mexico real estate guide by john forget - realtor

8/14/2019 Mexico Real Estate Guide by John Forget - Realtor

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This was written as a primer for those considering a purchase of Mexico Real Estate.

This is in no way comprehensive and is not meant as legal advice. Please consult

with a QUALIFIED Realtor® or attorney before you even start the process. A

knowledgeable Mexico real estate expert will assist you in many more ways than

just buying a property. They will even be able to help you with a plan to lower your

capital gains for when you decide to sell...that's forward thinking on your part!

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Mexico Property Ownership – The Safe Way

Buying in paradise does not mean having to roll the dice!

By John Forget

I am often asked “Can foreigners really own property in Mexico?” The answer is a

resounding yes – but only if you use the same common sense you would use in

Canada or the U.S., use a qualified real estate professional and have competentlegal representation. Follow this formula and you and your family will have a safe

investment that you can enjoy and benefit from for many, many years.

Although there is no way to explain the intricacies of real estate in Mexico in this

format, I will try to give a reasonable understanding of the process - and give you

some tips on protecting your investment and interests. I strongly recommend

seeking professional guidance. More often than not, it costs you nothing but it can

save you headaches, time, money…or even your entire investment!

It doesn’t surprise me that people visit this wonderful country called Mexico and fall

in love with her charm and beauty. It doesn’t surprise me when folks say that theycan’t believe how friendly the people are or how affordable everything is. I’m not

even surprised when someone says they want to live here part-time, or even

permanently. I am amazed, however, when they decide to invest in real estate and

work with the first person they meet that says they “sell” real estate.

There are literally millions of folks in Mexico that say they sell real estate. Very few

of them do this as their fulltime job and even fewer are trained in the

BASICS! Would you allow a taxi driver to give you a root canal? How about getting

brain surgery from a waiter? Of course you wouldn’t! You don’t risk what is

important to you with someone without the knowledge to help you…period!

There is plenty of misinformation when it comes to owning property in Mexico. It is

also the case that a little information can be dangerous (do any of you have a know-

it-all in-law?). Please use this basic primer for general information purposes only and

seek professional representation to buy real estate in Mexico. If you are considering

a pre-construction project, I stress this point even more - there are very few legal

protections with this type of investment...no matter what the nice salesman told

you!



How Foreigners Own Real Estate in Mexico

The Mexican constitution states that foreigners may not directly own land in the

“restricted zone”. Although this name sounds ominous, the restricted zone is simply

all the land up to 100 km (around 60 miles) from the borders, all the land up to 50

km (around 30 miles) from the Mexican coastline, and the entire Baja. All otherMexican lands may be owned outright (fee simple) by foreigners. To save the

problem of having to change the constitution (a bad proposition for any politician),

but still allow secure foreign investment, the Mexican government introduced a land

trust system called a fideicomiso (pronounced “fee-day-ee-co-me-so”).

The fideicomiso is created through a Mexican financial institution (bank) and this

bank holds the deed to the property…in trust. You and/or other persons that you

specify are sole beneficiaries to the trust (and therefore the property). You have full

rights to do whatever you like with your property: it can be developed (within the

law), rented, leased, sold, or given away. In other words, fee simple ownership in all

but name. The great news is that the property is not an asset of the bank. If thebank fails...the trust is transferred to another financial institution.

THE PROCESS

Find Your Agent - A good rule of thumb is to make sure your agent has 1-2 years

experience practicing real estate in Mexico, a minimum of 10 completed

transactions, CONOCER certification (a standards based competency certification

given by the Mexican government), and belong to Mexico’s professional real estate

association, A.M.P.I. - ASK FOR THE PROOF!

You do not need a license to sell real estate in Mexico. If that last sentence doesn’t

concern you, read it again.

Financing – If you need it…get it now! Nothing is worse than finding the perfect

Mexican property and losing it to someone else because the other person had their

ducks in a row before you. Most sellers in Mexico will not accept a “subject to

financing” in the agreement. Your agent should be able to connect you to some

lenders. An ethical agent will also disclose if he will receive a commission for this

service. Ask the question so you know who your agent is really working for.

Find the Property - If you are in a market that has an MLS, use it. Your agent

should have asked you a million questions by now to make sure that the properties

they will show you will actually meet your criteria. If you feel that the agent is not

listening to you…find a new one - quick! Don't be surprised if you ask for a 3

bedroom condominium, with a pool, and close to the beach and they come back

with a 1 bedroom house on a mountain with no running water (ok, that may be an

extreme example but it's pretty darn close).



You Found the Place of Your Dreams – The agent will put together the sales

agreement and, if he/she is a true professional, have it checked by a licensed real

estate attorney. Your agent’s fiduciary (first) responsibility is to protect you and your

rights (whether your agent knows that will depend on how well you interviewed

him/her). One other thing to consider – make sure you are working with an agent

that knows the property’s true market value and can negotiate. Just becausesomething seems like a good value doesn’t mean that is what it is worth. It’s only

money but it’s your money, right?

After the Sales Agreement Is Accepted - Your agent should give you an estimate of

closing expenses - based upon the actual accepted purchase price. Closing

expenses can be anywhere from 4 – 10 percent of the purchase price (more if

financing is involved). Some expenses are fixed and some are percentages of the

purchase price. The fixed expenses can be the same whether the property is 150K

USD or 950K USD and that is the reason for the spread. Generally, the more

expensive the property, the lower the percentage of the sale price the closing

expenses will be. These costs will cover setting up the trust, the first year’s trustfee, permits, the property acquisition tax, legal expenses, and more. None of this is

paid to the agent or the seller, only the Notario’s office (more on him later) and the

government. A quick side note – if the seller or agent asks you to declare a lower

amount for the property than was agreed to…run away.

Set Up An Escrow Account – Your agent should ALWAYS recommend you set up

an escrow account for the purchase. It is around $550-$650 USD but it is the safest

way to buy and probably the best money you will ever spend. The agent will set up

this account for you. Americans are very familiar with the escrow concept but it is

mostly unknown to Canadians. In a nutshell, the initial deposit and remaining

purchase amount are deposited into a U.S. escrow account. The money is only

disbursed when the buyer, seller and Notario agree that all conditions have been

met and there is a legal sale at the closing. Before the close, if a seller or agent ask

you to give them any of the purchase amount to hold in trust in their "trust

account"…run away.

Title Insurance – Depending on the circumstances of the sale or property, title

insurance may be a good idea. Title insurance rates are in the $5-$6USD / $1,000 of

the property’s value. Talk to your agent about the value of title insurance.

Until the closing, there is not much else to do. The Notario or attorney will ask you

to complete a beneficiary statement (a great concept as it avoids estate taxes

and/or probate...if you happen to leave this world) and ask for assorted paperwork

and I.D.s. You will also have to decide if you are going to be in Mexico for the closing

because, if not, a power of attorney may be needed so someone can sign on your

behalf. Closings generally take 30-60 days on a cash sale and 60-90 on financing.



At the Closing – All parties are represented. The Buyer and Seller sign where they

must and verify that all information is correct. The Notario signs off and the property

is transferred to the buyer once the Notario verifies that the funds have been wired

to the Seller. The Notario is the only person that can transfer property from one

owner to another.

Congratulations, you now have the pleasure of owning a Mexican home. Have a

margarita and count your lucky stars that you worked with competent real estate

professionals.

AFTER THE SALE - What now?

For you folks that want to know as much as possible, I would like to add this little

prologue. There are some things you will be responsible for after the sale.

Bank Trust Fees - Paid yearly and run $400-$650 USD/year depending on thebank. For the most part, there is no differentiation between institutions, other than

the price. Your first year is covered in the closing fees.

Property Taxes – Almost free in Mexico but still worth mentioning -

Currently they are around $50 for every $100,000 of the appraised value.

Property Insurance – Most folks do not have it here (concrete doesn’t catch fire

easily) but it is worth exploring.

Utilities – You have to pay them here too. The good news is you won’t freeze to

death if the power is cut in the winter. Most utilities are equal to or less than U.S.

and Canada rates.

A Little More About the Notario – The Notario is the ONLY entity in Mexico that

can transfer title in Mexico. The Public Notario is not like a public notary in the U.S.

and Canada. To qualify as a Notario, the person must have a Mexican law degree, be

at least 35 years old, and have at least 3 years experience working in a public

notary office, pass a stringent exam, and be appointed, for life, by the state

Governor. The Notario’s fiduciary responsibility is to the federal government (one of

the little secrets you need to understand and the main reason you need professional

representation for a real estate transaction).

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About John Forget

John Forget lives in Bucerias, Nayarit Mexico with his wife, Christie, and their four

teenage children. John is the broker and, with Christie, owner of Elements Realty

Group. Originally from Canada, John took his real estate training in Alberta and has

been practicing real estate in Mexico since 2004.



Current Certifications and Memberships – REALTOR®, AMPI, MLS, CONOCER,

CIPS (Certified International Property Specialist), a founding member of the Mexico

Real Estate Network and is currently working on his TRC (Transnational Referral

Certification).

Geographic Areas of Expertise: Puerto Vallarta, Nuevo Vallarta, Flamingos,Bucerias, La Cruz de Huanacaxtle, Punta Mita, Sayulita, Litibu, San Pancho (San

Francisco), La Peñita, Guayabitos and San Blas. Through the Mexico Real Estate

Network, John is able to assist clients all over Mexico.

P.S. The reason John works so hard for his clients is because teenagers eat

a lot and university is expensive. Call him at 1-888-54-MEXICO or email

[email protected] or visit Elements Realty Group at

www.ElementsOfMexico.com. This article can be found online at

http://www.homeinmexico.com/The_Mexico_Real_Estate_Ownership_Mini_G

uide.html

mailto:[email protected]

http://www.elementsofmexico.com/

http://www.homeinmexico.com/The_Mexico_Real_Estate_Ownership_Mini_Guide.html


mailto:[email protected]

http://www.elementsofmexico.com/



mexico real estate guide by john forget - realtor

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