Purchasing Property in Mexico: Part 4
In this entry about purchasing property in Mexico you will learn about the promissory contract and the purchase sales contract. Everything you need to know about both, when to use them, how they work and what role they play when buying real estate in Mexico is right below.
What is a promissory contract?
One of the most important documents that will be reviewed during the real estate acquisition process is the promissory contract. It is the first formal document that outlines the details and terms for the sale and acquisition of the real estate transaction. The promissory contract’s purpose is to outline details such as legal description of the property, agreed price, penalties and other items committing both parties to an obligation to enter into a future document: the purchase sales contract. The promissory contract is especially important when the title transfer takes time, such as when buying pre-construction.
When is the promissory contract prepared?
The promissory contract is prepared after the offer to purchase contract has been accepted. This means all negotiations are finished, the final selling price has been agreed on, and the terms and conditions have been accepted by both the buyer and the seller.
What should be included in the promissory contract?
The promissory contract should clearly set forth the specifications that will eventually be continued in the purchase sales contract. It should include:
- Name and personal information of the buyer
- Name and personal information of the seller
- The seller’s promise to sell
- The buyer’s promise to acquire
- A full legal description of the property
- Outlines purchase price, deposit and payment schedule
- Delivery date for possession and transfer of the title
- Responsibilities of both parties
- Terms and conditions
- Penalty clauses in the event of default
- Signature of both parties and witnesses
How binding is a promissory contract?
If properly structured, it is legally binding and fully enforceable in a court of law.
What is the purchase sales contract?
The purchase sales contract binds the buyer and the seller; it is the last contractual document required to transfer the rights of the property to the buyer. This contract needs to be formalized in a public document before a notary public, in which the notary public will follow all provisions to transfer the property legally. It is important to note that the offer to purchase and the promissory contract are intended to give the details and preparation for the transfer of the property, whereas the purchase sales contract is the instrument used in the actual, legal transfer. While the promissory contract is a promise to convey, the sales contract is the actual conveyance.
When do we use the purchase sales contract?
The purchase sales contract is used when you finalize the transaction. The promissory contract is temporary and only obligates both parties to enter into the future contract, whereas the purchase sales contract is the final action. The latter is like your title deed in the U.S., it needs to be signed in front of a notary public and recorded at the public registry.
Now if you have any question about how to purchase property in Mexico or about any of the TOP MEXICO REAL ESTATE properties we have listed anywhere throughout Mexico, please feel free to contact any of our Top Mexico Buyer’s Representatives and we will be glad to answer all of your questions and to help you find your very own piece of paradise.
And remember, here at TOP MEXICO REAL ESTATE…
We make it happen!
We would like to thank Quetzal for sponsoring this blog. Quetzal is a new development in Bahia Principe. To learn more about Quetzal, please click here.