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 The differences in the procedures of buying and owning land vary within Mexico. If you are a foreigner purchasing within a restricted zone, you will have a fidecomiso trust. If you are a foreigner purchasing outside the restricted zone, you will have an escritura, or deed, without a trust.
The suggestions below are from my experience in sales transactions and property management in the states of Jalisco and Nayarit over the past 7 years.
When we are in a different country, we get off to a better start by putting on our thinking cap and remembering to "Locate Ourselves." We become more aware of differences and make better decisions by following this advice. Developing the skill to ask questions, then listen, and ask more questions to refine the information, goes a long way in getting better results.
Patience is a virtue and also a necessity. Procedures take longer. Business and governments move at a different pace from what we may have experienced elsewhere. Time is not money, necessarily. Efficiency is not always the objective. There are differences in how other cultures look at the same things. Right versus wrong is not always the issue.
Reminders:
1. Spanish prevails, both written and spoken. This may seem too simple to talk about but a number of times we forget this important fact. Some international businesses use English as the common language. This is not true in Mexico, so become accustomed to this fact.
2. Language: Informal and formal written and spoken Spanish are different. Legal documents are in more formal, old world style of description of information. If you are fairly good at expressing yourself in social Spanish, you may not understand written legal Spanish.
Learning a foreign language is particularly hard if we're doing it over the age of 3 years old. However, if we can't read, write or speak a language, you should realize that we are illiterate in that language. Being illiterate makes us unable to understand without a translator. If you need a translator, please don't think just anyone is capable of reading a document, or even a bill or memo, correctly. Important documents you are asked to sign: don't sign them until you've had a professional, competent, ethical person advise you about what the document says.
Of course, we want to work on our Spanish skills and we each learn differently. There are many choices available for learning a foreign language e.g., classes, private lessons, books and other teaching tools. You don't want to remain illiterate so form a plan to start learning even if it may take you a long time to become satisfied with your skills.
3. Rentals in this market: There is a large demand for short-term vacation rentals. There are fewer long term rentals available. If you want to lease a condo or villa for 6 months or longer, you don't have as many choices. Accept this and prioritize what you need first, then try to get what you want. There is a difference.
4. Length of time for a property to sell and the number of properties on the market: Traditionally, a resort area anywhere, has a higher turn-over than a community built around families with school aged children. Property for sale doesn't necessarily mean there is something wrong with the market or people are leaving because they have found problems where they live. A typical buyer begins with one type of property, and very often upgrades into a more expensive villa or condo, and often a total departure in style and location from their first choice.
5. Capital gains: This subject brings up more confusion, anger, and misunderstanding than anything I have experienced over the past year. The law is clear as to who qualifies for an exemption. The law applies to nationals as well as foreigners. The procedures notaries are using to handle transfers of property, varies.
The buyer traditionally chooses the notary. Of course, most buyers don't know who to use, so first time buyers should ask for recommendations from their real estate agent, friends, or business associates. If you are thinking of selling, make an appointment with a notary and take in your paperwork to discuss your case. Again, if you are not fluent in Spanish, you have to rely on other people to tell you the "facts". Well, let me remind you, different people interpret the "facts" differently. You will need the best person you can find to help you interpret the "facts," if you can't do it on your own. You need to make some business and ethical decisions when you buy or sell property.
6. Maintenance of a property in our climate in Mexico: Many times I talk with new purchasers who want to hire a property management company to maintain their properties when they are not in the country. It is a good idea to rely on the advice of a competent, professional manager in the beginning to know how much time it takes to care for a property in the tropics and how many times a maid/mozo is needed in the home. Later, if you find you don't agree with the suggestions of the manager, then change your system. Most first time buyers underestimate the time it takes to maintain a property, pay the bills, and handle repairs. These first time owners may not have a history of how things are done in a foreign country and they don't have the experience yet to always make the best decisions. Take your time, be patient, listen and learn so that you can become more knowledgeable in how things work.
7. Costs for the buyer in addition to the sales price: If you are a foreigner buying in the restricted zone, you will need to create a fidecomiso trust. Not all of Mexico is within a restricted zone. Being near the ocean or within a certain distance of a state border constitutes a restricted zone. Nationals may also choose to buy within a trust for family or business reasons. A fidecomiso requires a bank to be the trustee and the buyer becomes the primary beneficiary with rights attached thereof.
There is a cost to apply for a permit to own as a foreigner, as well as costs for the bank fidecomiso trust administration each year. Currently, new fidecomisos are permitted for 50 years and renewable. Other costs for the buyer include a tax appraisal, no lien certificates, property transfer tax, and notary fees. A rule of thumb for properties over $250,000 US is 5-8% for these costs, but this can vary. Always ask for an estimate. These buyer costs do not include your own legal counsel (highly recommended), survey, inspections, title insurance, or other items. Many times the seller pays the sales commissions to the agencies representing the buyer and seller, capital gains tax if applicable, and charges to cancel the exiting trust, if there is one.
The seller should also be responsible for individual ownership fees such as HOA or condo fees, utilities to date of closing, special assessments and back taxes. Don't assume all of these fees will be paid by the seller. For example, the notary will not be required to collect individual electric usage charges or telephone charges. The notary is required to do certain things in order to transfer title. Find out what this includes and what is doesn't include. The notary is an attorney with specialized knowledge and is appointed by the state. The notary doesn't represent the buyer or seller as an individual attorney in the transfer of title. The notary is given the responsibility of collecting taxes, both transfer tax from the buyer and capital gains tax, when applicable, from the seller.
To be continued...
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer conduct his own due diligence and review.
Harriet
Cochran Murray
For
additional information on
properties, for sale or lease
within the bay please visit Harriet
Murray website, call
or e-mail me at: harriet@casasandvillas.com
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