Guide to Buying in Mexico
Buying a Home
• Property Taxes: Property taxes are much lower in Mexico than other parts of North America. They are typically about $100USD per year for every $100,000.00USD of property value. There is a 15% discount if paid before February 15th.
• The Bank Trust:
Foreigners (non-Mexican) are able to purchase real estate in Mexico. They may directly own rural or urban land in the interior of Mexico with certain limitations on specific agricultural tracts. In the restricted protected zone, a Bank Trust Deed is used. These Protected areas include 100 kilometers along all-natural borders, 50 kilometers along coastlines and all of Baja California, Puerto Vallarta and coastal Nayarit are in the restricted zone.
The Bank Trust Deed “Fideicomiso” is established through a Mexican bank giving foreign buyers rights and privileges of ownership. As of 1994, the Foreign Investment Law allows these deeds to be established for a term of 50 years and renewable forever.
This public deed is called an Escritura.
In the restricted zone, title can be held in one of two ways:
(1) The Mexican bank trust is for residential property.
(2) A Mexican corporation can hold nonresidential real estate.
Foreign nationals can be the sole and exclusive stockholders of the corporate stock which holds the title to this nonresidential property within the restricted zone.
If you hold property as residential and claim it as a fiscal residence in Mexico, you can be eligible to waive partial capital gains tax. Certain restrictions do apply.
• The Notary:
The public notary in Mexico is responsible for the transfer of real estate. The notary’s responsibilities are much greater than what we are familiar with in the United States or Canada. The notary in Mexico is appointed by the governor of the state and the executive branch of the federal government of the particular state. A notary is an attorney who has additional specialization and has passed an extensive exam.
He/she is appointed for life.
• The Deed (Escritura) is prepared from the purchase-sale agreement.
The Escritura, as well as all closing documents are in Spanish.
English translations are courtesy translations only.
Prior to closing, the notary examines the documents of the seller to verify the title.
A search of the public records is done to determine further status of the title and the existence of liens against the property. The notary is responsible for the collection and payment of property taxes and government transfer taxes.
If a seller owes capital gains, that is determined by the notary. This tax is collected and paid by the notary, when due. The Escritura, or public deed, names the seller conveying and the buyer receiving the property, in addition to the legal description.
The terms of the bank trust (Fideicomiso) agreement are incorporated into the Escritura. There should also be a description of the metes and bounds of the land, and a plat.
In the case of construction, there should also be a floor plan or footprint of the building on the land. A buyer should also receive evidence that utility services on the property have been paid to the date of closing. At closing, the notary meets with the buyer and seller to formalize the transfer by requiring appropriate signatures upon execution of the deed.
The Escritura is then recorded with the public registry where the property is located.
• Closing Costs:
The buyer pays closing costs, with the seller paying any capital gains taxes and real estate fees. Closing costs are typically higher than costs for buyers in the United States and Canada. Included in these costs are:
o Appraisal (Avaluo)
o Cautionary Notice (Aviso Cautelar)
o Provisional Notice (Aviso Preventivo)
o Certificate of No Debt (Certificado de Libertad de Gravámenes)
o Certificate of No Property Tax Debt (Certificado de No Adeudo Predial)
o Fiduciary Fee (Comisión Fiduciária)
o Copies (Copias)
o Additional Files (Folios Adicionales)
o Property Transmission Payment Forms (Formas para Pago Impuesto Transmisión Patrimonial)
o Tax and Legal Instruments (Impuesto Sobre Negocios Jurídicos e Instrumentos Notariales)
o Tax on Property Transmission (Impuesto Sobre Transmisiones Patrimoniales)
o Registration in Public Register (Inscripción Registro Público)
o Registration in Foreign Investment National Register (Registro Nacional de Inversión Extranjera)
GETTING STARTED
Before we begin our search to find you a property, there is some information that we need to know, we call this our Home Buyer Consultation. We will ask you some questions to help us get a better idea of your ideal neighborhood and home:
What type of property are you looking for: House, Condo or Land? Commercial?
1. Number of bedrooms and baths?
2. What area are you interested in?
3. How will you use the home ? Part time/full time ? Interested in vacation rentals?
4. What features do you most need/want?
5. What is your budget?
We will review your search parameters and demonstrate the FlexMLS portal and app, explain listing notifications and market conditions, and go over scheduling of
appointments.
Viewings:
If you are here in Mexico, we will set up viewings to show you properties that we think will be a good fit for your criteria. If you are outside of the country, we can send you links to properties and we can also set you up to receive automatic updates when something new comes on the market that is a good fit for what you are looking for.
Step 2 Financing yes…
For American Citizens..MOXI.. A Global Mortgage Company.
For Canadian Citizens …SEAPORT Credit Canada.
Step 3 Setting Your Search
We will begin a search for you based on price, location and house-specific criteria provided by you. You provide feedback about the search results and tell us which homes are of interest to you. We will set up showings and begin viewing your top home choices. We will work together to narrow down your preferred list until you find the home you want to buy.
Step 4 The Offer
We will then discuss and write an offer to present to the seller. Negotiation follows and once accepted the agreements are initiated, signed and dated.
The offer details all terms of sale, closing date, price, etc, and has one effective date: when all parties signed the offer and all addendums in agreement.
The period of due diligence then begins.
We always recommend an inspection and allow time to review the report.
The seller has a period of time to provide documentation and/or information in order to satisfy these conditions in the offer.
As a buyer you have a deadline to order, complete, review and accept or reject the home inspection and you also have a deadline to review legal documentation and/or accept and/or reject them.
Step 5 Close the Contract
Once all conditions are satisfied/removed (usually 7 – 14 days), we will request an escrow account to be opened for you. An escrow agreement will be signed by both buyer and seller and a file number is issued.
The buyer pays the cost ($750.00USD) of opening the escrow account. The buyer will have a deadline to wire a 10% minimum deposit (part of the purchase price) and escrow fee into their new escrow account
At this point, the closing lawyers initiate coordinating the titling process with the designated Public Notary.
An estimate of closing costs will be provided by the Notary and the Buyer must wire a deposit for costs to the Notary or the newly opened escrow account.
Buyer and Seller provide the closing coordinator and/or Notary all required documentation such as: ID´s, proof of address, KYC Forms (Know Your Client), and bank trust forms, if applicable. From this point until closing, agents, lawyers and the Notary — chosen by the buyer — work together to get everything done for the closing date. A few days before closing, Buyer funds an escrow account with remaining balance of the agreed purchase price and arranges the remaining 50% of the closing costs to be paid. Utility bills, property taxes and any other expenses owed between buyer and seller will be prorated and agreed upon before or at closing. Letters of transfer for utilities will be signed at closing so the buyer can proceed to have utilities transferred into their name at the local utility office. Buyer and Seller attend closing or have a legal representative attend for them (with prior notice and acceptable power of attorney written and approved by notary and bank trustee). Signing of the corresponding public deed happens at the notary and possession (unless formally changed) is given at closing.
Yeah..it’s celebration time
