There is a process of three separate contracts when purchasing property in Mexico. In systematic order they are the offer to purchase, the promissory contract and the purchase sales contract. All three of these agreements have a specific purpose. Each one occurs sequentially to the next as the proposed sales furthers itself along. Buyer and seller will conclude the closing once all three agreements are completed. Authorities will then officially register and record the title.
Offer to Purchase
This is the first level of the buying process. The process includes a buyer’s offer to the current owner that includes a determined amount of earnest money that would go into an escrow account. The document, Offer to Purchase, can be fairly simple or as detailed as you need it to be. You must allow the current owner enough time to research the information and discuss the legal documentation with their counselor.
The buyer and seller must come to an agreement at this phase. The seller must refund the money given for earnest back to the buyer should they not come to an agreement. The following information needs to appear on the Offer to Purchase:
- Names and personal information of both the buyer and seller
- The date
- Full description and address of the property
- Price and payment terms in detail
- Provisions for the escrow
- Terms and conditions of the offer in detail
- Name of Notary who will close the transaction
- Closing date
- Name of responsible party(ies) for closing cost, real estate fees, and capital gains taxes
- Any miscellaneous responsibilities assigned to either party
- A clause indicating that the title shall be passed on free and clear of any liens or encumbrances
- Penalty clause in case of noncompliance for both parties
- Property condition (disclosures)
- Any inclusions or exclusions
- Signatures of all parties involved and witnesses
This is probably the most important of the three contracts. Especially if a quick sale and/or closing isn’t performed within 14 days. After both the buyer and seller come to a complete agreement and sign off on the Offer to Purchase, the Promissory Contract will then state the terms, dates and agreed upon specifics directly related to the transaction. This document should be handled by both parties’ legal counsel, themselves and your real estate agent. Anyone can and will refer back to this contract if there are any discretions during the buying / selling procedures.
The Purchase-Sales Contract
The buyer, seller and Notary Public need to sign this contract, as it is essentially the last document of the transfer. This document officially transfers the property from the seller to the new buyer. The Purchase Sales Contract can be structured in several terms to fit either a trust agreement and/or an assignment of real estate trust or a reserve title contract. Depending on the terms of the sale, detailed in the Offer to Purchase and/or the Promissory Contract, any one of the elected structured terms will be implemented immediately after the closing is completed. The Notary Public will legally transfer and record the deed or trust title in accordance to its agreed upon terms then.
There is No Purchase Without These Contracts
These are the three basic types of contracts that you need to understand when you decide to purchase a new home in Mexico. We highly recommend you work hand in hand with a certified and knowledgeable real estate agent that can help you answer any questions about any of these three contracts. It is important for you to understand the basics and when each one will come in handy while you go through the process of becoming a homeowner in Mexico. No transfer of ownership of any property in Mexico will be take place if these three contracts do not ocurr in timely fashion.
And remember, at Top Mexico Real Estate…we make it happen!