How To Buy Property In Mexico

How to buy property in Mexico?

Notwithstanding its political unpredictability, Mexico’s economy is expanding gradually.

Due to Mexico’s alluring combination of white sand beaches, indigenous history, famous towns, and more, the country’s already enormous tourist industry keeps expanding.

As a result, there are several methods to take advantage of this chance, particularly by investing in real estate such as buying a home to live and retire in Mexico or investing in businesses like restaurants or hotels.

However there are limitations and unique regulations when buying property in Mexico. As a result, we wish to provide you with information on how to complete the procedure smoothly.

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).

Can Canadian And US Citizens Buy Property In Mexico?

It’s time to dispel some of the longest-lasting misconceptions about buying real estate as a Canadian or American and if it’s even viable to purchase a condo in Mexico.

Anywhere in Mexico, property can be purchased by Mexican nationals, although in certain of the more sought-after districts, international buyers must pay additional fees.

Property (a home or condo) must be purchased through a fideicomiso, or fideicomiso trust, with a Mexican bank if it is within 50 kilometers of the coast or 100 kilometers of a border.

Foreign buyers planning to live and retire in Mexico are advised to see a notario as they prepare all the necessary papers and documentation to establish the fideicomiso.

The fideicomiso, which is created at the closing and title stage of the transaction, is a 50-year renewable trust that typically costs $600 a year.

It should be remembered that every real estate transaction in Mexico need the participation of a Notario Publico for all formalities and documentation.

These notaries should not be mistaken with a standard notary public in the US since they have substantially greater authority and expertise.

The typical procedure for a Canadian or US citizen buying property in Mexico’s “restricted zone,” though it may vary, should be:

• The adage “a picture is worth a thousand words” could not be more true.
• To sell or acquire, sign the original sales agreement. For pre-construction purchases, a deposit of 5%–10% is often required, whereas the minimum down payment for previously constructed homes is 40%. The Spanish-language contract must be drafted by a Mexican attorney and is legally enforceable.
• Submit your down payment and any subsequent payments as specified in your sales contract by wire transfer.
• The seller calls your bank to begin the fideicomiso trust application once you have paid the remaining payment on the property in full. Oftentimes, at this stage, you can take possession of the property.
• Cover closing expenses, taxes, and fees. In Jalisco and Nayarit, closing expenses are often approximately 6%. Check out our closing costs estimator.
• The Public Registry releases the last deed (escritura) to the property within three months of the closing date, at which point it becomes legally yours.

The entire registration process for a property can be finished in 45 to 100 days.

Depending on the kind of real estate being purchased, such as pre-construction agreements, beachfront homes, land acquisitions, etc., the procedure could be slightly different.

How To Buy Property In Mexico

STEP 1: Make An Offer

Often, your attorney would draft a contrato de promesa (promissory agreement) to do this.

STEP 2: Reserve 10% As Earnest Money Escrow

You will be required to reserve a specific sum (often 10% to 20% of the purchase price) as earnest money once your offer has been approved in writing. This ought to be kept with a third party under escrow.

Don’t provide this money to the merchant under any circumstances. Notarios won’t keep deposits in their bank accounts because they don’t want to be responsible for the monies’ tax obligations.

You can probably find a method to recommend if you’re dealing with a lawyer or real estate agent.

One option calls for the money to be kept in escrow in US dollars.

The deposit is transmitted at the current exchange rate as soon as the deal is about to close.

By doing this, the conversion rate issue is avoided. If the earnest money is converted immediately into pesos, sits about for a few months, and the sale ultimately falls through, someone will be responsible for the currency changes and the exchange fee twice.

And most likely it will be you, the customer.

You might also have a cashier’s check drawn in the name of the seller and have your notary or another reliable party store it.

Title insurance companies typically offer escrow services if you are dealing with them.

Escrow agents in the United States are licensed and are therefore legally accountable for ensuring that the terms of a contract are satisfied before the money is released.

Mexico is an exception to this. There shouldn’t be any issues if the escrow agent you’re working with is an honest real estate agent.

You won’t be able to stop him if he steals your money, though.

STEP 3: Ask About Title Insurance

It is advised that, if you can, you obtain title insurance for your property.

But, a notary will check the title of a property to make sure there are no current liens on it. The notary will further look into whether taxes have been paid. Moreover, the research could not cover the whole line of ownership.

Yet a title insurance firm will go further to make sure there aren’t any hidden surprises. Purchase the property elsewhere if the title search indicates that the title is not clear.

Brokers and even lawyers will occasionally claim that title insurance is not required. Therefore, it is advised that you get title insurance if it is offered.

You probably won’t ever use it, but you simply never know. If someone else makes a claim against your property, title insurance will protect you by paying you back or defending your case in court.

Without title insurance, you have few options in the event that something goes wrong, and the ones you do have will probably be costly and time-consuming.

STEP 4: Hold Off On Signing The Closing Documents While The Notary Orders An Appraisal, Examines The Title, And Completes The Closing Paperwork

At this stage, you must draft a contrato de compraventa (purchase sales agreement or contract of purchase and sale). You would typically ask your lawyer to handle this. It is in Spanish that the contract is deemed to be enforceable.

The English translation, even if it is side by side, could not be exact. So, ask your lawyer to review and explain the Spanish translation.

Your attorney can prepare the paperwork for a direct deed based on how you’re acquiring the property.

Your lawyer will get the paperwork necessary to register your acquisition with the Ministry of Foreign Affairs, as well as assist you in establishing a bank trust or a Mexican business.

Your title insurance company and the notary will check the property’s title in the meantime.

They will accomplish this by asking for a copy of the title deed as well as records like the certificado de libertad de gravamenes (lien certificate).

This document will outline the property’s specifics, including its size and status  (residential or commercial), as well as the name of the registered owner.

A certificado de no adeudo (non-lien certificate), if granted by the local tax office, will demonstrate that no taxes are owed or will expose unpaid back taxes.

Also, they will check to see whether any other property-related payments, such water or electricity, are unpaid. At this point, you can also have the property evaluated to determine its assessed value.

Obtain copies of the seller’s paid cable, homeowner’s association, water, energy, and other utility bills if you’re buying a house. An address still has unpaid invoices associated with it.

You will be in charge of them, not the previous owner. Be sure that any outstanding mortgage debt is settled by the seller prior to the property title passing to you because this rule also applies to delinquent mortgages.

If the seller employed domestic staff such as a maid or a gardener, you need have a document signed by each of them confirming that they have individually received their severance compensation and also that their rights have indeed been met.

Start over with a new contract of employment that is drafted by your lawyer if you are interested in keeping them on board.

STEP 5: Real Estate Closing 

You will meet with the seller, your broker or attorney, and the notary for the closing once you get confirmation from your attorney, notary, and title insurer that the property’s title is sound and the purchase of sales agreement is prepared for your signature.

After receiving the deed (escritura), you must either present a cheque for the remaining balance or arrange for the money to be deposited into an escrow account, with the escrow agent releasing the monies once they have the deed in hand.

STEP 6: The Notary Registers Your Deed

The deal isn’t actually finished until the notary has registered your ownership with the office of land registry, even though you will have a copy of every document related to the property.

Over the years, notarios failing to correctly complete this final step has been the subject of all kinds of horror stories. To make sure this has been done, you must check in with the notario.

After you have your registered deed, check to see if each page has a seal and if there is a certificate of registration, which ought to be there.

With these documents in hand, you may visit the land register office, where staff members will check the certificate’s registration number. Also, they’ll show you proof that the transaction has been recorded in their books.

STEP 7: Have A Mexican Will Prepared For You By Your Attorney

While it is the least ideal option to make sure your heirs receive your Mexican property, it is possible to transfer it to them as directed in your US or Canadian will.

Your heirs will undoubtedly spend months, if not years, arguing with Mexico’s bureaucracy over your estate if other arrangements have not been made.

By having your lawyer draft a will in Spanish that distributes your properties and possessions in Mexico, you may spare your family the suffering, time, and money.

STEP 8: Inform The Ministry Of Foreign Affairs Of Your Intent To Purchase

No matter how you want to manage your property while you live and retire in Mexico, you must notify the Ministry of Foreign Affairs of your purchase intention.

As previously noted, the permit application is often made on your behalf prior to the closing by the notary or your attorney.

You should not be concerned that you will have to wait months for the papers to be processed because issuing these permits is a regular procedure. In reality, the government promises to issue them in a short period of time.

You can get your permit within five business days if you’re acquiring property through some kind of trust and you apply at the ministry’s headquarters in Mexico City.

The permission must be issued in 30 days if you submit an application at one of the state offices.

You must register the firm with the Ministry of Foreign Affairs if a Mexican corporation will be created and hold title to the property.

In order to complete the registration, the Ministry has 15 days. Any of those situations will result in the trust permission or registration being automatically regarded as permitted if the ministry’s deadline has passed and you have not heard anything.

What Are The Issues You Can Encounter When Buying Property In Mexico?

1. Issue Of Ejido

There wouldn’t be anything interesting to discuss in terms of how to buy property in Mexico if the ejido land issue didn’t exist.

Nearly all of the tales you’ve heard about Mexican officials seizing foreigners’ property are based on events that happened on ejido land. Because you don’t actually own ejido land once you buy it, it might be a great deal.

The term “ejido land” refers to communal agricultural land that was given to a community, frequently an indigenous tribe. Although not being worth much at the time, most of this land is today prized beachfront real estate.

You would require the consent of all community members in order to purchase any portion of it. You would also need to detach your lot from the ejido and convert it to a freehold title.

The complicated and challenging procedure of converting ejido property to private ownership is the reason why so many people have chosen not to do so legitimately, instead choosing to bribe authorities, fabricate documents, or just hope that no one would find out in the future.

Nonetheless, there are respectable law firms in Mexico that are experts in transforming ejido land into real estate that may be sold under a freehold title.

The following is advised if you believe you have an excellent opportunity to purchase legally converted ejido land:

• When making a purchase, be sure the property is listed as having a freehold title in the property registration. Don’t convert it at the same time as your transaction.
• Have a separate, outside attorney examine the history of the title and determine if the transfer of the ejido land to a freehold title was legitimate.
• Invest in title insurance to protect yourself from potential lawsuits, whether they are meritorious or unjustified.

2. No Foreign Ownership Restrictions

In general, there are no limits on who can own residential property in Mexico, and the title can be held in their own name.

It’s not necessary to hold it in a trust, but you can do so if you want to secure your assets or use it for estate planning.

Nonetheless, there will be particular regulations that apply if the property is close to the ocean or a border.

3. Special Rules For Land Or Coastal Border

Mexico has a limited area known as the Zona Restringida, which is a region that lies 50 kilometers (31 miles) from the coastline or 100 kilometers from an international land boundary.

Non-citizens who wish to live and retire in Mexico have been prohibited from owning real estate in this area in their own names since the early 20th century.

Yet the government developed a workaround in 1973, which was established in its current form in 1993, in order to promote international investment.

In other words, it permitted the utilization of a trust to buy real estate inside the prohibited zone. This trust, known as a fideicomiso, is comparable to a land trust in the US.

You are both the trust’s Grantor and Beneficiary, according to American trust jargon, as the buyer of the property.

Therefore you have total control over the property’s acquisition, disposition, and management. The Trustee is an institution of your choice.

4. Notary In Mexico

In contrast to much of Latin America, the United States, and Europe, the notary’s function is distinct in Mexico. A lawyer with at least five years’ experience is required for the notary position, which the state governor chooses.

The notary represents you during the transaction as a buyer in Mexico. He does not act as the seller’s agent and is not an unbiased third party.

For a basic property transaction, there is typically no need to retain a second lawyer. Most closely resembling escribanos in Argentina and Uruguay are notaries in Mexico.

For a non-standard sale, however, you could require a second lawyer. For instance, if you’re simultaneously launching a firm or a corporation with the acquisition.

A title search will be done, all the documentation will be prepared, the real estate transaction will be processed, the new title will be recorded with the municipality, and taxes and fees will be collected.

If you’re not a native Spanish speaker, be sure the notary you choose is proficient in English. He will translate for you and clarify what all the paperwork in Spanish is stating.

It is advised to get another translator who speaks your language apart from your real estate agent. 

5. Official Documents Are In Spanish

Spanish is the official language in Mexico, therefore your closing documents and sales contract should also be in Spanish.

Yet, the majority of competent realtors will provide you with an English translation of the sales agreement for ease of use.

This is a fantastic tool for ensuring that both you and the seller are clear on the terms of the transaction, including the sales price, the products that are included, and any unique requirements or contingencies.

But keep in mind that if there’s a discrepancy between the paperwork you signed in English and Spanish, the Spanish version will take precedence.

Ensure that any modifications you and the seller make to the English version are reflected in the Spanish version after the talks are through.

You may, at your option, request that a third party interpret parts of the official papers.

Final Thoughts

Should you buy property in Mexico? Of course. Most likely, you’ll have a positive experience buying property in Mexico.

Throughout South America, there are several top-notch real estate firms and a greater number of really licensed agents.

Ensure the real estate firm you choose to purchase from is trustworthy, uses actual agents, and abides by the law.

If you’re unsure, don’t be afraid to call a timeout and inquire further until you’re satisfied.

Never be reluctant to ask questions about Spanish conversations you overhear or unfamiliar phrases.

Your property in Mexico will ultimately be fun to have, so it will be worth the effort.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.