Buying Property in Mexico
With the snow starting to fly here in Colorado perhaps you have thought of buying a vacation home? Where would you go? Mexico, Jamaica, South America? Well here's some information about purchasing property in Mexico.
The Mexican constitution, written in 1917, gave communal or ejido land to every Mexican village for use only—not to sell. In 1973, a constitutional amendment (the Foreign Investment Law) allowed foreigners to purchase property anywhere in Mexico, except in the restricted zone—32 miles from high tide and 64 miles from any border. Most foreigners, however, only wanted to buy property on the coasts or near the borders, so in 1994, Mexico passed another amendment to the constitution. Now foreigners can own property in the restricted zone with a bank trust or fideicomiso.
Foreigners can’t own property in the restricted zone outright. Instead, a real estate trust (fideicomiso) is set up to hold title for foreigners. The fideicomiso is executed between a Mexican bank and the seller of property in the restricted zone. The bank acts on behalf of the foreign buyer, buying and taking title to the property. The trustee bank then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary.
The foreign buyer retains all rights of ownership—the bank just holds title, and can’t use or sell the property. The buyer, on the other hand, is entitled to use and exploit the property, or even sell it for fair market value to any eligible buyer.
Retain a Mexican attorney, asking to see the attorney's license, or have the attorney's license number included in a retainer agreement before employing any services.
First, all foreigners are required to apply for and obtain a permit from the Ministry of Foreign Affairs prior to entering any real estate contract. After you’ve got permit in hand, you find a piece of property you want to buy. Now you must open your trust account. To open your trust account you will need your accepted offer for purchase, a photo ID and 10 percent of the purchase price of your new home (your earnest money or down payment). Very important note here: do not give anyone any money that is not being handled by a bank escrow representative—not to the seller, and not to a real estate agent. You’ll hand over the cash when you sign a bank contract with a bank official.
Closing usually takes 30-45 days. Closing costs are paid by the buyer and are usually about 6 percent of the purchase price, 2 percent of which is sales tax. The buyer does not have to be present at the time of sale, but your bank trustee will need to be given the power of attorney to execute the closing process for you.
Coldwell Banker is an international real estate brokerage with several offices in Mexico. If it is time to look for a new home in Mexico contact me and I would happy to refer you to one of our superb agents.