Mexico Real Estate offers many great opportunities.  However, because of the fact that laws and processes are different here in Mexico, many non-Mexican buyers make costly errors because they don’t take the time find the information they need first.  In some cases when buying Mexico homes, the new buyers even make blunders that they would avoid back home – simply because of the uncertainty of being in a different business culture.  Based on their years of direct experience in the Mexico property market, a panel of experts from the TOPMexicoRealEstate NETWORK, “certified professionals that specialize in guiding new buyers through the Mexican purchasing process,” has identified the top 5 mistakes made by non-Mexican buyers.  The following is a compilation of their answers, giving a general overview of their answers for each of the five points, then giving their exact answers below.  Each mistake is followed by advice from the panel on how to avoid causing problems for yourself in that area.

The real estate experts who contributed to this article are:

Jim Scherrer – Puerto Vallarta Real Estate

Linda Neil – La Paz Real Estate

Mitch Keenan – Yucatan Real Estate

Thomas Lloyd – Playa del Carmen Real Estate

The top 5 errors non-Mexican buyers make are:

#1 Not surrounding yourself with reliable, experienced professionals

The panel’s answers point to this as the number one error that non-Mexican buyers make when buying Mexico Real Estate.  The key behind this is to find an experienced, reliable broker or agent.  After this, it is also necessary to find a notary public – again with knowledge and experience to do things right – and a Mexico title insurance company, among others. A reliable agent is central, as they can also help point you to other trustworthy professionals.

The panel’s answers are:

“Not using a reputable Agent/Broker, not using a reputable notary public, and using a Title Company.” – Mitch Keenan – Yucatan Real Estate

How can you avoid this error?

“Check with the USA Consul in Mexico. They have a list of recommended Notary Publics and Agents.” – Mitch Keenan – Yucatan Real Estate

“When you select an agent, make sure that the agent is member of AMPI, The Mexican Association of Real Estate Professionals.  Also, check references.  This agent is representing your purchase in a country where you are not familiar with the laws; you need to be confident that that person is.” -  Linda Neil – La Paz Real Estate

“These top 5 errors are only a few examples of the items and risks that a non-Mexican buyer must administer. There are hundreds of other topics that a buyer must address and decide upon; only through EXPERIENCE can teach us to look for these issues. The best way to avoid all of these mistakes and other errors in the purchasing process is to surround yourself with experienced players. It costs the same commission rate to hire an agent with 15 years experience vs. an agent with only 2 months experience.  If you are making a $200,000 dollar investment wouldn’t it make sense to hire someone with credentials and years of experience to represent you.” – Thomas Lloyd – Playa del Carmen Real Estate

#2 Buying from the listing agent and not finding an exclusive buyer’s agent

Even if an agent seems honest, reliable or experienced, no agent who is representing the seller can also represent they buyer fairly, since each one needs an agent protecting only their interest.

The panel’s answers are:

“The most common mistake I have seen are for new buyers to retain the services of a real estate representative just because he was advertising a property on the internet and had his email and phone number on a yard sign next to a property. I am surprised as how some non-Mexican buyers who are very diligent in their money investment decisions while in their home countries come to Mexico and will choose to retain the services of a real estate agent based on the fact that the agent is able to speak English.” – Thomas Lloyd – Playa del Carmen Real Estate

“Buying anything from a listing agent or the sales agent representing the developer; their loyalty is to the seller and they have a fiduciary duty to that seller. No matter how honest, nice, and sweet that agent may seem, it would be a conflict of interest for him to discuss any negatives about the property or to truly help the buyer in getting the best price and contract protection.” – Jim Scherrer – Puerto Vallarta Real Estate

How can you avoid this error?

“Use a professional buyer’s agent exclusively representing buyers and having no listings.” – Jim Scherrer – Puerto Vallarta Real Estate

“The agent who represents you as a buyer cannot represent the seller as well.  Agreeing to and signing an agency disclosure agreement can serve as further protection.” – Linda Neil – La Paz Real Estate

#3 Not carefully considering the implications of different property types, locations, etc.

Different property types have different have various considerations to be made.  Especially the area of pre-construction purchase of Mexico Condos needs special attention; preconstruction offers excellent opportunities, but for the buyer’s protection, the right steps need to be followed.

The panels answers are:

“Buying a pre-construction Mexico Condo with a payment schedule based on the calendar.” – Jim Scherrer – Puerto Vallarta Real Estate

“Buying in a remote (and supposedly growing) area in order to save money. As everyone knows, the three main rules to buying real estate anywhere are location, location, and location. During periods of recession and/or slow growth, these remote areas are the first to drop in value and the last to recover. With current economic conditions the way they are, it may be many years before the remote areas see any appreciation in value.” – Jim Scherrer – Puerto Vallarta Real Estate

“You should not attempt to buy Ejidal property. Ejidal property offers considerably lower prices, but it must be converted to private property before it can be sold.” – Linda Neil – La Paz Real Estate

“When purchasing in preconstruction, to allow for some money to be held back until the legal possession has been delivered. Many times the buyer will have paid out the entire value of the property, have received the physical possession, yet remain waiting for the developer to deliver the legal possession.” – Thomas Lloyd – Playa del Carmen Real Estate

How can you avoid these errors?

“The buyer needs an agent that knows how to write purchase contracts that protect the buyer’s initial deposit and progress payments. They should be prepared with payment schedules based on construction milestones, delivery dates, closing date, etc. as opposed to calendar dates. They should also have construction delay penalty charges, contingencies for 100% refunding upon failure to perform, and escrow protection.” – Jim Scherrer – Puerto Vallarta Real Estate

“Include only private property in your property search.” – Linda Neil – La Paz Real Estate

#4 Not reviewing contracts and documentation or following processes properly

Reviewing all documentation and following processes properly is necessary in any real estate purchase.  However, this is especially true when buying Mexico Real Estate, where regulations are not as well defined to protect the buyer, and taxation and other processes follow different rules than what buyers are used to in their home country.

The panel’s answers are:

“Many first time buyers do not understand the implications of the Capital Gains Tax issues. They believe that capturing a low acquisition cost on a property will decrease their closing costs expenses but forget to understand the more expensive capital gains tax levied against profits on the sale of the property.” – Thomas Lloyd – Playa del Carmen Real Estate

“A potential risk is not to check if you are dealing with the legal owner of the property.” – Linda Neil – La Paz Real Estate

“Assuming everyone they deal with has the same business ethics as they are accustomed to in the US or Canada, thereby not paying extremely close attention to ALL documentation they are signing.” – Jim Scherrer – Puerto Vallarta Real Estate

“Not including a clause in their purchase sales agreement to allow for the first beneficiary (the buyer) to have the voting rights transferred from the fiduciary for condo association meetings.” – Thomas Lloyd – Playa del Carmen Real Estate

“Some non-Mexicans believe they can hold property with a private contract and avoid paying closing costs and taxes. They are placing much of their hard earned money at risk by not receiving a title duly subscribed with a notary public and filed in the public registry.” – Thomas Lloyd – Playa del Carmen Real Estate

“Depositing money in an agent’s or seller’s personal account.” – Mitch Keenan – Yucatan Real Estate

How can you avoid these errors?

As Thomas Lloyd points out above, “these top 5 errors are only a handful of examples of items and risks that a non-Mexican buyer must administer.”  It is almost impossible for an new buyer to manage, and often even be aware of, all of these considerations.  Therefore, it is of key importance to have a reliable agent whose experience gives them the necessary knowledge of the various contracts, processes and documents involved.  Additionally, the panel points out the following:

“Never deposit money or give money to an agent or a seller without verifying that the agent has a verified earnest money account or escrow account.  It is always a good idea to spend the extra $500 bucks to set up an escrow account with a title company to hold the deposit.”  – Mitch Keenan – Yucatan Real Estate

“Deal only with the legal owner of the property or a legal power of attorney.  It is necessary to request, receive and review a copy of the title.  For cases such as this, your agent will have to know Spanish, or you will need to get a certified translation.  You should also have a title investigation, and buy title insurance.  Even if the prices are high, it is worth avoiding risks involving the title.”  – Linda Neil – La Paz Real Estate

#5 Rushing a Decision

Your Mexico real estate purchase is one of the most important decisions you will make, whether it is property for your home, or for an investment.  Rushing into a decision can have undesired, long term consequences.

The panel’s answers are:

“Being pressured into a hurry up decision.” – Mitch Keenan – Yucatan Real Estate

“Spontaneously buying on the beach, having no idea of the many magnificent properties available with better views, neighbors, lifestyle, etc.  than can be found on the beach.” – Jim Scherrer – Puerto Vallarta Real Estate

How can you avoid this error?

“Never be pressured into a deal. Take your time do your due diligence.” Mitch Keenan – Yucatan Real Estate

If you feel you are being pressured, or not being presented with all the best options, also see the advice for error #1 “Not surrounding yourself with reliable, experienced professionals,” and error #2 “Buying from the listing agent, not finding an exclusive buyer’s agent.”

For further information about buying Mexico Real Estate and avoiding costly errors, contact a Mexico Agent in the TOPMexicoRealEstate NETWORK; OUR EXPERIENCE; thousands of Property transactions & years of assignments in Mexico AT WORK,  PROTECTING YOUR INTERESTS.

I have written several articles on the Yucatan real estate purchasing process here in Mexico Articles about the role of the Mexico Notary Public, about rectifying property measurements, and even about Mexico real estate taxes Below are the last points I wish to share with you before covering other topics dealing with owning property in Mexico

CORPORATION CAPITAL GAINS taxes are a little more complicated. If you are holding title by utilizing a FOMC (Foreign Owned Mexican Corporation) you are definitely going to want to employ a good accountant He or she will be able to help you reduce your ISR debt when you sell.

TITLE INSURANCE

Title insurance is available in Yucatan and Quintana Roo Advise your agent and notario that you would like title insurance.

MEXICO MORTGAGE LENDERS

There are mortgage lenders that will loan to foreign buyers Ask you agent for a reliable lender Keep in mind that lenders in Mexico usually require a minimum 30% down stroke, interest rates are typically higher than in the USA, there are many hoops to jump through and junk fees are pricey Deals that involve a mortgage usually take more time to close and often cause a lot ofbrain damage for all parties.

Mitch Keenan has been a Licensed Broker in the United States since the 1980s. He holds a GRI and a CRS from NAR (National Association of Realtors). With over ten years of living and working in the Yucatan real estate industry, Mitch brings American business ethics and Mexico business experience together to give buyers unparalleled service. 512-879-6546

THE www.TOPmexicorealestate.com NETWORK

Mexico s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!

Mexico Real Estate Investments have been extremely profitable in this country for the past number of years But the overall consensus with our panel has been “surround yourself with Mexico real estate experts” to avoid unsuspected pitfalls Stewart Title has a team of lawyers that assist non-Mexican buyers, investors, and developers who are coming down in record numbers to purchase properties and develop in this growing Real Estate market

A question was asked a few days ago regarding a property purchase.

Mexico Real Estate Investment QUESTION

“Can you give us an estimate on the amount that would be due on Mexico Acquisition Taxes for a pre construction condo purchase

I entered into a contract in the summer of 2007 for a unit at Mexico Pre construction Condo “X”. They required a 30% down payment with a final payment of 70% at close.

My contract is all in US dollars How do I calculate the amount that should be captured on the deed and how will this affect the amount payable for the Acquisition Taxes In 2007 the Mexico exchange rate was approximately 10 pesos per dollar and in 2009 we are approximately 15 pesos per dollar

Mexico Real Estate InvestmentANSWER

Even though the purchase price was set in US Dollars, the deed by which the property is transferred will mention Pesos. Since 30% of the purchase price was paid previously at an exchange rate of 10.00 Pesos p/dollar and 70% will be paid at 15.00 p/dollar, the most practical way is to determine the amount paid in Pesos at the time of each payment:

Example:

Purchase Price in Dollars in July 2007 = USD$ 10,000.00

30% Down payment at 10.00 Pesos per dollar paid on July 2007= $30,000.00 Pesos.

70% at closing at 15:00 Pesos per dollar paid on July 2009 = $105,000.00 Pesos

Purchase Price in Pesos to be declared in the deed: $135,000.00 Pesos

It s important that the purchase price calculated is well determined, since it could affect the parties when calculating closing costs. The seller could pay more Mexico Capital Gains Taxes or the purchaser can pay more transfer of property tax and deed registration at the Mexico Public Registry if the figures are not registered correctly.

Ivan Castillo is the regional manager of the Stewart Title offices for the Yucatan Peninsula and Los Cabos region.Both a practicing lawyer and administrator, he has been working in Mexico Law specializing in real estate for more than 13 years Licensed in Mexico, his offices administer a variety of services ranging from Escrow Services, Legal/Closing Coordination, Title Insurance and brokerage services for American, Canadian, Spanish & British buyers and owners Please note that the above article is his professional opinion and an in depth study will be necessary for individual case by case accounts www.TOPmexicorealestate.com 512-879-6546