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Frequently Asked Questions About Mexico Real Estate

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The rocky coast south of Puerto Vallarta
Credit: Harriet Murray

Throughout the year I receive many frequently asked questions about Mexico real estate and periodically stop for a moment to answer them for my readers.

Question

What is the federal maritime zone? I just bought my home in front of the beach. Can anyone build in front of me?

Answer

Beaches are public in Mexico and belong to the Mexican government for the use and enjoyment of all.

No one can buy in the maritime zone. The adjoining landowner to the maritime zone should pay the annual taxes on this adjacent land and should work to acquire the concession agreement to this area. Paying the annual small amount of tax for the concession in front of your land only gives you the first right to proceed with the concession agreement.

You need to hire an expert lawyer or qualified professional to work with the government on acquiring the concession of the federal zone for as long a period as is possible to be granted. Be sure you have the concession documented in your beneficiary rights of your fidecomiso. The term of the concession agreement can be 10 years, 20 years… whatever is being done at the time you make your formal request.

There is a substantial cost required in obtaining the formal concession from the government, and it is not automatic. There is an annual tax due, as well. Do not confuse the small yearly tax on the concession as the same thing as a formal concession agreement for determined period of time. Your yearly tax then will be related to the formal concession agreement.

Question

Can I bring my household goods and car to Mexico on my temporary visa?

Answer

The Expats In Mexico Immigration section provides information on household goods and auto importation. It is regularly updated.

Question

Is there escrow in Mexico to hold the deposit of funds required in my purchase agreement?

Answer

Escrow is highly regulated in Mexico, and certain Mexican banks and escrow companies are permitted to hold your money as a third party. Check which ones you may use through your AMPI real estate agent and/or Mexican attorney.

Question

Should I get title insurance?

Answer

You should investigate the title companies, which issue title insurance in Mexico. Find out what their exceptions to coverage are in their title commitment.

Also ask your attorney what the notary and title insurance have and do not have in common. Ask your lender, if you are using one, if they require you to have title insurance.

Make your decision after you have researched this question thoroughly to your satisfaction.

Question

What is an exclusive listing agreement on property in Mexico?

Answer

An exclusive listing agreement in Mexico is similar to those in the U.S. A real estate professional is given the exclusive right and responsibility to market the property and receive offers to present to the seller. The seller agrees to compensate his exclusive agent for accepted offers during the term of the exclusive listing contract. The real estate professional may agree to offer the property to other real estate agencies and to pay them a fee or percentage of the real estate commission on the property.

The exclusive listing agreement and compensation to the real estate professional applies to all offers, regardless of who brings in the buyer. If there are exceptions permitted in this agreement as to whom may be named as an exception where no payment is due the broker, this has to be so mentioned in the agreement.

Question

Why are buyer closing costs so much higher in Mexico than in the U.S.? Why doesn’t the seller or mortgage company roll these costs into the purchase price and loan?

Answer

If you are purchasing in the restricted zone in Mexico, you will be required to acquire your property through a fidecomiso bank trust. The bank trust holds the property and cedes to you the rights to own, build, remodel, sell, tear down and give away the property. There is a cost associated with applying for and receiving permission to buy as a foreigner. There is an annual fee to the bank for administration of the trust.

But the single largest expense is usually the acquisition tax to acquire the property. This is now about 2.5 percent of the tax value in our state of Jalisco and a similar percent of the sales price in our neighboring state of Nayarit.

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.

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