Buying a Property in Mexico
Anybody can own properties in Mexico, except for an area 100 kilometres along the coastline and 50 kilometres along the borders, which is reserved for ownership by Mexican nationals. Foreigners can get a 99 year lease via a trust to “buy” in those restricted areas.
Any foreign national can buy property in Mexico and except for some Tax Law breaks reserved for nationals or foreigners who are enrolled to pay taxes in Mexico, they are treated as nationals for all purposes regarding ownership. Any foreign national also requires a permit by the Ministry of Foreign Affairs to buy property anywhere in Mexico. The Notary handles this. In said permit the foreigners renounce the right to invoke the protection of their governments, should there ever arise a dispute concerning the property.
The essential steps of the process of acquisition are the following:
1.- Identify a property that suits your needs regarding area, price and other personal considerations.
2.- Pass an offer in writing to the seller via your Realtor if you have one. The offer should mention the price, your desired time of closing and specify if you are buying it with cash or if you intend to use a mortgage. As opposed to other countries, prices of properties are usually negotiable and you hardly ever get into a multiple offer situation.
3.- Once the seller accepts an offer you should choose a Notary, since in Mexico they do the due diligence and they are liable in case there are any problems with the ownership of the property. They charge the buyer between 5 and 7% of the price of the property which includes local taxes and the fee of the Notary.
4).- Then, there are two possibilities. 1) Go straight to the signing of the deed with the Notary of your choice; 2) Sign a private Promise to Buy/Sell contract with your seller. It specifies the property information, price, intended time of closing, Notary´s office and reciprocal penalties for the parties in case one of them renege on their commitment to buy or sell. The exception to this is when the delay for the closing is related to a third party responsibility (a government´s permit delay, a delay from a banking institution in case there is a credit involved, etc). If you sign the private contract it is customary to pay 20% of the agreed price at that point and establish penalties that at least cover that amount for each party at fault.
5) If you sign a private contract it also includes the obligation of the two parties to submit to the Notary any documents related to the operation including the original deed free of liens. The Notary then does the due diligence, deals with the permits requested for foreigners, asks both parties for any additional documents they may require and drafts the deed for the acquisition/sell.
6) In agreement with both parties and once the due diligence is finished (it can take from 4 weeks to up to 2-3 months) the Notary suggests a signing date. At that point the buyer needs to pay in full the remainder of the agreed price, the local taxes and the Notary´s fees and the buyer the Federal Income Tax for the capital gain. This usually has to be done by a bank transfer or a certified check (which can be complicated to obtain and cashing it may take some time).
7) The same day the deed is signed and once all the transfers are done and credited to the accounts of the parties involved (buyer, seller and Notary), a final version of the deed is signed by the buyer, the seller and the Notary as a witness. That original is permanently saved in the books of the Notary and each party can receive a certified copy of the deed. The “original” for the buyer (called primer testimonio) which has been registered with the Property Registry in Mexico is handed to the buyer a few months later (up to around 6 months). However, in the meantime, the certified copy is full proof of ownership.
8) A Realtor should accompany you through all of this process trying to resolve any doubts for the buyer or seller, write the private contract and facilitate the contact with the Notary. The Realtor´s commission is paid in full by the owner of the property and it should only be paid after the deed has been signed.
This information is solely intended as a general description of a standard process of acquisition to illustrate its most important parts. For precise advice and fees please consult your Realtor and/or Notary (the latter especially for legal matters) at the time of purchase.