When buying Mexico real estate, you’ll probably be investing a significant amount – an amount you wouldn’t imagine investing in the stock market or another avenue of investment without the solid experience of a qualified professional behind you. This logic should also apply to a real estate purchase, especially in another country. Mexico has many excellent real estate investment opportunities, but it is worth taking time to form a team of experts who will fulfil the various roles of a safe purchasing process, leaving you free to think about the investment potential, confident that the transaction is in competent hands.
The following is a list of the professionals you may need to work with, and what their function is.
The first and most important step is to find an agent and broker who will be the focal point of your real estate team. The agent is the team member who you will work with the most, viewing and selecting properties, making offers, etc. The broker or the agent will orchestrate the transaction, ensuring that it is being carried out safely, minimizing unnecessary risks. The agent will also play a key role in helping you decide which other services you will need, and where to find experienced, reliable professionals.
The Notary Public
There are significant differences between a notary public in the US and the notary public in Mexico. In the US, the notary public might be a bank clerk, secretary at an office, or practice any other occupation. In Mexico, the notary public must have a law degree, show verifiable experience and pass a rigorous exam. They are appointed for a lifetime term by the governor of the state. Typically there is a notary public for approximately every 30,000 residents.
In Mexico, all legal documents, such as deeds, wills, powers of attorney, constitution of corporations, establishment of trusts and other legal transactions must be made before a notary public in order to be valid. If the document is not notarized by a Mexican notary public, it is not legal! You should think of the notary public here along the same lines as a judge in the United States. As part of the closing process, the notary public will verify the following official documents, which are required by law for any transfer:
- A no-lien certificate from the public property registry, based on a complete title search
- A statement from the treasury or municipality regarding property assessments, water bills and other pertinent taxes that might be due
- An appraisal of the property for tax purposes
The notary public is also authorized to calculate and collect any capital gains taxes generated by the sale. The notary public is in charge of registering your new deed with the public registry, and issuing a preventative notice of the sale with the registry. It is important to remember that the notary public is an independent third party to your transaction. He will not be able to advise you on details in your contract such as price, location, financing, and terms of sale. For that reason, you should seek the advice and counsel of a certified realtor, and, in some cases, a real estate lawyer.
In most transactions, it is necessary to have a lawyer review the contracts. While the notary will ensure they are valid and legally binding, your lawyer will review contracts on your behalf ensuring that you are aware of the implications of any clauses, conditions or penalties on either end of the transaction. Since Mexican laws differ from those in the U.S. or Canada, this advice is very valuable.
Title companies will carry out title searches on your behalf, and offer title insurance; again, unlike the notary, the company you hire will be working on your behalf. In some cases, a buyer may choose between a title company and a lawyer. Title companies also offer services such as escrow accounts.
Once an offer has been agreed upon by all parties, an earnest money deposit is placed in escrow with a reputable title company. These companies will hold the escrow funds (which are usually 10% of the purchase price for the earnest money deposit and the subsequent 90% for the balance of the purchase) until the closing. They will then disburse these funds according to a mutually agreed upon letter of disbursement signed by both the buyer and the seller.
A significant number of developers in Mexico still do not except escrow. In this case, you will need to work closely with your agent to evaluate the reputation of the company before making payments directly to them.
In some cases, such as when a mortgage is needed, a bank will be responsible for the appraisal. If not the buyer and agent may need to seek appraisal services. The appraisal value is important in that it determines some taxes that may be payable at the time of purchase.
Mortgages are becoming more common in Mexico, and a variety of banks in the country offer these services. Mortgages are available for non-Mexicans. A bank’s services may also be necessary if you are buying through a Bank Trust (“Fideicomiso.”) This service is mandatory if you are buying along the coast or near the border.
In the case that your real estate will be used for business purposes or taxes are required at the time of purchase, a certified accountant’s services may be useful in evaluating your strategy and payments. In the case of opening a Mexican corporation for your business or to own your property, their services will be required.
The most important point is to start your purchasing process off on the right foot, taking time to find an experienced and reliable broker, and investing in hiring services of other professionals when necessary. Again, this is a major investment, and you don’t want to run unnecessary risks for reasons that could easily be avoided with the right professionals behind you.