How To Buy Your New Home (Or Investment Property) In Mexico
Important Points To Consider
It is simple and straightforward to buy property in Mexico for foreigners. However, you need to do your due diligence and hiring a real estate professional is a must.
You do need to have an idea about your property objectives before you dive in. Are you looking for property to live in… or are you looking for investment? The end-use for your property may dictate how you go about purchasing it.
Read more: Best Places To Buy Real Estate In Mexico
What is “Ejido”?
In 1917, the government declared that all land in Mexico would be “ejido“. This means, communal land used for agriculture and farmed by locals. This implied no one could own private property. Nowadays not all Mexican land is ejido. It’s important to make sure that any property considered for sale is not classified as such.
Mexico passed the Foreign Investment Law in 1973. This allowed foreigners to purchase real estate anywhere in the country. The only restrictions being border and coastal land. That is to say, both 100 km of international borders or within 50 km of the coast. In 1993, the law amended to allow for sale within restricted areas through a fideicomiso. To clarify, fideicomiso is a trust agreement established with a Mexican bank.
What is Fideicomiso?
A fideicomiso allows a foreign buyer to hold property with all the rights of a citizen. With a single fideicomiso, you can hold many Mexican properties. Above all, owning the properties with continuance, and will the property to your heirs. Plus, you can transfer the trust to another foreign buyer, if you want to sell.
A fideicomiso is good for 50 years and is renewable thereafter (by you or your heirs). It can be held by one or more individuals or by an entity (LLC, for example). The setup ranges from US$500 to US$1,000, and maintenance fees for US$500 to US$700 per year.
Buying Property In Mexico Through A Corporation?
Foreigners can also own land in restricted areas through a Mexican corporation. These can be 100% foreign-owned. Only consider a corporation when buying real estate strictly for investment or business. If you plan to subdivide and develop land, a Mexican corporation makes sense.
Corporations come with more restrictions and reporting requirements than fideicomisos. You need to submit monthly reports on income and expenses. After that, a certified accountant needs to complete it. Then, send it to the Mexican Department of Treasury. Property held in a corporation are considered commercial, so it’s subject to extra taxes.
The initial costs to set up a corporation will vary depending on the attorney. The least required is $50,000 Mexican pesos (about US$2,800 at today’s exchange). Moreover, you’ll also incur costs for the certified accountant to maintain it (US$600 to US$800 per year).
Always involve your attorney in reviewing the legal status of the land. Most importantly, include title search, preparation of contracts, and setting up your corporation.
Read more about fideicomiso here.
Lastly, the buying process should play out like this…
Steps To Buy Property In Mexico
1. Offer And Acceptance For Buying A Property In Mexico
Make an official offer. Mexican law recognizes verbal agreements. However, you should write both the offer and acceptance. This ensures no confusion on terms and conditions. Send your offer in the form of an “Offer to Purchase” contract. Detail the main terms of the sale. Include price, payment plans, details on an earnest money deposit. Deadline for the seller to accept the offer is usually included. These are all standard practices when buying property in Mexico.
As soon as the seller has accepted your offer, make an earnest money deposit. Either by the real estate agent or the buyer’s attorney must hold this payment. You should include a clause in the offer that guarantees the deposit if either a promissory agreement or a final sales agreement isn’t executed in a certain amount of time; also note who received the deposit. If the seller requires it to be non-refundable, make sure it’s not more than you’re willing to lose.
2. Promissory Agreement
3. Purchase/Sales Agreement
4. Closing And Title Transfer
Firstly, verify everything is correct. Secondly, when all the closing paperwork is ready, you will get a notice of a due date and the final closing costs due. Finally, you will sign the deeds, payments settled, and the title transferred to the bank.
|Certificates of no encumbrances and no tax lien||US$200 – US$300||Buyer or Seller (Negotiable)|
|Notary fees||US$650 – US$1,200||Buyer|
|Public registry filing fee||US$100 – US$300||Buyer|
|Appraisal fee||US$300 – US$500||Buyer or Seller (Negotiable)|
|Acquisition tax||2% of purchase price||Buyer|
|Trust permit fee (50 years)||US$1,000||Buyer|
|Foreign investment registration fee||US$300 – US$800||Buyer|
|Administrative and closing costs involved in a typical transaction
*The seller may use his own real estate attorney for the transaction. In which case, he would be responsible for covering this separate legal fee.
5. Delivery Of Unit
Finally, do a walk-through to ensure that your property is being handed over in good condition before you take it. Once you’re satisfied, you’ll sign a delivery statement. This details the official delivery date of your property.
Keep in mind that your attorney can handle the entire purchase process. As a result, you don’t need to be in the country for every step. Lastly, by granting your lawyer a power of attorney, they can assist you through each stage of the sale. That is to say, every stage all the way up to the signing of the closing deed on your behalf. You just bought a property in Mexico, congratulations!