchases in Mexico have been limited to full cash payment at the time of closing, but recent changes in Mexican regulations regarding foreclosure on foreign-financed property have made lenders more comfortable, and cross-border loans are now available through several brokerage firms with representatives in the main Mexican destinations. Lenders range from internationally known financial institutions to private entrepreneurs and funds.

Q. I am looking to purchase a pre construction unit, what type of payment schedule can I expect?

A. All developments are quite different in regards to their deposit policies; it would depend on the development as to what payments could be expected. Generally there are a couple of different scenarios you can expect with a pre construction development. One is a deposit paid at the time of the contract written, which is usually 10% of the purchase price. The remaining 90% would be due at closing. The other option that you may see is what is called a staged payment plan. The staged payment plan means you would put a certain percentage down at the different stages of construction. The stages would be outlined in the contract in advance so you will know what percentage of the purchase price is required and when. The staged payment plan can tend to be harder to finance through conventional means as there can be more of an element of risk from the banks point of view.