Home Expat Blogs The Dynamics of the Real Estate Market in Mexico

The Dynamics of the Real Estate Market in Mexico

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Orange building in Merida
Credit: Starmuc | Bigstock

Welcome to my new blog from Mérida. My goal is to help you better understand how real estate works in the Yucatán and the dynamics of the real estate market in Mexico.

Let’s begin by looking at the socio-economic conditions that have developed in Mexico over the last several decades. A large middle class has emerged to create a more robust market. Additionally, with the growing foreign interest in living and investing in Mexico, the market is becoming more dynamic and secure for investment and ownership.

Historically, Mexico was a country of basically two large economic groups; the rich and the poor. The poor rarely owned real estate and the rich tended to subdivide what real estate they had and pass it to their heirs.

The current real estate market, where two previously unknown parties come together to buy/sell real estate, is still a relatively new business in many regions of Mexico. This is the reason why, in most of Mexico, there is no MLS, no real estate licensing requirements for agents, no governmental oversight, limited institutional financing, few large organized real estate companies or real estate professional organizations, like the NAR (National Association of Realtors) in the U.S.

There is an organization known as AMPI, which partners with the NAR.  However, they do not have the membership strength and discipline power in Mexico that the NAR wields in the U.S.

It is important to remember that Yucatán has been like an autonomous region, separated from Mexico for decades. Yucatecos tend to think of themselves as Yucatecans first and Mexicans second. Rules, regulations and new business practices have tended to evolve here more slowly than in other regions of Mexico.

Historically in Yucatán, when two individuals come together in an agreement to buy/sell real estate, the parties have utilized a promise to buy/sell real estate agreement, called a “Promesa de Venta.” The agreement is typically drawn up by the buyer’s notario and the buyer is responsible to pay the notario and the closing costs. Upon signing, the buyer gives the seller a deposit to hold as “earnest money” to seal the deal. In return, the seller provides the notario with current and notarized escrituras (title documents), cedulas (tax statements), planos (lot plan), personal data and corresponding information.

The Promesa de Venta is still popularly used in Yucatán. It is not unusual for a seller not represented by a real estate agent to require this contract, with the understanding that the seller will hold the earnest money deposit. Should the buyer fail to buy, through no fault of the seller, the buyer will forfeit the deposit. Should the seller, through no fault of the buyer, refuse to sell, there is a penalty clause in the contract stating the seller must return the amount of the original deposit and pay a penalty equal to the amount of the deposit to the buyer. If the seller does not return the deposit and pay the penalty, the buyer will have a very strong document for filing a lien against the property, and quite possibly gain title to the property after the legal process terminates.

Next time, I’ll discuss buying property on the Yucatán Peninsula. See you then.

5 COMMENTS

  1. This is an interesting article. So the value of home is based upon what they think it’s worth. You can walk away with having something not worth its value because of the above.

  2. Hi, Sandra. The value of the property (home) is ultimately determined by the market place, what a buyer is willing to pay for it.

    That said, for tax purposes, all properties have a municipal appraised value. That appraised value is determined by the office of the Catastro and is reflected in your annual property tax assessment/bill.

    I’m not sure how you interpreted from the article that a home value is based upon “what they think it is worth”. Let me know how the article lead you to believe that and I will edit the wording so that it doesn’t cause confusion.

  3. Good write-up! In am living in QRoo&Yucatan now 30yrs! I have build&sold 5 times,thank God my wife is Yuca. &has legal-real estate background! What a pain in the ass,the time delay between start&finish sale!! Never can be 30 Day escrow!!never!! 1 yr if your lucky!!? I love the people!the system sucks!!

  4. Yes Ken, Indeed sometimes the process can be time consuming. Luckily for us many of the properties we handle are already in fideicomisos. We frequently close deals in 4-6 weeks. However, we have deals that take longer to close. I actually prefer the system here (México), where 99% of our deals are in cash – compared to the USA, where 90% of all deals are financed. Inspection contingencies, financing contingencies, HUD and VA contingencies, mortgage companies that refuse loans at the last minute, despite issuing letters of pre-approval and title companies that charge outrageous fees to close a deal.

    Personally speaking, a team of horses couldn’t drag me back to handle real estate deals in the USA. Talk about a system that sucks… The system in the USA is a nightmare. Real estate agents are either unbearably aggressive or too lazy to handle their sides of a deal. Inspectors are paid to nitpick a used home to the nth degree, tossing the entire deal back into a negotiation. Mortgage lenders lie, steal and cheat (ie. the financial crash of 2008). Banks are entirely incompetent and operated by defeated, underpaid employees that just want to go home. Title companies charge by the page for closing docs that as thick as a set of encyclopedias, weigh a ton and require a gazillion signatures on never ending boiler plate. Give me México every time. It’s not perfect but compared to what I had to endure as a broker in the USA… México is heaven on earth!

  5. Woo-wee. Mitch you said it. The process of buying and selling in America, especially here in the NYC area, is so complicated and frustrating, filled with complacency and corruption. No one does there job but somehow expects to be paid well for doing nothing. I am excited to start my Mexico home search next week!

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