You have found your dream property and want to make an offer. Everyone involved is very friendly and seems very nice. You trust your new friends, and assume you have protections in place to prevent you from having problems with the purchase. But have you done your due diligence before buying real estate in Mexico?
Due diligence is necessary and your responsibility before becoming committed to sending money or being bound by a real estate contract.
What does due diligence include?
1. A contract of sale that includes buyer rights, penalties for either side, where money should be sent and what is included in the purchase.
2. An escritura showing the property is legally registered in the public records. New construction will be the land escritura.
3. Identification of the seller and his/her legal right to sell.
4. If a condo, is the condo regime registered (resale) or is it a condition for new construction. What are the bylaws and rules of the existing regime, or if new, what does the proposed condo regime say regarding homeowner fees, pets, restrictions on owners, parking, etc.?
5. If the property is under construction, who receives your payments for the purchase, and will the money be used for the construction? Does the developer have the ability to finish the property or is he/she depending on presales? There are not commonly bonds or insurance, so what are your risks, and are you comfortable with them?
6. In resales, generally purchase funds are put into a third-party escrow company registered in Mexico to do business.
7. In new construction, funds usually go to the developer.
8. Other as needed.
Time for due diligence depends on if the property is a resale or new construction. Resales allow more time for investigation of the legal documents of the property and inspection. There is more legal documentation, or should be, for an existing property.
With new construction, the list of what needs to be created, such as individual condo registration in the tax registry and condo regime registration, is done closer to the physical completion of the property. Construction can take 12-18 months or longer.
Here in our Bay of Banderas market, we are experiencing a large number of condos for sale. Many popular projects are new construction. Buyers become excited with the idea of something new, with updated kitchen and baths, enormous pools and gyms, hot tubs or entertainment areas.
It is your right to ask for documents from the seller and the development. It is your right to have a competent attorney and other qualified professionals advise you of your risks.
AMPI agents have an ethical responsibility to allow you to use any professional (attorney, engineer, accountant, architect, etc.) you wish to use to evaluate your proposed purchase.
Any agent, real estate attorney, attorney or other person advising you is obligated under the civil code to be honest and competent and allow you to use experts.
We want you to be happy with your choice of a home, condo or land here in Mexico. Insist on your right for due diligence.
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 conduct his/her own due diligence and review.