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Choosing a Real Estate Partner in Mexico

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We make choices every day, and choosing a real estate partner in Mexico is a big one. My strong belief is that we need to make informed decisions. One of my favorite quotes is attributed to President Kennedy: “We choose to stay with the comfort of opinion rather than the discomfort of thought.”

In Mexico’s real estate market, there are both nationals and foreigners who are registered to do business and pay tax to Hacienda, the Mexican IRS. There are also people who choose not to be registered in Hacienda (foreigners must be registered with Immigration to work). It is illegal to not report earned income here.

What does this have to do with selling or buying real estate in Mexico? You want the agent you work with to be legal and professional. You want him/her to be actively working and have the knowledge and experience to assist you.

Selling real estate is a job that all nationals can do, whether or not they have any expertise or not. A foreigner, on the other hand, must have a visa to work.

If either a national or a foreigner does not have a cedula (identity card) with an RFC number, there is a good chance he/she is not registered in the country to pay taxes. Unregistered aliens (foreigners) and untrained nationals may be called “coyotes”. They roam on their own, looking for prey.

Let’s assume you work with a professional listing agent who is paying his/her taxes, but another person you meet wants to give you a buyer referral for your home. This person may expect a fee. This person does not have to have a real estate license to receive compensation.

You have to make a choice, if you want to work with him/her, knowing that any fee you or your agent pays him/her will be a cost to you or the agent and not deductible.

When a real estate agent from the U.S. or Canada requests a referral fee, we explain that we pay a certain percentage and must withhold tax. It is rare if a referring agent outside of Mexico is able to provide a Mexican tax receipt. The professional referring agent usually understands and accepts a deduction for tax before receiving his/her net amount. These professional agents are aware of real estate rules and ethics. We appreciate their referrals and professional understanding of the cost of doing business.

A “coyote” may be your neighbor who lives in Mexico part-time or is retired. Why should a person who can’t get a referral fee in the U.S. or Canada because he/she is not a real estate agent charge a fee in Mexico and pocket it without paying any tax? He/she is working illegally and can be deported.

Choosing a real estate partner in Mexico is all about making an informed choice. Hopefully this blog will help you make a wise choice.

This article 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/her own due diligence and review.

1 COMMENT

  1. Some minor notes. Real estate is is the number one and highest paid job among expats. You don;t have to have experience nor schooling to sell. There is no legal organization/association for agents in Mexico. When you buy a house in Mexico yo sign about three forms, in the US it is about 50 forms called disclosures.There are not many safeguards for buyers/sellers with complaints. It seems every area has different rules on how they sell real estate.
    For example in Ajijic area the commissions are the highest in Mexico. 10% for land is too high I might add, that is the going rate. Without much oversight, you bet, choosing a real estate agent is the most important thing you can do. Like this or not one must negotiate the fees the agents charge. This is Mexico all is negotiations and variable. Now if you want to develop land this is another ballgame. .

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