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Buying Mexico Real Estate

About Buying Mexico Real Estate Property

A foreigner considering the purchase of property in Mexico should have in mind basic guidelines because there is no licensing law for real estate or escrow agents in Mexico and regulation of attorneys is virtually nonexistent:

The first step is to carefully select your real estate broker. Verify that the agent you are considering is an active member of the Mexican Association of Real Estate Professionals (AMPI). AMPI members are affiliated with the U.S. National Association of Realtors (NAR) and the Canadian Association of Realtors (CREA).

In Mexico More than 50% of all land is ejidal or government property. Some provisions allow ejidos to be converted into private property.

  •   Make sure that the value to be registered in your deed is the full amount you paid. In many communities it is customary to use an appraised value, rather than full value, as the basis for cost. Since appraisal values can often be 40% to 60% of true commercial value, the buyer will save money at the onset in both acquisition taxes (2% of declared value) and property taxes. Nonetheless, using a value less than full purchase price can be costly when selling since the capital gains tax paid on the sale will be based on the value declared in the deed at the time of original purchase. Thus a seller may end up paying a hefty capital gains tax on a fictitious book value. Better to declare it correctly at the beginning than be stuck with unwelcome taxes when it is later sold.
  •   Ensure that title be recorded in the local Public Registry, whether through direct ownership or a trust,  Should a lien attach, correctly or incorrectly, to the trusted property, no beneficiary may transfer his rights to the property unless they have been registered in his name prior to the attachment of the lien.
  •   A neutral third party must be selected to handle the transfer of your title. Escrow companies operate under Articles 193 to 208 of the Mexican Commercial Code, and perform services as neutral third parties and/or consultants in the transfer of titles. Since there is no licensing for these companies, it is wise to insist on references and an examination of track records in much the same way you would in selecting your realtor.
  •   Spend on research and obtain a valid transfer of title. Closing costs can range from 3% to 20% of property value. A less expensive property will cost more, percentage-wise, to transfer with the percentage decreasing as the price increases.
  •   A binding arbitration clause must be added. Lawsuits can be costly and time consuming. It is far less expensive for the parties to agree ahead of time to resolve any possible dispute through binding arbitration.
  •   Buying Mexican property meant paying all cash or convincing a seller to carry a mortgage but that is a thing of the past. These days U.S. finance companies are entering the lending market, opening a whole new panorama of possibilities for leverage in the Mexican market. Another important option is the use of self-directed IRA accounts for Mexican property acquisitions. Properties purchased with IRA funds can be investment properties only, not for personal use. Nonetheless, a great deal of money is being made in Mexican recreational properties both through appreciation in the purchase and sale, and from rental income. Solid investments today can provide a great nest egg for attractive retirement.