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The ABCs of Purchasing Real Estate in Mexico

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 “The buyer needs a hundred eyes, the seller not one.”

George Herbert 1593-1633

Harriet Murray Blogs for Expats In Mexico
Harriet Murray

Our Real Estate Professionals in Mexico (AMPI) organization is working with the National Association of Realtors (NAR) in the U.S. to teach U.S. agents the ABCs of purchasing real estate in Mexico. I’d like to share these ABCs with you.

First, as a foreign purchaser of a home in Mexico you should know that the process of buying a home here is different than where you live. You’ll need to look through a different set of glasses and have more awareness, street sense and patience in Mexico.

Also, if you want your real estate agent in your home country to receive a referral fee, he/she needs to make some initial contacts and do some screening for you of real estate agencies and specific areas within Mexico.  Your agent from home may even come down with you to view your areas of interest and be with you when you interview local agents.

Any referral fees should be agreed upon between the real estate professionals who will sign an agreement. Taxes also must be addressed between the two agents for the referral fee.

Let’s take a look now at the key ABCs you need to know about purchasing real estate in Mexico.

Making an Offer

In Mexico, making an offer to purchase a home begins with an oferta, or offer, which is an initial document that sets forth the offer of price and general terms, and /or a contrato de promesa, which is a promissory agreement. These preliminary documents are followed by the more formal convenio de compraventa.  The convenio should accurately reflect all details of the transaction. It is the guide for the transfer of the property and is also the source of information for subsequent documents such as the fideicomiso and the escritura deed, as well as tax valuation. The Notaries will refer to the information in the convenio de compraventa in order to prepare the final deed.

Spanish is the legal language for contracts. You need to be fully knowledgeable of the content of any agreements that are signed.  Translations of documents in English are available to aid in understanding, but bad translations from Spanish can be a real problem for the purchaser.

Deposit and Escrow

A deposit of earnest money is customary with an offer to the seller.  THERE IS NO LEGAL REQUIREMENT THAT THIS DEPOSIT BE PLACED IN AN ESCROW ACCOUNT.  The NAR course states that the foreign real estate professional should not always expect the deposit to be put into an escrow account. Some developers do not accept third party escrows, and the money is paid directly to them. There are Mexican banks that have permits to hold escrow accounts in foreign money such as U.S. dollars. There are American escrow title companies that have permission to hold funds in the U.S. for purchase of Mexican real estate.

If escrow services are to be used, a separate agreement should be drawn up to cover the terms, including how and when the funds will be disbursed.

Transferability

Ownership and transferability must be determined. There are three basic factors that establish the transferability of a property:

1. Possession of a title in the owner’s name

2. Right to sell the property

3. No liens

Possession of a title and rightful ownership of the property does not necessarily mean that it can be transferred (please see ejido lands below).

Statement of No Liens

The seller should provide you with a certificado de libertade de gravamen or a statement affirming that that are no liens, unpaid taxes or other encumbrances on the property. Communal or ejido (farming) land is owned by a group who has to all agree to sell a parcel first to one of their own members. Only when this is accomplished, can a Mexican National sell or transfer that property to a foreigner or non-ejido member.

Condominium Developments

Federal law requires a recorded regimen de condominium. Without it, ownership of a condominium unit cannot be legally transferred. A condominium development is required to have an administrator and an executive committee as well as established procedures for meetings of unit owners. The regime must also cover the method of setting the assessments and a system of resolving conflicts between owners.

It is also prudent that you verify that all homeowners’ association fees have been paid. If the previous owner has employed household staff, such as a housekeeper or gardener, you should make an effort to determine if they have been properly dismissed and compensated in accordance with Mexico’s labor laws.

This blog 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 own due diligence and review.

6 COMMENTS

  1. Finding a competent, honest and hardworking bilingual Mexican lawyer who only serves your interest in getting the required information and papers filed is essential, as well. Get an excellent referral from someone you trust and read the contract thoroughly. The horror stories are out there. Don’t take anything for granted or at face value.

  2. Harriet, your article is right on. I have been a land investor in Mexico for 25 years and have seen plenty of mistakes made by foreigners going into deals with full heart and little brains.
    Contrary to popular belief, there are honest developers, lawyers and real estate agents.
    You just have to do serious due diligence.
    Buena Suerte !

  3. If you think you , as a US or Canadian citizen, you are going to be able to rent out your property because the agent said you will make money, be very wary of him/her.Your condo association may not allow rentals of less than ninety days, your Bank Trust may not allow it, the Mexican government will want to tax your income as will your government. Be very careful.If you expect rentals to make your payments,it may not work out that way.

  4. There are expats who register and pay taxes on their rental income in Mexico, and it works out fine.

    The government has an option of a low flat rate, and you don´t have to keep track of formal receipts for deductions.

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