Owning a home in Mexico has become very popular over the last few years. However, because the Mexican real estate market is so familiar, buying a home can become a problem due to the belief that we have the same rights there as we do in our home country. This is not the case. With all the people available to buy property in Mexico, it is important to know all of the pros and cons that come with the process and to be aware of issues that can arise.
Be Aware of These Issues Before Buying a Property in Mexico
Ejido land is probably one of the most exciting subjects in the Mexican real estate world. Ejido land has been the source of nearly all of the stories about foreigners getting property taken from them. Ejido land is a great deal, as it is not yours after you buy it.
Ejido land refers to communal agricultural land that was granted to a group, often an indigenous one. This land did not have a lot of value at the time but has become some of the most desired property in the beaches of Mexico.
It is difficult to convert ejido land into private ownership. Many have tried to avoid it by bribing officials or falsifying records to get around the law. However, there are reputable Mexican legal firms that specialize in the conversion of ejido land to land that can be sold.
Restrictions on the Ownership of Residential Property in Mexico
Mexico does not have any restrictions regarding the ownership of residential property. You can even own the title in your name and hold it in a trust if you would like. However, different rules will apply if the property is located near the coast or an international border.
Rules For Property Ownership on Coasts or International Borders
Mexico has a restricted area that is located within 31 miles from the coast. This zone has been closed to non-citizens since the beginning of the 20th century and they are not allowed to own property within it.
To encourage foreign investments, however, the government came up with a loophole in 1973 and was revised into its current state by 1993. This loophole allowed the use of trusts, known as fideicomisos, to purchase property in the restricted-zone.
This is much different from U.S. trusts in which you, the property buyer, are both the Grantor and Beneficiary of the trust, indicating that you have full control over the sale, purchase, and management.
Notaries Are Way Different in Mexico Than Anywhere Else
Notaries in Mexico are different from their role in the majority of Latin America and Europe or the United States. The state governor appoints the notary and they must have at least five years experience as an attorney. The notary in Mexico is your representative during the real estate transaction, not the sellers’. There is no need to hire another attorney to represent you in a simple property sale. For a non-standard transaction, such as starting a new business along with the home purchase, you may need to hire an additional attorney.
The notary will conduct a title search, prepare all paperwork, process the real property transaction, register the new title with the municipality, and collect the tax and fees. If you are not fluent in Spanish, make sure you hire an English-speaking notary. This person will act as your translator and help you understand the Spanish-language documents.
All Documents Are In Spanish
Mexico’s official language is Spanish. All official documents, including sales contracts and closing documents, are in Spanish when it comes to investing in luxury condos or townhomes in Mexico. For simplicity’s sake, good realtors will provide an English translation of the sales agreement. This document is great for ensuring that both you and the seller fully understand the terms of your deal.
Remember that if there is a discrepancy between the English and Spanish versions of the documents you signed, the Spanish official version will prevail. You and the seller must agree to make any changes on the English translation. This will ensure that the Spanish version is available at the conclusion of negotiations. You can request that some official documents be translated by a third-party at your option.
The Purchasing Process For Mexican Real Estate
Make an Offer & Negotiate the Price
This can usually be done verbally with the seller, or through your agent.
Sign the Contact for the Sale
This is where you will document the price, specify the terms of sale, and include any special payment arrangements or penalties for default.
Put Down the Deposit
This will normally be between 5% and 10% of the sale price.
If the Property is in a Restricted Zone, Create a Fideicomiso
Transferring the fideicomiso to your name can help you save time and money; however, it needs to be renewed after fifty years.
Get Permission from the Foreign Secretary to Complete the Home Purchase
A statement will be required to indicate that you won’t seek foreign jurisdiction for your property transaction which is the law for property in Mexico.
Carry Out the Valuation
These things will be again performed or arranged by the notary. This valuation will be used for tax purposes to determine the value of the home.
Sign the Escritura
At the notary office, sign the Escritura and make the final payment. This escritura is your title to the property once it has been signed and recorded.
Pay Taxes & Fees and Register the Property
The notary handles all of these tasks and all you have to do is pay. Within three months, the final registration in the property registry will be completed and recorded.
Closing costs should not exceed 5% of the purchase price. These costs include a 1.5% notary fees, a 2.2% transfer tax, and some other oddities and ends like the fideicomiso set up fees. If you have a mortgage, the costs associated with the closing process could be higher.
Mexico is a great place to buy property. There are many excellent realty firms and real estate agents to help you find your dream home in Mexico. Do your research and call one today to begin the process and learn all about buying property in Mexico.