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The Pandemic Is Causing Real Estate Changes in Mexico

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Our Lady of Guadalupe church
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The pandemic is causing real estate changes in Mexico and the rest of the world. Those who have lived through wars or major economic upheavals have been in this situation before. Now, we are all experiencing the effects of this dangerous disease and its impact on everyone.

Mexico has adopted many of the same procedures as other countries to fight this disease, which of course is affecting the economy and the real estate market.

The economic downturn, pandemic restrictions and limited travel have created a buyer’s market, which will require creating strategies to offer the best purchase value.

First, if a seller does not need to sell, there could be a downside to putting a home on the market in a buyer’s market. If there is little demand, pressure will be put on sales prices to push the prices downward. This downward momentum causes many buyers to make lowball offers.

Sellers and their listing agents need to have a realistic strategy to deal with what buyers will be asking for in discounts, allowances and conditions. This is to be expected in a buyer’s market in an economic downturn.

Homebuyers may ask seliers to pay for closing costs, or make the sale contingent on the sale of other properties. Buyers know they are in the driver’s seat during a buyer’s market. They may demand the seller make upgrades or repairs as part of the purchase deal. All those little things sellers have put off repairing will pop up in the home inspection. And some buyers will tend to ask for “out” clauses that will let them walk away.

At the end of the day, if the buyer does not have money or access to it, the sale will not occur.

Sellers and their listing agents should talk about all of the requests and prices they should expect from buyers. But having a genuine and capable buyer will be the best opportunity to sell the property. The new game has to be understood and the seller, with his/her agent, has to play it well or lose out to another seller.

The seller in this market also will have to deal with the change in the peso, which affects capital gains. If he/she bought at an exchange rate of 19 pesos to the U.S. dollar and the exchange rate is now 25, there will be more ISR, or capital gains tax. So, it may be better to lower the sales price for the benefit of the buyer than pay more taxes. Look at what the net will be at a sales price the seller and his/her agent think will make them competitive.

Buyer agents will have the advantage of showing their buyers more properties than usual. A seller and his/her representative have to be competitive and anticipate what the market is doing and, importantly, create a strategy that separates their property from other properties.

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.

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