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| “Property
has its duties as well as its rights.”
Thomas Drummond, 1838
June 22, 2003 |
 Buying
Real Estate in Mexico
Here are some guidelines for success
in a real estate acquisition in Mexico:
- Be sure the agent you select
to represent you is a member of AMPI, the Mexican
National Real Estate Association. Ask for references
and check them out. Be satisfied that the person representing
you is experienced in Mexican transactions.
- Insist that the person representing
you, represent only you, the buyer, and not also the
seller, unless you understand, agree to and sign an
agency disclosure agreement.
- Consider the purchase of private
property. Ejidal property is often offered at a far
lower price. It cannot legally be sold or promised
to be sold until it becomes private property.
- Be certain that you and your
agent are dealing only with the owner of record or
his or her legitimate power of attorney. Insist upon
receiving a copy of the seller’s deed as a condition
of your offer. If you and/or your agent don’t
understand Spanish, get it translated.
- Think carefully about how you
acquire title in order to avoid or minimize probate
and transfer costs in the future.
- Closing costs may run from 13%-20%
of the cost of a $50,000 dollar property. The multimillion-dollar
property will be about 3.5% of the purchase price.
Certain costs are fixed regardless of value. Be sure
to budget for closing costs and get a full estimate
in writing from the company supervising your transfer.
- The major portion of your payment
for the property should be withheld or held in escrow
until the deed has been signed by the seller and,
if applicable, the bank trustee (if a fideicomiso)
- Insist upon receiving a registered
title document for your property. If the seller is
financing the property, sign a document protecting
his interests in the event of your default. Be sure
you know the amount, which is declared, in your deed
and understand the tax implications of same.
FIDEICOMISO
THE BANK TRUST FOR OWNERSHIP OF REAL PROPERTY IN MEXICO
Article 27 of the Constitution of
the Republic of Mexico prohibits foreign ownership of
real property locate within 30 miles of any coastline
or 60 miles of either border. This is referred to as
the restricted zone.
In 1973, recognizing that many Americans
would enjoy the rights of ownership and bring needed
dollars to the country, President Echeverria approved
the bank trust, fideicomiso, for of ownership, which
is available to non-Mexicans. This regulation was further
expanded in the Foreign Investment Law of l989.
Properties located within the prohibited
zone may be acquired by a foreigner through a Mexican
bank trust naming the buyer of the property as the beneficiary
of the trust. Naked title is placed in the name of the
bank selected by the buyer, as his trustee. The bank
administers the property according to the instructions
of the buyer/beneficiary. The buyer/beneficiary has
full ownership rights; he may build on the property,
tear down existing buildings, modify them, rent lease
or sell at anytime conforming only to the general laws
of the country established for all persons.
The term of the trust is fifty years
and can be renewed for additional fifty year periods,
after which it must be transferred to “one entitled
to hold property” in Mexico. In other words, title
to the property may rest in one beneficiary indefinitely,
provided that it is renewed within the terms established
by the law.
The procedure for establishing the
fideicomiso, the bank, is as follows: a permit must
be obtained from the Secretary of Foreign Relations
which includes a description of the property to be placed
in trust, the use for which it is intended, an personal
data on each of the beneficiaries. Once granted, the
bank draws up the trust document, which is recorded
in the state where the property is located.
The costs for the permit to establish
bank trusts are current about $1,500US and annual administration
fees are generally $450US -$750US or pesos equivalent,
per annum. There are additional closing costs; however,
and it is wise to request a written estimate prior to
beginning the transfer process.
MORTGAGES
The majority of real estate purchases
in the Bay of Banderas are done without mortgages. There
are Mexican banks and American lenders, however, who
will provide a mortgage on a Mexican property.
In some cases, the seller will finance
the property for a short term. A one -year term for
financing is not unusual.
A mortgage can affect the type and
cost of the fidecomiso, which the bank trustee will
accept. Check first to be sure of the terms and costs.
This article is based upon legal
opinions, current practices and my personal experiences
in the Puerto Vallarta-Bahia de Banderas area. I recommend
that each potential buyer conduct his own due diligence
and review. Linda Neil, The Settlement Company, has
contributed information for this article.
HARRIET MURRAY
Harriet
Murray, Broker
For additional information on properties for sale or
lease within the bay, please call or e-mail me at: harriet@casasandvillas.com
Thanks and until next week.
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