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BUYING IN MEXICO FAQ

The Los Cabos Real Estate market offers countless investment opportunities whether you are a developer, retiree or luxury real estate investor.

The slowdown in the global and US financial markets in past years have had a direct impact on coastal real estate in Mexico. The Los Cabos real estate industry experienced a general slowdown in real estate sales and substantial price adjustments for a short time. Fortunately, over the last few years we have seen an increase in real estate sales and a return of the luxury real estate market.

There are still many real estate investments available at exceptional prices however this will not last forever. Many wise local and foreign retirees and investors are snapping up the available properties. Let’s face it; on the West coast, it is hard to find such incredibly well-priced properties in such a naturally beautiful location with friendly people and magnificent weather.

In addition to protect your investment, Oceanside Real Estate works with several proffessional property management companies to provide you with peace of mind.

In order to assist you, we have designed a list of the most commonly asked questions by buyers when purchasing in Los Cabos.

IS IT POSSIBLE FOR CANADIAN, AMERICAN OR EUROPEAN CITIZENS TO ACQUIRE REAL ESTATE IN THE COASTAL AREAS OF MEXICO?

The answer is a resounding, yes! The means, by which foreigners can acquire real estate, is through a Mexican bank trust, technically known in Spanish as a Fideicomiso.

Individuals or foreign companies, in their own right, as well as foreigners that own stock in a Mexican corporation, can all acquire properties through different methods depending on their location. In the interior of Mexico, through direct title and through a bank trust in the coastal areas, including beachfront properties.

WHAT IS A BANK TRUST?

A bank trust or what is locally referred to as a Fideicomiso, is the agreement or contract which is contained within the Title deed whereby the bank, known as the trustee (Fiduciario), holds the title for the buyer (Fideicomisario) who, in turn, has all the beneficial rights of use and enjoyment of the property.

HOW LONG IS THE BANK TRUST FOR?

A new bank trust is normally for a period of 50 years and can be renewed for a further period of 50 years.

CAN I TAKE OVER AN EXISTING BANK TRUST / FIDEICOMISO?

Yes. If you decide to do so, you will be taking over the existing trust that is in place. It would be wise to check how many years are remaining in the existing trust, since it may be better to establish a new 50-year Bank trust instead.

WHAT ARE THE COSTS OF THE BANK TRUST AND WHAT OTHER TRUST FEES ARE INVOLVED?

The initial fee varies from bank to bank; therefore, it is a good idea to get a quote from different banks.

Typically, the initiation fee is approximately $500.00 to $650.00 USD, plus an additional, annual fee to be paid in advance. This is almost always the same amount as the initiation fee.

The bank fees are often based on the value of the property. However, many banks will typically negotiate a fixed price for a specific time period or for the period of the trust.

AS A PURCHASER AM I PROTECTED?

Absolutely. On acquiring a property, it is placed in trust with the bank as Trustee (Fiduciario), who, for all technical purposes, is the legal titleholder. The Trustee and purchasers’ responsibilities are clearly specified within the Bank Trust, which forms part of the title.

The Trustee is responsible for holding the property in trust for the purchaser who is then the beneficiary (Fideicomisario) of the Trust. In conjunction with the Trustee, the purchaser has the ability to rent, sell or transfer the rights to the property.

The Trustee`s (Fiduciario) function is purely an administrative one. The bank Trustee will only act upon written instructions from the Owner/ beneficiary (Fideicomisario) of the property.

HOW MANY PARTIES ARE THERE IN A TYPICAL REAL ESTATE SALE THROUGH A BANK TRUST?

Well, this really depends on who is selling the property.

If a Mexican national is selling a property to a foreigner, then normally there are approximately four people directly involved in the transaction. The parties would be the purchaser, the seller, the public notary and the bank.

If a purchaser is acquiring a property from another foreigner, in the coastal region of Mexico, then there would be approximately 5 people involved; the public notary, the seller, the buyer, the seller’s bank and the purchaser’s bank, if the purchaser is establishing a new bank trust with a different bank.

NOTE: It is important to note that the real estate brokerage, or agent, plays a very important role in the real estate purchasing process in Mexico.

A good agent, or broker, essentially orchestrates the whole process and is the main supplier and communicator of all the required information to all the parties involved in each transaction.

WHAT IS THE FUNCTION OF A MEXICAN PUBLIC NOTARY OR “NOTARIO PUBLICO”?

A Mexican Public Notary is a lawyer and is appointed to his or her position by the governor of the specific state, after completing rigorous exams.

This is normally a lifetime appointment.

The purchaser generally chooses the Public Notary since the purchaser pays the closing cost fees.

The Notary has an obligation to be neutral to both purchasers and sellers, even though the purchaser generally pays the Notary`s fees.

The Notaries function is to draw up the title. This involves checking the title chain (history) of the property that is being acquired.

The Notary also makes sure that there are no outstanding liens or encumbrances and that the property is current in the payment of the corresponding property taxes and maintenance fees, if they apply.

The Notary will also make sure that all the official requirements; evaluations, tax appraisals, non-lien certificate and other documents, are in place prior to the signing of the title.

On the designated closing date, buyer, seller and bank Trustee must appear before the Notary to sign the deed, which will then be officially certified by the Public Notary.
Once the deed has been signed and certified by the Notary, it will be sent to the Public Registry’s office for its inscription.

Once the deed is registered, it is returned to the Notary’s office and the purchaser will be able to pick up the registered title.

HOW DIFFICULT IS THE PROCESS WHEN I WISH TO SELL MY PROPERTY?

The process is very simple. On receiving an accepted offer for your property, you will instruct your trust bank via a letter of instructions informing them that you are selling your property.

Once the title and all the paperwork has been completed by the Public Notary you will sign the deed in the presence of the Notary and the other parties involved.

On signing the deed, the net funds, after taxes and expenses, will then be wired to your specific account.

This is obviously a very simple explanation. There is a lot of work involved in completing a transaction but most of this is usually coordinated by your real estate professional.

Your real estate professional will guide you through each step of the process.

IN MEXICO, WHO IS RESPONSIBLE FOR THE CLOSING COSTS, MEXICAN CAPITAL GAINS TAXES AND REAL ESTATE FEES?

In Los Cabos, the purchaser pays the closing costs. The purchaser is responsible for paying the Notary`s fees and expenses as well as the transfer (purchase tax), escrow fee and all closing costs related to the sale.

The Seller is responsible for paying the Mexican Capital gains tax (Impuesto Sobre la Renta), if it applies, as well as the real estate fees. The seller also needs to be up to date with all his trust bank fees, property taxes and other payments related to the property, up to and including, the closing date.

WHAT ARE THE APPROXIMATE CLOSING COSTS INVOLVED IN THE PURCHASE OF A PROPERTY?

Obviously, it is difficult to give an exact amount, since closing costs are based on each individual property and have to be calculated specifically for the property being purchased.

Basically, you can expect to pay approximately 4% to 6% of the value of the property in closing cost fees. Remember, these closing cost fees are over and above the actual purchase price.

To avoid surprises, make sure that your real estate expert provides you with an estimate of the approximate closing costs for you prior to making an offer.

HOW LONG DOES IT TAKE TO CLOSE A REAL ESTATE TRANSACTION IN MEXICO?

This really depends on the property being purchased. Assuming that the property’s paperwork is in order, you could expect to close within a period of 45 to 90 days.

WHAT TO EXPECT WITH IMMIGRATION

Mexican regulations regarding immigration change from time-to-time as with most countries, therefore it is advisable to find out the pertinent information before applying for your resident visa.

Many independent agents assist aspiring residents with the procedure that may involve a few trips to the local immigration office before getting your desired resident card.

For up-to-date information and regulations, visit your local Mexican consulate or the official National Immigration Institute (INM) website where you will find the requirements to apply for or upgrade your immigration status.

There are several types of immigration statuses and associated visas for foreign visitors to Mexico:

 

Tourist Visa

When you arrive in Mexico by land or air, the customs officer will stamp your passport with a 180-day Tourist Visa. This visa allows you to vacation in the country but does not give you permission to perform any profitable activities during your stay.

 

Temporary Resident Visa

If you wish to live here full-time, the next step on the immigration ladder is the Temporary Resident Visa, which allows you to stay for a whole year before applying for renewal.
Property owners are advised to obtain this Temporary Visa, which does not place restrictions on foreign travel. A work permit can be added as part of the Temporary Visa allowances, giving you the legal right to work.

 

Permanent Resident Visa

After four years of successfully renewing your Temporary Resident status, you may apply for a Permanent Resident Visa.  The Permanent Visa gives you the total freedom to live and work in Mexico and enjoy every right Mexican citizen do except for the right to participate in elections. To keep your resident status, you must inform the INM of any address and work changes within 90-days of their occurrence.

 

FOREIGN PLATED CARS

Regulations regarding the use of foreign plated vehicles in Mexico should be carefully followed. For additional information on this subject, we suggest you checkout the website for the Foreign Affairs Department of Mexico or meet with a legal adviser.