Are you thinking of buying a property in Mexico? Well, there are legal basics you need to know in order to make your purchasing process easier. First of all, you need to know that buying a house in Mexico as a foreigner is different than it is for a Mexican; the reason is that there are different laws that apply to foreigners. This article will result very helpful for you, but you will also need the help from your agent; or even better, from a team of professionals to guide you through all the purchasing process. Don’t hesitate to contact us!
The Restricted Zone
To begin with, according to the article 27 of the Mexican Constitution, a foreigner can’t directly acquire a property within 50 km from the water and 100 km from the border. This area is known as the restricted zone. However, Mexico’s Foreign Investment Law allows foreigners to acquire indirectly a property in the restricted zone through two legal entities:
- Bank trust (fideicomiso): This is when a bank is hired on the client’s behalf to hold the title deed. The client pays a yearly maintenance fee, which can be around $400-$800 USD. However, the bank maintains all the rights of the ownership. Although, it is the beneficiary who enjoys the use of the property and can benefit of it: use it, sell it, rent it, modify it, etc. This entity only allows one property per bank trust.
- Mexican Corporation: It requires two shareholders and one of them must have a Mexican Tax ID; for which he needs to get and maintain a permanent resident visa. With the Mexican Corporation you can own multiple properties. Nevertheless, it requires the corporation to do a monthly and an annual report of taxes. It is a good idea to hire an accountant if you choose this entity.
Once you choose the entity that works best for you, the process continues and this leads us to the type of properties.
Type of Properties
- Re-Sale (re-venta): This is when you purchase a property directly from an individual and usually the house is ready for occupancy. When buying through re-sale, an escrow account is recommended. An Escrow is an insured account that holds the money on behalf of the buyer and the seller. The money is released once the conditions of the contract are satisfied and the buyer assumes the conditions of the property.
- Pre-Construction (pre-construcción): It is also known as pre-sale and you purchase directly from the developer; usually you will have to wait for the construction to be completed in order to be able to use your property. When purchasing pre-sale, the money goes directly to the developer, as it is used for the construction. In these cases the physical delivery is often prior to the legal delivery.
The physical delivery is when the client takes possession of the property. While legal delivery is when the client signs the title deed in front of the notary public.
- The first step in the purchasing process is the reservation. For this step you need to make a deposit (usually 10% of the value) to hold the unit while you make a final decision. This step only applies when you’re buying in presale. The reservation usually is valid for 15 to 30 days.
- The second step is the Offer to Purchase (OTP). This contract includes a purchasing price by the buyer, all the details for the payment, and other requests to purchase the property. This step takes from 1 to 5 days.
- If the seller accepts the OTP, the next step is the Promissory contract or Purchase Agreement. This includes all the legal aspects of the sale. It takes around 15 days.
- The last step is the Title deed. It’s the definitive process to transfer the right of the property to the buyer, and the title deed is signed in front of the notary.
Why do we use attorneys?
Throughout the purchasing process, it is highly important to use an attorney that can guide and help you with all the legal aspects of your purchase. An attorney will make sure that the process satisfies all the legal requirements and that the current title deed of the property is clear.
Also, he will review the terms of the promissory contract; ensure that taxes are correctly calculated and paid during the closing process. And, he will review the correct registration of the new title deed in the public registry.
These are the legal basics of the Mexican real estate. Nevertheless, there are many more aspects that you need to know before purchasing a property in Mexico. Buying in another country is not only selecting and buying a home. At Top Mexico Real Estate we can help you and educate about the process of buying Mexico real estate. Our professional trained agents will answer all of your questions and will be happy to help you.
We specialize in helping Canadians and Americans find and purchase their home in Mexico safely. Go to our website and start looking for the property of your dreams. Remember, at Top Mexico Real Estate… We make it happen!