Buying Process

Mexican Property Acquisition Process

By Thomas Lloyd

The Mexico process of locating and acquiring a Mexico second home or Mexico investment property has several additional steps that are not realized in our own home country's normal process. Below please find a brief introduction and over view of the Mexico Real Estate Purchasing Process.

INVESTMENT POINT: First determine your Mexico investment parameters. Calculate an additional 6.5% for all the Mexico Closing Costs. The closing costs may range from 4.5% up to 6.5% of the value of the property depending on the total value of the Mexico Property as well as for the extra services you retain.

MEXICO REAL ESTATE SEARCH: Learn, Search and Locate a Mexico home, Mexico condo, or a lot that meets your criteria; retaining the services of a Mexico real estate agent is extremely helpful and will make your search more efficient and safe. Choosing the correct agent is one of your first most important steps. How long has the agent worked in Mexico? Is he certified or licensed by the Mexico federal government? Does he have a university degree, knowledge in international investing? You are about to invest hundreds of thousands of dollars in another country, shouldn't you retain the services of a top qualified real estate team and agent? It is also recommended that agencies and agents be members of the AMPI association. AMPI is a Mexican association of real estate of the industry with guidelines for the practice and professionalism of each member. This association is quite similar to the NAR (National Association of Realtors) widely known in the USA.

BUYING FROM A MEXICO DEVELOPER
OR
BUYING FROM A INDIVIDUAL SELLERS OF MEXICO RE-SALE PROPERTIES

Mexico Re-sale Properties

MEXICO REAL ESTATE OFFER TO PURCHASE: Once your ideal property is located, it is ideal to have a verbal agreement accompanied with a printed document delivered and agreed with the seller. The OFFER TO PURCHASE agreement lists out various items which include dates, offer price, payment plan, and escrow account if chosen, amongst other items.
RETAINING LEGAL COUNSEL: At this point, a buyer may elect to have professional counsel to review the contract, prepare a Purchase Sales Agreement, and/or to administer the closing process with the Notary Public.
MEXICO ESCROW ACCOUNT: Before proceeding with the signing of the contract, and if an escrow account is to be utilized, the creation would initiate at this point.
MEXICO PROMISSORY CONTRACT: Basically the information outlined in the verbal agreement and the Mexico Offer to Purchase document are then expanded and detailed in the Mexico Promissory Agreement. This document details property costs, inclusions and exclusions, as well as the deadlines being established in the " Convenio de Compra/Venta " (sale agreement). Once signed by the buying and selling parties, a deposit (10%-20%) is normally paid by the buyer and cancellation penalties are established if either party cancels without contractual expressed reasons.
MEXICO PROPERTY DOCUMENTATION: The seller will need to present official documents which may include: original property deed, up-to-date tax receipts for the property, public utilities bills (shown without outstanding amounts due), condo association bills (shown without outstanding amounts due), amongst others.
PRIVATE TITLE SEARCH: Before proceeding with the establishment of the Bank Trust, and if a private title search is realized, this would be the period in which to hire such services. It is important to mention that the Mexico Notary Public has the responsibility and realizes this activity of title research within his services and fees. It was not common to do neither title researches nor title insurance in the Mexico purchase process till only a very few years ago. The Mexico Title Research is realized in preparation for a commitment letter, followed by the issuance of title insurance by private organizations. Listen to an video interview explaining this process by clicking here Video: Title Insurance
MEXICO BANK TRUST OR MEXICAN CORPORATION: If the property is inside the 50/100km coastal/border zone (Restricted Zone) and you are a Mexican Foreigner, you will need to set up either a Mexico Trust or a Mexican Corporation. The rule of thumb when choosing between a Mexican Corporation or Bank Trust; if you plan to use your property as a business or plan to have at least 4 or more properties, a Mexican Corporation is a tool of choice, other wise, residential properties are established under a Mexico bank trust.
PERMISSION FROM THE FOREIGN SECRETARY'S OFFICE: If setting up a Mexico bank trust, your bank representative normally administers the preparation of this permission. Otherwise your legal counsel can arrange the paperwork. At this point, you will also be asked to sign the " Calvo Clause ", which states that you will not seek foreign jurisdiction in dealings with your property transaction.
MEXICO NOTARY PUBLIC: Once the bank trust is prepared, choosing and establishing the meeting with the Mexico Notary Public is arranged. The Mexico Notary Public�s position and duties are quite different than accustomed in the USA. The Mexico Notary Public�s preparation, position, and responsibilities are viewed upon much as a Judge�s position in America. They are appointed by the Governor of the State and the Executive Branch of the federal government for particular state districts and are attorneys who have passed two extensive examinations in order to receive their lifetime appointments. The Mexico Notary Public�s responsibility during the property transaction include:

i) Confirm that the land is private and officially owned by the seller

ii) Arrange for an official appraisal of the Mexico Property ( Avaluo )

iii) Collection of official documents from the buyer which include Photo ID (passport), Birth Certificates, Marriage Certificates, and your visa (could be a Tourist Permit FMT)

iv) Collection of official documents from the seller which are mentioned above from the Buyer

v) Title research of the land is realized by the Notary Public which involves the research of the public records to determine the status of seller's title to the property and the existence of any liens against the property

vi) Collection of Mexico Capital Gains Tax. The Notary Public will calculate the amount due and collect when the deed is signed over to the buyer. Normally these taxes are due by Seller

vii) Collection of Mexico acquisition taxes and other local and state taxes. These are due by the buyer.

PAYMENTS: Whether you are paying with cash or via some kind of financing you (or your lawyer representing you) will need to have the agreed funds available for hand-over at the Notary Public's office on the date the deeds are transferred in your care. Cashiers Check or wire transfers can be utilized. Wire transfers are normally prepared by the buyer and his bank in preparation to execute during the meeting with the notary public and seller, at the date of deed transfer.

Escrow balances are also prepared beforehand for release of monies at the deed transfer signing date with the escrow officers. See video interview on Escrow Accounts: Video: Escrow Account

With the deed signed over to the buyer, the Notary Public and legal counsel fees are paid. Mexico Real Estate Agents fees are normally paid by the seller and can be arranged to be paid during and from the instructions within the Mexico escrow account.

MEXICO MONEY TRANSFER DECLARATION: Cash or monetary instruments (of any kind) with a value of or exceeding USD$10,000 MUST be declared when you enter Mexico (and the enter/exit the USA - even if you are in transit to Mexico from elsewhere via the US). There are no limits on how much you can transfer in or out of either country - but sums over the US$10K limit must be declared on a special form.
PUBLIC REGISTRY: after the property transfer has been formalized, the notary public will record the deed �escritura� with the Mexican public registry of property where the property is located.

Buying from a Developer in a Preconstruction Project

MEXICO RESERVATION PAYMENT: Once you have found your property of choice, developers will request a reservation payment. Personal checks or wire transfers are the payment of choice, at which time the developer will deliver a receipt, guarantee of refund ability over a specified number of days allowing for review of the contract. Reservation quantities may vary from $10,000 up to $50,000 usd.
DESIGNATION OF MEXICO TRUST BENEFICIARY CONTRACT: Once the reservation amount has been transferred, the developer will begin forwarding contracts and their respective attachments for your review. Contracts are typically written in Spanish with a complimentary English translation version for your review.
REVIEW CONTRACT: As outlined in the Mexico Reservation receipt, a certain amount of days are released to the prospective investor to review the contract. Typically these days may vary from 7 days up to 20 days.
RETAIN MEXICO LEGAL COUNSEL: At this point, a buyer may elect to have professional counsel to review the contract, prepare a Purchase Sales Agreement, and/or to administer and or coordinate the closing process with the Mexico Notary Public. See video interview of the closing coordination activities: Video: Closing Services
SIGNING OF �MEXICO DESIGNATION OF TRUST BENEFICIARY� CONTRACT: Once the Mexico developer and buyer are comfortable with this contract, two sets are printed and signed by the legal representative of the developer. These copies are then forwarded to the investor for his signatures. One set remains with investor the other returned to developer.
PAYMENT OF DEPOSIT: Once the developer has signed the contracts and these have arrived in care of the buyer, the first deposit can be forwarded to the seller.
PAYMENTS DURING CONSTRUCTION PHASE: The �Designation of Trust Beneficiary� contract will outline the payment structure, dates and amounts.
SELECTION OF FINISHING'S: During the construction phase, developer may contact buyer for his selection of detailed interior finishes. These may include the style of counter tops, tiles, bathroom accessories amongst others. Again the �Designation of Trust Beneficiary� contract will outline these details either within the contract or as an attachment to this contract.
DELIVERY OF MEXICO CONDO UNIT: The Mexico developer will advise as to the progress of the construction as well as to the date of delivery of the unit. *Please note that you can receive the unit with keys before obtaining title, this is usually specified by the Developer and Buyer during negotiation process.
OBTAINING THE MEXICO CONDOMINIUM REGIME: The developer is responsible to obtain these documents from the city and state offices. With this important document, instructions to the bank to set up your Mexico Bank Trust can be realized.
TRANSFER OF MEXICO TITLE PROCESS: With the Mexico Condominium regime prepared, the Designation of Trust Beneficiary Contract can now be transferred into the Bank Trust or into the Mexican Corporation �Titled� status. This will complete the deed transfer process.
MEXICO PROPERTY DOCUMENTATION: The developer will need to present official documents which may include: original property deed, up-to-date tax receipts for the property, public utilities bills (shown without outstanding amounts due), Mexico condo association bills (shown without outstanding amounts due), amongst others.
MEXICO BANK TRUST OR MEXICAN CORPORATION: If the property is inside the 50/100km coastal/border zone, you will need to set up a trust or a Mexican Corporation. The rule of thumb when choosing between a Mexican Corporation or Mexico Bank Trust; if you plan to use your property as a business or plan to have at least 4 or more properties, a Mexican Corporation is a tool of choice, other wise, bank trusts are recommended.
PERMISSION FROM THE FOREIGN SECRETARY'S OFFICE: If setting up a Mexico bank trust, your bank representative normally administers this permission. Otherwise your counsel can arrange the paperwork. At this point, you will also be asked to sign the " Calvo Clause ", which states that you will not seek foreign jurisdiction in dealings with your property transaction.
MEXICO NOTARY PUBLIC: Once the Mexico bank trust is prepared, choosing and establishing the meeting with the Notary Public is arranged. The Notary Public position is quite different than accustomed in the USA. The Notary Public preparation, position, and responsibilities are viewed upon much as a Judge�s position in America. They are appointed by the Governor of the State and the Executive Branch of the federal government for a particular state district and are attorneys who have passed two extensive examinations in order to receive their lifetime appointments. The Notary Public responsibility during the property transaction include:

i) arrange for an official Mexico appraisal of the Land ( Avaluo )
ii) collection of official documents from the buyer which include Photo ID (passport), Birth Certificates, Marriage Certificates, and your visa (could be a Tourist Permit)
iii) collection of official documents from the seller which are mentioned above
iv) title research of the land is realized by the Notary Public which involves the updated research of the public records to determine the status of seller's title to the property and the existence of liens against the property
v) Collection of Mexico Capital Gains Tax. On some extraordinary occasions buyers may agree to pay this tax as part of the buying agreement. The Notary Public will calculate how much this is and collect when the deed is signed over to the buyer. Normally these taxes are due by Seller
vi) Collection of acquisition tax and other local and state taxes. These are due by the buyer.

PAYMENT AT CLOSING: The contract will outline the quantity and instructions on how to pay this amount during the closing phase. Wire transfers can be prepared by the buyer with his bank to be executed during the meeting with the notary public and seller at the date of deed transfer otherwise a simple cashiers check can be arranged for delivery after signing.

PUBLIC REGISTRY : after the property transfer has been formalized, the Notary Public will record the deed �escritura� with the Mexican public registry of property where the property is located.