Determining how to pay a fair price for Mexican real estate is dependent upon the amount of research you do and the answers you get to your questions from your real estate professional.
Here are some of the questions you should be researching and asking:
Recently Sold Comparable Properties
A comparable property is one that is similar in size, condition, neighborhood and amenities. A 1,200 sq. ft one-story condo recently remodeled should be listed at about the same price as a similar 1,200 sq. ft. condo in the same neighborhood.
That said, you can also gain valuable information by looking at how the property you’re interested in compares in price to different properties. Is there a big difference in the prices of two bedrooms and three bedrooms? You can also ask about comps that are currently in escrow as a pending sale.
Check Out Comparable Properties Currently on the Market
View other condos and get a true sense of how their size, condition and amenities compare to the property you’re considering buying. Then you can compare prices and see what seems fair. Reasonable sellers should know that they must price their properties similarly to market comparables if they want to be competitive.
Look at Comparables Recently on the Market That Did Not Sell
If the condo you’re considering buying is priced similarly to ones that were taken off the market because they didn’t sell, the property you’re considering may be overpriced.
Consider Your Dreams
Ask your agent for a Comparative Market Analysis (CMA) when you have zeroed in on one or two properties. The agent has chosen the properties, but look at the analysis and consider qualitative factors like how much you really want the property. Getting a fair deal isn’t just about the numbers. Sometimes it’s about your dreams.
When you’re writing an offer, which may be competing with other offers, you have to factor in how much you want the home and let it have an impact on your proposed purchase price.
If you really want the home and can see yourself living there for the foreseeable future, put your best foot forward when making the offer so you have the strongest possible bargaining position.
If you are not sure about the property, though, you have more freedom to try to get a deal. But if you’re not happy with the property, the price will never seem fair, even if you get a bargain. Even if you pay a little over market value for a home you love, you won’t really care in the end.
Market Conditions and Appreciation
It all depends on where the market currently sits on the real estate boom-and-bust curve. Even in a seller’s market, properties may not be overpriced if the market is on the upswing and not near its peak.
Conversely, properties can be overpriced even in a buyer’s market if prices have only recently begun to decline. It is difficult to see the peaks and valleys until they’re history. Use your best judgement after your research has given you more insights.
Make an Offer
Even in a seller’s market, you can always make an offer below list price. Some sellers list properties for the lowest price they’re willing to take because they don’t want to negotiate. Others list their properties for higher than they expect to get. They expect to negotiate downward, or they want to see if someone will make an offer at the higher price.
If the seller accepts your price or counter offers, you’ll have an indication that the property probably wasn’t worth what it was listed for, which will give you a good chance at getting a fair deal. On the other hand, some sellers may underprice their properties in the hope of generating lots of interest and sparking a bidding war. Ask about this possibility.
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.