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Psychological Factors Affect Real Estate in Mexico

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Harriet Murray Blogs for Expats In Mexico
Harriet Murray

There are many psychological factors that affect real estate in Mexico. Let me explain.

Once an experienced real estate instructor taught a group of new real estate agents how to create a Comparative Market Analysis (CMA). He was an interesting teacher and showed his students how to obtain a more detailed assessment of real estate values. A CMA adjusts the features of a property based on its closest competitors’ features in monetary values of pluses and minuses.

If the neighborhood you’re looking in typically has swimming pools, garages and extra landscaping, homes without these features have dollar values deducted for the lack of each feature that is not the ´´norm´´ or most common. By making these refinements, the students began to see more clearly how to use a system to establish valid reasons for the differences in values of properties within the same neighborhood. Conversely, if a home in a particular neighborhood is the only one with a swimming pool, this home may not get a plus, but a minus value for not being the typical or “norm.” This home may sell, but not necessarily for a higher price (possibly a lower price) than homes without pools.

The students thought they had learned a pretty sophisticated appraisal method and were about to shut their notebooks and quit for the day, when the instructor spoke: “Can anyone tell me what this statement means? “Fear of loss is greater than the desire for gain.”

Several new agents gave their ideas of the meaning. Some tried to say the statement about loss was not correct; that there were exceptions to this “rule.” The instructor said he had learned this principle in the most important literature books in the world. He had tested the validity of the statement many times, and he had never been able to disprove it.

What did the instructor mean?

In order for you to make a decision to take an action to buy a car or a home, you have to want to acquire something more than you care about losing something else (money in many cases). Could this statement mean that as long as the fear of losing is greater than the desire to have something, losing will win? Yes, it can mean this. How?

If you are not sure of the value in a property, you will not want to make an offer and spend the money to buy it. You may mention that you want to buy in town because you like to walk everywhere. The agent finds a perfect property for walking in town, with all the other features you want: a view of the water from the bedroom and a kitchen that opens to the living area. All of your requests are found within your budget! You hesitate but are not ready to sign the offer. What does the agent do? Until and unless the agent finds out what fear of loss you have, the transaction will not go further.

Home the beach Puerto Vallarta, Mexico
Credit: Harriet Murray

What could be a fear of loss to stop you in your tracks from buying a property in Mexico? Could something have happened in the exchange between your agent and you or from a third party that has caused you to feel the investment will not be safe? Is there concern or fear that the property is not well built, safe or in an area where values will go down? Is this fear of loss something that your agent can draw out and discuss with you to correct misunderstandings or misinformation?

Is the fear of loss valid? Should your agent respect this fear? Should you look at other areas or types of properties that do not make you feel negative? Until these concerns or fears are dealt with, it will be very hard if not impossible for you to make a forward decision, no matter where you might be buying in Mexico.

Is the fear of unemployment, financial upheaval, loss of savings or retirement assets enough to compel you to put off buying? Would you have a different attitude if your child needed a special school and the only way your child could be enrolled was to live within the school district? If the fear of loss of opportunity for your child is stronger than the desire to save money, you will most likely buy the house.

Viewpoint is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.

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