Buying property in Mexico involves a series of contracts. Today we will look at the 3 Basic ones that you will encounter as part of the purchase process in Mexico. They are the Offer to Purchase, the Promissory Contract, and the Purchase-Sales Contract. This last one is drawn up and legalized by the notary public, then subsequently registered and filed at the public registry as the title.
If the buyer is non-Mexican, and buying within the restricted zone, the normal flow of contracts to be prepared are the offer to purchase, the promissory contract, and finally the purchase-sales contract, which will be drawn up and legalized by the notary public, then registered and filed at the public registry. If buying outside of the restricted zone, and the protocol can be executed immediately, the offer to purchase and the promissory contract may be avoided.
The Offer to Purchase
The Offer to Purchase will likely be the first document utilized that begins the process of transferring a property from seller to you- the buyer. It can also be prepared as a Reservation Agreement or an Earnest Money Deposit, and lists the main points of a future transaction. You can make this as complex or as simple as you feel is necessary. Any money released at this time such as earnest money, should be refundable during this phase, and a reasonable amount of time should be allowed so that buyer and/or legal counsel can research the property documents.
What should an offer to purchase include?
- Names and personal info of both parties
- The date
- Description and address of the property
- Price and payment terms
- Provisions for the escrow
- Terms and conditions of the offer
- Name of notary
- Closing date
- Name of person responsible for closing costs (typically buyer), real estate fees and capital gain tax (typically seller)
- Responsibilities of both parties
- A clause indicating that the title shall be passed free and clear of liens or encumbrances
- Penalty clause in case of noncompliance
- Property condition
- Inclusions
- Jurisdiction
- Signature of the parties and witnesses
The Promissory Contract
This is one of the most important documents to be elaborated and reviewed during the real estate acquisition process. Many people know this document as the hard copy and will hold the details such as legal description of the property, agreed price, penalties and other items. Of the contracts you complete, you will need to depend on this one the most, because it is the first document to outline the terms and details for the future execution of the real estate transaction. If the buyer and seller are able to execute the sale immediately, the parties can bypass the promissory contract and go straight to the purchase sales document.
If the closing cannot occur within 14 days, a promissory contract is recommended.
The Purchase Sales Contract
The Purchase Sales Contract is in essence the last contractual document required to transfer the rights of the property into the new buyer’s possession. This contract may be structured in various models such as a real estate trust agreement, an assignment of real estate trust or a reserve title contract; the model depends on the details and method of how the property will be transferred. It is important to note that the Offer to Purchase and Promissory Contract are intended to give the details and preparation for the transfer of the property whereas this final contract is the instrument exercising the actual, legal transfer.
The Purchase Sales Contract is the document which the notary public will use in following the protocol to transfer the property legally, and will become the legal title indicating new ownership.
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