During the closing of the real estate transaction you as a buyer have the obligation of paying closing costs. The closing costs are divided in multiple parts. In Part 1 I spoke to Ivan Castillo at Stewart Title Latin America´s Playa del Carmen office so he could explain what they are. We continue with Part 2 and look at the different costs for the buyer and seller.
Ivan Castillo: Most of the fees that I´ve mentioned are fixed and other ones are variable. So the higher the purchase price is the lower the percentage will be- and vice versa- because there are fixed fees and variable fees. So there is usually wrong information on the internet or certain websites that indicate that the closing costs are from 5-6%. That would be right on a certain range of purchase price, let´s say $350,000.
However, if you have a real estate transaction where the purchase price is $60,000 then obviously it will increase to 10-11% of the purchase price. Now, if you´re talking about a $3 million transaction the closing costs will lower to 2.9-3% of the purchase price. So it is very important that any buyer, when they engage an attorney or us as a title company, the first thing that we will do is let them know through a closing cost estimate what is the amout of money they are looking at paying.
Ivan Castillo: On the seller´s side you also have closing costs. The closing cost that the seller usually is looking at paying are 3 things.
1. Certain certifications from the public registry or municipality through which we verify that the property is free and clear from any liens or encumberances, and that the seller is the rightful owner.
2. Brokers commission in the event that there´s a broker involved.
3. Capital gain tax, which in Mexico is considerably high. It´s 35% of the profit. It´s not as clear cut as we would like because the capital gain tax is calculated based on multiple factors such as: the date when you aquired, the possible date when you are going to be selling, and between this period of time you have depreciation factors and inflation, among others. In addition, sellers can deduct taxes if they have, for example, a permanent resident visa. If they are registered with the Mexican IRS, they have their RFC number which is like a social security number, and a CURP. So if they have those 3 items they can deduct a little bit of taxes.
One thing that is very common is we usually assist selling customers on reducing their capital gain tax by jointly working with an accounting firm to conduct some sort of tax strategy to lower their tax implications. So this is how the real esatate transaction would close from a financial perspective. You have the sellers closing costs and the buyers. In a general sense that would be the amounts or the process everyone needs to go through.
Ivan Castillo: If you take a look at the real estate transaction at a big scale it probably wouldn´t change from the one in the US or here, because over there and here you submit an offer of purchase. If it´s accepted then you sell a purchase and sell agreement. And then from that agreement you move to the final closing, so here the final closing is done through the deed that is issued before the notary public ( Read notary public part 1, 2 , 3) . However, if you look at it with a magnifying glass the closing proces from a legal perspective might change dramatically because of all the parties that would be involved, and everything that is required by law to close the transaction. So the customers don´t usually see that because part of our job is to do all the legwork, do all the paperwork, just have a certain date for closing when the buyer and seller will show up. With the notary public here they will conduct the closing, we release the money from escrow to pay the multiple parties involved and that´s it.
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