Can anyone own property in Mexico?
Yes – anyone can own property in Mexico regardless of whether they have a resident status or not. If it is within 50 km of the shoreline you will require a bank trust in order to purchase the property. Outside of the 50 km zone there are no restrictions.
Can I own property near the ocean?
Yes you can own a property near the ocean however the mexican law provides certain conditions.
If a property is located in the “restricted zone”, which corresponds to any land located within 50 km of any coastline or 100 km from any of the three borders shared with other countries, the foreigner must acquire the desired property through a bank trust. The parties involved are the seller (trustor), the bank is the Trustee (Fiduciario), and the buyer is the Beneficiary (Fideicomisario.)
Why are the Offer to Purchase contracts and listing contracts so lengthy?
The main reason for this is because they are written in a dual column format with spanish and english. With many foreigners purchasing property in Mexico it is translated for them to make it easy to understand. One point to remember is that the Spanish side is the legal side and the English is only a courtesy translation.
Why does it take so long to purchase a property in Mexico?
The process of purchasing in the tourist zone (within the 50 km of the coast) takes much time as there is an application process for the bank trust which normally takes 30 to 45 days. Once the trust has been approved the deed can be executed before a Notary Public. At this point you can have possession of the property. The final step is for the deed to be recorded at the municipal/ federal levels which takes an additional 30 to 45 days.
What is the cost of bank trust?
The opening fee is approximately $500 USD, along with an annual fee which is around $500.
What is the purpose of the trust?
A foreigner cannot legally own coastal properties in Mexico (within 50 km of the coast) so the title of the property is put into a trust with a Mexican bank. The bank plays the role of trustee. The property buyer becomes the Beneficiary in the trust. Those rights are recorded by a Notary. If you are the beneficiary you can sell your property without constraints. You will need to assign an alternate beneficiary at the time of the purchase (in the event of your death) as the Mexican laws require this.
The trust can be renewed for an infinite number of 50-year periods, if the bank trust administration is not changed.
What documents are necessary and who oversees them?
The public notary processes and certifies all documents. This includes all official documents to transfer ownership. This includes a no-lien certificate (which comes from a complete title search of the public property registry). You need a property statement from the municipality, water bills, statements for any taxes that might be due, and a property appraisal for tax purposes.
* It is important to note that the Notary is an impartial entity and does not give advice to or represent the buyer or the seller. It is the buyers/sellers responsibility to have their own legal representation. Quite commonly the real estate company will give recommendations on a good closing attorney to ensure your best interests are considered.
Can anyone buy my property if I want to sell it?
Yes, and if the buyer is a foreigner you can assign your trust rights. If the buyer wants to get a new trust with their bank, they can do so. And if the buyer is a Mexican national, trust can be reassigned to the new buyer
What happens if the buyer is a foreigner? What happens to the 50-year period?
The buyer can take over an existing trust and renew or extend it for another 50 years after the current trust expires.
Who pays the closing costs when a property is sold?
Normally, the transfer of acquisition tax, the notary’s fees and expenses and all other closing costs are paid by the buyer. The seller pays the broker’s commission and the capital gains tax.
What is the percentage of the transfer tax?
Between 2-4% of the tax appraisal value.
Are there property inspectors in Mexico and is it worth having a property inspected?
Yes – there are a number of property inspectors available. They perform a similar inspection to what the American/Canadian companies do and give an overall rating of the property condition including structural, electrical, gas, plumbing in the form of a document that can be kept for future reference
What can you expect to pay for closing costs? How much are closing costs?
These vary from 4 to 10 % of the sales price. This depends on the value of the property.
How long does it take to buy a home?
45 to 60 days with a bank trust. For Mexican nationals, about two weeks.
How is payment made?
Funds are securely held by a third-party escrow service who distributes the funds at time of closing.
What is the cost of the escrow account and who pays it?
The escrow account fee will cost approximately $750 USD and is paid by the buyer.
Who represents the buyer in the process to make sure their best interests are taken into consideration?
The real estate brokerage representing the buyer will protect their interests. When dealing with an accredited real estate brokerage they are bound to an Ethics code and regulations to represent their clients fairly and confidentially. The brokerage will help negotiate the purchase between the buyer and seller and then once a purchase agreement has been made, they will guide the buyers through the process providing advice, market comparisons, recommendations and provide any required instructions and information in a professional manner.
Does the buyer need to pay any real estate commissions or fees?
The real estate commissions are paid by the seller. It is not usual for the buyer to pay any real estate fees. This is not regulated and some agents may ask the buyer to pay additional fees. (For example : a for sale by owner where the agent is only representing the buyer and the seller does not want to pay for real estate fees the agent may ask the buyer for a commission)
*In summary you should budget the purchase price of your property PLUS 6.5 % for a total cost of buying a property in Mexico. (This includes the escrow, trust, Notaria fees, transfer tax, etc).
What happens if I own property in Mexico and I die? Who will inherit my property?
If you have a beneficiary or substitute beneficiary listed on your deed then the property will automatically go to them. If you do not and you are a foreigner ,your will in your home country will take precedence ,however it must first be legally translated into Spanish and presented before the courts in Mexico. This is a very lengthy and costly process and this is why it is highly recommended to have a beneficiary listed on your deed.
What is the summer climate like in Puerto Vallarta?
The summer, referred to locally as the rainy season, ranges in temperature between mid 20’s and mid 30’s celsius. The humidity is quite high making it uncomfortable at times. It rains frequently and heavily which tends to happen in the late afternoon/early evening.
What are the highlights of Bucerias?
Bucerias is known for its culinary experiences and artistic flare. There are many very good restaurants to enjoy without breaking your budget. Bucerias has one of the highest concentrations of beach restaurants in the Bay offering fine dining with amazing views. Bucerias draws lots of artists and you will find many galleries with fine art for sale and art studios for lessons. There are also many social/sports clubs which include pickleball, golf, cards, community volunteering.
Definitions
Here below you will find some terms that are commonly used in the real estate field. We have included their definitions for your convenience.
Official Appraisal: This is a professional document which gives an estimate of the property value based on sales of other homes nearby. This appraisal is often required by a lender to make sure the mortgage isn’t higher than the value of the property.
Notary Fees: These are the fees of the notary public who is retained for processing documents necessary for the sale of the property.
I.V.A.: This is the value added tax of Mexico on consumptions. It has been in force since 1980. The current rate is 16%.
Property Taxes: The property tax is charged by the local municipal government. It is used to fund municipal services such as schools, or street maintenance etc. It is often derived from a formula which uses the assessed property value.
Capital Gains Tax: This is where the seller must pay capital gains tax on the profit, which is the difference between the purchase price and the sales price.
Title Insurance: This is in place to protect the lender or home buyer from any claims that arise about the property. Many lenders expect buyers to purchase this insurance in case of loss or errors.
Title Search: Where the public records are searched to ensure the existing owner has no outstanding liens or claims against the property.
Escrow: This is where an impartial third-party service is used to safeguard the money and the funds will be transferred only after certain conditions are met. When the escrow entity is satisfied with the instructions, the funds are transferred to the beneficiary.
Mexico’s Foreign Investment Law: This law allows simple (direct) ownership of non-residential properties in restricted areas. The property must be owned by a Mexican corporation and it must be used for non-residential purposes. The law also extended the fideicomiso term of residential properties to 50 years, up from 30. It also includes a renewal upon request from a party with interests in the property.
Fee Simple: If a 100% foreign owned Mexican company wants to acquire property, it can do so, so long as the usage is industrial or commercial.
Mexico’s Restricted Areas: According to the Mexican constitution, this is an area which is 100 kilometers from any Mexican border and 50 kilometers from the coast. Since the Baja is so long and narrow, the entire peninsula is part of the restricted zone. If you want to buy this type of property, you must use a Mexican bank trust (fideicomiso) as a foreigner.