Mexico is home to more American expats than any other country in the world, over 750,000 strong. A land of sunshine, rich cultural traditions, historical heritage, lower living costs and a slower, easier pace of living, Mexico has been an expat destination for decades. But buying a home in Mexico requires a professional to guide you through the process.
Many expats rent their homes in Mexico but an increasing number are opting to purchase a place and put down deep roots.
But buying a home in Mexico is different than back home and requires an expert to guide you through the process. We asked Harriet Murray, a nearly 20-year veteran of the real estate business in Puerto Vallarta to lend a hand.
“The first piece of advice I would give someone interested in buying a home in Mexico is to rent for a while to see what area fits you best,” Murray said. “You may want to find a month-to-month furnished rental so you can see which area is best for you. Since Puerto Vallarta is an international resort city, it’s very expensive to rent during the winter high season, so I would recommend coming during the summer.”
Rentals are available through her company’s website – Cochran Real Estate – as well as most other real estate firms and specialized rental agencies in Mexico. The rental commission is negotiable, according to Murray.
“Once you decide on an area and price range, contact a real estate professional you can trust,” Murray said. “We begin the search for your new home by reviewing the Multiple Listing Service (MLS) in Puerto Vallarta, which is very comprehensive. The three Association of Real Estate Professionals (AMPI) chapters in the Banderas Bay-area run the MLS service. It’s the only database with listings and proof that the property can be bought and sold. About a half dozen cities in Mexico have a genuine MLS service, which provides guidance on pricing by area.”
A key consideration for all home purchasers is the location of the home. If it is located in the Restricted Zone, foreigners cannot legally own direct title to real estate. The Restricted Zone is defined as the land area within 100 kilometers of Mexico’s international land borders with the U.S., Belize and Guatemala, as well as the land area within 50 kilometers of Mexico’s ocean front areas (the coastline of Mexico).
Foreigners can hold title to property in the Restricted Zone by acquiring a Fideicomiso, which is a long-term irrevocable bank trust. In this case, a Mexican fiduciary bank holds the title and cedes the rights to own and occupy, remodel, sell, give away or leave to heirs. The Fideicomiso is not a lease, but a renewable trust held, currently, for 50 years by the Mexican government. If you purchase property outside of the Restricted Zone, you can hold title to the property.
Murray said that once you decide upon a home, an offer is made to the seller through your agent in a bi-lingual contract. If the seller accepts, you will be expected to put 10 percent of the purchase price in escrow. Escrow companies are still relatively new to Mexico and must be approved by the Mexican government.
The next step is to hire a Notario, a specialized attorney who has the power to transfer property and is appointed for life by the Mexican government. Notarios represent the government in the sale or transfer of property.
“You apply through the Notario as a foreigner who wishes to purchase property in Mexico,” Murray said. “The Notario secures the required permit for a foreigner to own in Mexico from the government in Mexico City. You also give the Notario a deposit before work begins. Once the government approves the purchase, the bank trust (if you are purchasing property in the Restricted Zone) can be assumed or transferred, or a new trust with the same or different bank can be created for the buyer.”
Importantly, when you hire a Notario, he/she will conduct research to see who sold the house. If you wish to go back farther than the current seller, you may want to hire a title company, which is the escrow company holding the purchase funds. The title company generally will research the title several owners back.
Murray said that title insurance is recommended when the area where the home is located has had problems, the property price is over US$1 million or the property is located in the maritime zone, which is federal land adjacent to the shoreline.
“I also would highly recommend that buyers hire a local attorney who specializes in real estate to assist them,” Murray said. “Ask for recommendations from your agent or friends who already own property.”
When you are ready to close on your new home, the buyer sends the balance of the purchase price to the escrow company, which prepares a disbursement letter outlining all the expenses associated with the sale. This letter has to be signed by both the seller and the buyer. All paperwork is signed in the Notario’s office. He/she will conduct the closing for you. You do not have to attend the closing as long as you authorize your attorney or someone you have given power of attorney to who will represent you.
Once all the paperwork is signed, the disbursement letter and certain pages of the Escritura (your deed) are sent to the escrow company for disbursement of funds.
Financing is available in Mexico, although most home purchases in the country remain primarily a cash transaction. If you decide to finance, expect 60 to 90 days for loan approval and be prepared to put a minimum of 10 percent down on your new home. Interest rates are higher in Mexico, but peso loans available to expats are appealing when your home currency is stronger than the peso.
Purchase costs generally range from 5 to 10 percent, depending upon the price of the home you are buying. Real estate commissions in Mexico run between 6 and 8 percent, but often are negotiable.
Murray offered a final piece of professional advice to all expats considering taking the homeowner plunge.
“Make sure you look for a trusted agent to work with, particularly someone who has Certified International Property Specialist (CIPS) credentials,” she said. “Buying property in Mexico is very different than the U.S., Canada and other countries and requires expertise and knowledge of local business practices. Here, the largest professional real estate organization is the Association of Real Estate Professionals (AMPI). Licensing in Mexico of real estate agents, rental agents and property managers is not required, so make sure you’re working with someone who has the proper credentials.”