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How to Navigate Buying Real Estate in the Restricted Zone  

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Those of you who are thinking about purchasing property in Mexico should understand how to navigate buying real estate in the restricted zone, which is all land located within 100 kilometers (62 miles) of any national border and within 50 kilometers (31 miles) of any ocean.

To help you navigate buying a home in the restricted zone, I have put together a few key points you should know.

Use an Attorney

Real estate agents are not educated or experienced enough to take the place of an attorney. I recommend hiring one who is bilingual and bicultural. Many transactions have successfully closed because a good attorney solved the legal problems inherent in many sales. Good attorneys will charge a fair fee for their expertise and skill. If you are purchasing a condo, ask about the condo regime regarding pets, rental policies and other relevant questions that are important to you.

Understand the Scope of Work of the Notary

The Mexican notario publico is an experienced, specialized attorney who decides if the seller has the authority and ability to transfer his/her property. The notary is required to file the fidecomiso or deed with the public registry, and is a neutral party to the transaction. A notario publico should inform a buyer or seller if there are material issues that may cause harm to one of them.  The notario, however, does not have the responsibility to hold or disburse purchase funds. He/she is not an advocate for the buyer or the seller, but is charged to follow the state and federal laws.

An apostille will be needed for every legal document needed by the notary from the principals if the documents are from outside of Mexico.  The secretary of state of your state can issue an apostille on documents needed to be recognized by Mexico for legal reasons. Canadians need to go to the Mexican consulates for legal recognition of paperwork.

A notary coordinator is a good thing. An outside professional, authorized and paid by the notary, can coordinate the closing. The actual closing will be with one specific notary for a buyer and seller. In my experience, there is a conflict of interest if the buyer’s or seller’s attorney acts as the transaction coordinator. I have found one of the two principal parties can be put at a disadvantage. For this reason, your attorney or advocate should not be doing the closing with the notary.

Understand the Use of Escrow for Purchase Funds

Escrow and title companies with offices in Mexico or the United States can be authorized to hold purchase escrow funds. The escrow only holds the funds, charges an escrow fee and disburses the purchase price funds to the seller’s creditors (agents, notary capital gains payment on behalf of seller and other seller expenses). An escrow company does not do prorations of utilities, HOA fees and other expenses that should be credited or owed at closing. The real estate agent does this or your attorney. The consolidated closing statement of purchase funds is written by the agents or an attorney and signed by the buyer and the seller.

Escrow is the safest way to keep the purchase funds protected until they are transferred to the appropriate parties upon signing of the deed.

Know How Expenses and Funds Are Handled at Closing

The notary is not required to ensure that bills are paid except the property tax, water, trust fee (if applicable) and the condo fee.

The current bank trustee will not approve the transfer of the property until the bank trust fees are current.  Buyers get new trusts or assume existing trusts. If the seller trust is HSBC, Bancomer or Banamex, it may take months to approve a cancellation. Offers should include language addressing this delay, with buyer and seller agreeing in the beginning that the contract will not expire if this cancellation is delayed.

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.