Buying property in Mexico used to be a lot more complicated but now the recent changes in laws and regulations have enabled foreign investors to safely and completely legally own properties in Mexico, making it a very attractive for people interested in property for personal use or as an investment.
The first thing you should know is that Realty Kore deals in many different properties in Mexico and that we will be using some of those properties as examples of the type of amazing beach houses, tree houses and condominiums on offer here. But the information is applicable to Mexico in general.
As an introduction to Realty Kore and for new readers and listeners interested in buying property in Mexico we have created a series of Podcasts to help you. You can listen to the first podcast here and subscribe to future episodes.
When we start talking to foreigners who are interested in buying property in Mexico they usually have many of same questions. So let’s start with those as they usually cover about 90% of the issues that buyers ask about. We’ll include the obvious ones and the detailed legal ones and cover all the ground necessary to make you feel comfortable. Buying property in Mexico is completely legal and 100% secure.
1. How difficult is the process of buying property in Mexico?
The Mexican has made huge efforts to simplify and make the process of buying property safe. Foreigners are allowed to legally purchase property in Mexico.
2. What are the best ways to do it?
There are 2 different ways, the first is with a Fideicomiso which acts as a bank-held trust or the second is though a Mexican corporation.
3. Can you tell me about the Fideicomiso?
The word translates to “trust comission” and is pronounced “Fee-day-coh-MEE-soh). You’ll need to learn that one! A Fideicomiso is a real estate trust that is held at a Mexican bank of your choice, for exmaple Scotia Bank, HSBC or Santander. The banks act as a Trustee. You maintain complete control over the trust. It is similar to a Living Trust in the United States. A Fideicomiso gives you complete control over the property which allows you to lease, rent, mortgage, sell, improve and will your property.
4. Do you need the Fideicomiso?
The Fideicomiso was set up to allow foreigners to buy prime Mexican real estate in the “restricted zone”. It was designed to create confidence for foreign investment and ensures safety for the transaction. The restricted zone is where most property development in Mexico is taking place and is any land within 31miles (50 km) of the coastline and 62 miles (100 km) of the borders. Originally when the Mexican constitution was created, it was designed to protect their land against foreign invasion and large land loss. But rather than amend their constitution, Mexico created and added the fideicomiso to encourage foreign investment in the highly desirable areas, particularly along the coastline.
5. What’s the relationship between the Fideicomiso and the bank?
The trust is not classified as an asset at the bank. The Fideicomiso only acts as stewards of the trust. The trust is the beneficiary’s property and cannot be used by the bank in any way.
6. How long does the trust last?
The trust is for 50 years and can be renewed for additional 50 year increments at any time. The cost is approximately $500 USD
7. Is there any possibility that the government can reclaim my property?
Because of the North American Free Trade Agreement (NAFTA), Mexico cannot expropriate property except for a public purpose. An example of a public purpose is for building roads or essential infrastructure and should this happen they are obliged to pay far market price compensation to the owner, but expropriation is rare.
8. Is there an advantage to buying a property in Mexico through a corporation?
It is common to buy property through a corporation when your intention is to use the property for commercial reasons. You might plan to use the property in summer but rent or lease the property for the rest of the year. Also, buyers interested in multiple properties often choose this option.
9. What’s involved with setting up a corporation?
There are 2 main types of corporations in Mexico. The LLC is a limited Liability Corporation and the LLP which is a limited Liability Partnership. They have different tax structures so you should speak to an attorney in Mexico and in the United States (or your country of residence).
Pro Tip: Hiring a bilingual Mexican attorney that works exclusively for you as it is an important part of this process.
Since 1995 foreigners can own, operate and manage Mexican corporations but none of the corporations investors can be Mexican. Once you have established a corporation in Mexico it has the legal capacity to buy property anywhere in Mexico, including the restricted zone. The purchased property has the same rights as if it were a Mexican entity. There are no restrictions on foreign owned Mexican corporations who are dealing and developing in property so the advantages there are huge.
10. Is it expensive to set up a corporation?
Not really. The attorney’s fee is $1,500 USD to set up a corporation and there is an accounting fee of $100 per month thereafter.
11. What other official tasks are required?
When buying inside the restricted zone there are 4 main parties to be considered. All are helpful in their specific areas and each serves a purpose in the real estate transaction. Realty Kore can assist you with all of these.
The first is a good Real Estate Company. Look for an experienced, knowledgeable agents that know the lay of the land. They will help avoid the pitfalls and help to guide you through the process step by step, which is outlined in the second half of this article.
The second is a good bilingual attorney. Like I mentioned above it’s always best to have someone who is acting in your best interest. He or she will represent all your legal transactions and will draw up contracts and review the terms and conditions of the sale. It is best to choose a Mexican attorney as they are the only ones licensed to practice law and give advice on Mexican law.
The third important task is visiting a notary. They authenticate the legal documents, calculate capital gains tax and are responsible for ratifying all real estate transactions in Mexico. If your real estate transaction is not ratified it is considered invalid. The notary issues certificates of no liens, no debt and they request all permits. After the closing the notary must record the transaction at the Public Registry and at the Tax Office known as the “Cadastral”.
The fourth and final entity is the bank, that is if you are buying though a Fideicomiso. The bank must be a Mexican registered financial institution with an established trust department. There are many to choose from including Santander, Banamex (Citigroup), Scotia Bank or HSBC. They will issue a trust for the real estate for your use only. Under Mexican law, banks acting as Trustees are prohibited from transferring ownership, changing the beneficiary rights without your written permission.
Pro Tip: Choosing a larger, better known bank is considered prudent and adds additional safety.
12. What if something happens to the bank?
The Mexican government provide protection against bankruptcy. Your trust is guaranteed indirectly by the government.
13. What about title insurance and do you really need it?
Title insurance is optional in Mexico but we recommend it. Foreign buyers are used to having title insurance with property transactions as it is seen as an insurance policy for property ownership. In Mexico title insurance is an extra assurance that the ownership rights are held by the Fideicomiso.
Pro Tip: Title insurance companies can also be used as escrow agents which is the safest way to close the property transaction and ensures that all money is returned should the property deal fall apart.
14. What are all the administration and closing costs when buying a property in Mexico?
Having a reliable real estate company in Mexico to help you organise all the official paperwork and closing costs is essential. It can really help to take the stress out of the situation and allow you to concentrate on the more important issues. Here’s a breakdown of the costs involved.
Total closing costs including notario fees, escrow services, appraisal fees, origination fee, establishing the bank trust and the SRE Permit will total approximately 5-7% of the sale price.
Buyer’s fees include:
2% acquisition fee
1% recording fee
1% notary fee
$3,000 USD attorney fee
Buying through a trust and Fideicomiso
$1,500 USD set up fee
$500 registration fee
$500 annual fee
Buying through a Corporation
$1,500 set up fee
$100 a month accounting fee.
Continue below for the step by step process of buying a property in Mexico.
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Hopefully the above frequently asked questions have provided you with a lot of the information that you need for buying property in Mexico. So what’s the next step? Well, we have an concise 7 step guide that we provide for our clients who are buying property in Mexico.
Step 1: Make an Offer.
Your attorney or real estate agent will draw up a document called “contrado de permesa“. This is usually a standard form that can be amended. When you offer is accepted the notary or estate agent will estimate the closing costs for you.
Step 2: Sep Up an Escrow and deposit the agrees % of the accepted sale price.
Be sure to get the acceptance of your offer in writing. Here the escrow acts as a third party. It is advised at this point not to give the money to the seller.
As there are no official escrow accounts in Mexico one typical arrangement is for the real estate agent to hold the deposit in dollars in the United States. At the end of the deal the agent can transfer the money to his own bank in Mexico and avoid complications.
Another option is to use a cashier’s cheque with the seller’s name on it and to instruct your notario (or third party agent) keep it at their office.
Like we suggested above we advise our clients to get title insurance and choose a title insurance company that will also act as an escrow agent. In that way you get to kill two birds with one stone.
There are 3 stages to obtaining Title Insurance:
Stage 1: A 30% deposit is made and the buyer is issued a “Title Commitment”
Stage 2: The 60 – 90 day waiting period begins. This is for the city to record the title.
Stage 3: The buyer gets the Title Insurance Policy when the remaining 70% balance is paid.
Step 3: Sit tight until the notary investigates the title, gets the appraisal and puts the closing papers in order.
Next your attorney will draw up a “contrado de compraventa” which is a purchase sales agreement. A good estate agent (like Realty Kore naturally) will take care of this for you.In the meantime the title insurer and the notary will verify the property’s title. They will request from the local tax office a non-lien certificate which shows that no claims or debts are connected to the property.
Pro Tip: You should instruct the agent to prepare the document in English and Spanish.
Step 4: The Closing of the Property Purchase
After checking with your attorney, notary and title insurer that everything is correct and above board a meeting is usually scheduled with you, the seller, the respective attorneys, and any other broker for the closing. The deed named “escritura” is Spanish is exchanged and once it is in hand you can make the final transfer of funds through the escrow account or bring a certified bankers cheque.
Step 5: The Notario registers your ownership
A trustworthy and experienced real estate agent will always follow up with the notario to make this is very important registration is made. You should check that the paperwork associated with the property is registered correctly and that each page has a seal for a certificate of registration to be included in the finished documents.
Step 6: Consider making a Mexican Will with your attorney
In our experience it is much better to take care of this detail at the same time as all the other documentation for the purchase of the property. There have been many cases where the heirs to a foreign Will have to spend a lot of time and bother dealing with Mexican bureaucracy over an estate. Creating a Mexican Will with a local attorney will simplify things immensely.
Step 7: Registration with the Ministry of Foreign Affairs
It is the notary or attorney who applies for the permit to buy property before the closing phase. It’s very normal to issue permits and it’s not a cause of great concern if you are left waiting before you receive one.
– If you need to buy thought a trust then if possible apply though the ministry’s central office in Mexico City. In this way you’ll have t within five working days.
– If you apply for the permit at a regional office this could take up to 30 working days, but the permit must be granted.
– If you are using a corporation to make the purchase and hold title to the property then you need to register that company with the Ministry of Foreign Affairs. The Ministry has 15 days to complete the registration.
In any of the deadlines in the above cases expires and you haven’t yet received your permit then the trust permit or the registration are considered authorized.
Wow ! Congratulations. If you made it all the way to this part of the article I consider you are seriously interested in buying property in Mexico. Now that you have worked hard with informing yourself with all the ins and outs of Mexican property bureaucracy, why not kick back and browse through a selection of Realty Kore’s locations and incredible properties.
Inspired by local culture and mother nature, Punta Sayulita is a natural extension of the quaint village the community is named after. As good stewards of the land, this family friendly luxury community was born through conservation of natural resources and responsible development.
Download the Punta Sayulita brochure here
Why you should consider Punta Sayulita as a dream location.
Punta Sayulita is located only 21 miles North of the Puerto Vallarta international airport. With more direct flights to most major US / CAN cities, getting to Punta Sayulita is quick and easy.
Choosing Punta Sayulita is step one in planning a truly relaxing majestic home filled with all the elements that will make your family amazingly happy. Great food, luxurious surroundings, natural beauty and unforgettably good times all wait for your arrival at Punta Sayulita.
Enjoy the surrounding nature and vegetation. Hiking jungle trails, photography and bird watching are among the more pleasurable activities to be experienced while visiting sunny Mexico.
This environment is also ideal for water skiing, surfing, kayaking, scuba diving, parasailing and wake boarding are great activities to experience the waves and depth of the beautiful blue ocean. After you have built up an appetite, choose an authentic place to dine on local cuisine.
Discover the hidden beach in Sayulita