Mexico is home to more American expats than any other country in the world. A land of sunshine, warm weather, rich cultural traditions, historical heritage and a slower, easier pace of living combined with lower living costs, Mexico has been an international adventure destination for years.
If you are planning a move south of the border and are considering buying a home in Mexico, you should know the lay of the land before you go. To help guide us through the process, we asked Harriet Murray, a 16-year veteran of the real estate business in Puerto Vallarta, Mexico, to lend a hand.
“The first piece of advice I would give someone interested in moving to Mexico who has not visited many times previously, is to rent for a while to see what area fits you best,” Ms. Murray said. “You probably want to come during the summer low season and find a month-to-month furnished rental so you can see which area is best for you. Since Puerto Vallarta is an international resort city, it is very expensive to rent during the winter high season.” Rentals are available through Cochran Real Estate as well as most other real estate firms and specialized rental agencies in Mexico. Who pays the rental commission is negotiable.
“Once you decide on an area and price range, contact a real estate professional you can trust,” Ms. Murray explained. “We begin the search for your new home by reviewing the Multiple Listing Service (MLS) in Puerto Vallarta, which is very comprehensive. About a half dozen cities in Mexico have a genuine MLS service, which provides guidance on pricing by area.”
A major consideration for those considering buying a home in Mexico is the location. If it is located in what is called the Restricted Zone, foreigners cannot legally own direct title to real estate. The Restricted Zone is defined as the land area within 100 kilometers of Mexico’s international land borders with the U.S., Belize and Guatemala; and, the land area within 50 kilometers of Mexico’s ocean front areas (the coastline of Mexico). Foreigners can hold title to property in the Restricted Zone by acquiring a Fideicomiso, which is a long-term irrevocable bank trust. In this case, a Mexican fiduciary bank holds the title and cedes the rights to own and occupy, remodel, sell, give away or leave to you and your heirs. The Fideicomiso is not a lease, but a renewable trust held currently for 50 years by the Mexican government. If you are buying property outside of the Restricted Zone, you can hold title to the property.
Once you decide upon a home, an offer is made to the seller through your agent in a bi-lingual contract. If the seller accepts, you will be expected to put 10 percent of the purchase price in escrow. Escrow companies are relatively new to Mexico and must be approved by the Mexican government.
The next step in buying a home in Mexico is to hire a Notario, a specialized attorney who has the power to transfer property and is appointed for life by the Mexican government. Notarios represent the government in the sale or transfer of property. “You apply through the Notario as a foreigner who wishes to purchase property in Mexico,” Ms. Murray added. “The Notario secures the required permit for a foreigner to own in Mexico from the government in Mexico City. You also give the Notario a deposit before work begins.” Once the government approves the purchase, the bank trust (if you are purchasing property in the Restricted Zone) can be assumed or transferred, or a new trust with the same or different bank can be created for the buyer.
Importantly, when you hire your Notario, he/she will conduct research to see who sold the house. If you wish to go back further than the current seller, you may want to hire a title company, which is the escrow company holding the purchase funds. The title company will research the title several owners back. Title insurance is recommended when: 1) the area has had problems, 2) the property is over US$1 million, or 3) the property is in the maritime zone, which is federal land adjacent to the shoreline.
“I also would highly recommend that buyers hire a local attorney who specializes in real estate to assist them,” Ms. Murray said. “Ask for recommendations from your agent or friends who already own.”
When you are ready to close, the buyer sends the balance of the purchase price to the escrow company, which prepares a disbursement letter outlining all the expenses associated with the sale. This letter has to be signed by both the seller and the buyer. All paperwork is signed in the Notario’s office and your Notario will conduct the closing for you. You do not have to attend the closing as long as you authorize your attorney or someone to whom you have given power of attorney to represent you.
Once all the paperwork is signed, the disbursement letter and certain pages of the Escritura (deed) are sent to the escrow company for disbursement of funds.
Financing is now available in Mexico, although it still remains primarily a cash market. If you decide to finance, expect 60 to 90 days for loan approval and be prepared to put a minimum of 10% percent down on your new home. Interest rates also are higher in Mexico, but the new peso loans available to Mexicans, Canadians and Americans are appealing when the peso is weaker than the dollar.
Purchase costs range from 5 to 10 percent, depending upon the price of the home. Real estate commissions run between 6 and 8 percent, but they are negotiable.
Ms. Murray offered this final piece of advice to all would-be home owners: “Make sure you look for a trusted agent to work with, particularly someone who has Certified International Property Specialist (CIPS) credentials. Buying a home in Mexico and other countries is very different than the U.S. and requires expertise and knowledge of local business practices.” In Mexico, the largest professional real estate organization is the Association of Real Estate Professionals (AMPI). Licensing in Mexico of real estate agents, rental agents and property managers is not required, so choose carefully.