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How to Negotiate a Real Estate Offer in Mexico

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When buying a property in Mexico, there are differences in how you negotiate an offer. My blog today is all about how to negotiate a real estate offer in Mexico.

One of the most common mistakes is for a buyer to think the seller must do repairs or give allowances to the buyer to do repair or maintenance work after closing.

New construction does have a required one-year warranty from the developer. Typically, the guarantee starts when the buyer occupies the property. Occupying before closing is common in this market.

What does “Sold As-Is’ mean”? Sellers may list their homes for sale “as-is” when they don’t want to do any repairs before closing.  In Mexico, if there is no language to the contrary in the offer, property is assumed to being sold ¨as is.”

However, this status of ¨as is¨ does not change the legal rights of the buyer. The listing agent must still have the seller disclose known problems, and the buyer can still negotiate an offer with the final sale, contingent upon a real estate inspection.

It is best for you as the buyer to understand that the seller will not have to agree to repairs.

You as the buyer pay for inspection.  The knowledge you want to gain is what is the physical condition of the property?

In the end, your inspection is valuable so you will know what problems there may be, and know, for example, that the gas tank may need replacing in 6 months, or other advice the inspector provides in the report.

It is also important to know the results of an inspection, so that you can decide if you want to buy a home that has a large amount of work or expense needed to put it in the shape you want.

Two contingencies already in the offers we write here in the Bay of Banderas include inspection and legal review as conditions that are subject to review and your decision to withdraw or go forward with the purchase.

In resales, I recommend you not open escrow or pay a deposit until you are satisfied with your due diligence.

Getting your deposit back from escrow can be difficult.   Buyer and seller may not agree on whether one of the parties is in default. So, the safest way to go is to remove contingencies in writing or withdraw from the offer before any more money is spent and escrow is not opened yet.

There are time limits to complete an inspection and your time to review it before you respond to the seller.   All time limits need to be clear in the offer, and they are the responsibility of buyer and seller. Neither party should become in default and out of contract because a deadline is not respected.  If time is going to run out for the task, sign an addendum and have both parties sign it to be sure both parties agree to an extension of time to complete the task.

It is important to involve the HOA if you are buying a condominium or home with common areas.

I recommend that you should have the inspector note issues with the common area if it affects the property you want to purchase.

If the inspection finds a problem in the common area, you will be wise to cover this with the seller by asking him/her in writing to present the inspection report and perhaps add an estimate of costs for the HOA to receive from the seller. If the condo regime says the area is common, the expense should come from the HOA account, not the private seller.

We recently had this happen with a retaining wall. The buyer paid for a structural report, which she submitted to the seller along with a third party estimate of cost (HOA, of course, has the right to obtain other estimates), as well as the language in the condo regime that states the problem is a common expense for the protection of the entire property.  In this case, the buyer included the opinion of her attorney based on the condo regime definition of common area ownership and responsibility.

A safe way to approach a purchase is to have the inspection regardless of the seller not agreeing to do repairs. You as the buyer have the right and should have the inspection before you commit to going forward and opening escrow.

You should also have a qualified bilingual real estate attorney review not only the ownership papers of the seller, but also the legality of the condo regime as an HOA. If pet rules or rental policies are important to you, tell the attorney to look for these answers, as well as checking the financial condition of the HOA.

So, remember, even if a home is being sold ¨as is,” you and the seller can negotiate.

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.