Mexico is undoubtedly one of the smartest options to have your home away from home. Recently named as the world’s best place to invest by WIRE, the prestigious International Real Estate corporation, the Real Estate in Mexico offers unparalleled advantages for ex-pats and investors, such as a privileged geographical location, just a few hours flight away from the United States and Canada, low tax rates, plus the traditional Mexican hospitality and way of being. Additionally, Mexico has a first-world infrastructure with highways, telecommunications, first-class health services, and several international airports with direct flights and connections to many of the world’s most important cities.
First of all, a little bit of history
Before getting into detail, let us make a brief review of the recent history. Indeed, the Mexican real estate market has not always been as easy as it is today. At the beginning of the 20th century, only Mexican citizens were allowed to be landowners and de foreign buyers were out of the rid.
However, that changed in 1973, when the Foreign Investment Law was passed, and today foreign buyers can acquire property in Mexico, the restricted zone are those lands within 100 kilometers of international border or 50 from the sea. In 1993, this law was modified in such a way that foreign investors can purchase land and real estate transactions through a trust agreement between the buyer and a Mexican trust bank.
Contrary to the perception that some people have about the potential hazards of purchasing Real Estate in our country, it is absolutely safe to invest in residential property in Mexico, as long as you work with a well-established, reliable broker and comply with all the requisites you need to become the owner of a property in paradise.
If you are buying any property in the Mexican Caribbean such as Riviera Maya, you will most likely do it through a trust agreement, so you need to get familiar with it.
A trust agreement, known in Mexico as fideicomiso, is a three-party contract through which the seller transfers irrevocably to a bank real property. The bank is obligated to allow a beneficiary to use and enjoy the property as he/she sees fit. That includes the right to sell it and receive the benefits of such a sale.
The purchase process, step by step: Investing in Mexico
Make an official offer
Although Mexican law recognizes verbal agreements, you should write both offer and acceptance documents, that will ensure that there will be no confusion on terms and conditions. Send your offer in the form of an “Offer to Purchase” contract, where you should include price, payment plans, and details on an earnest money deposit.
You may also include a deadline for the seller to accept the offer. After this first step, you might be ready to make the earnest money deposit, which can be done to the real estate agent or an attorney.
Issue a Promissory Agreement
A promissory agreement is a document that binds both buyer and seller into a timeframe to execute the buying contract under Mexican law. It all the terms and conditions are met to execute the purchase contract, neither party can back out the sale. Completing the process usually takes some time, so it also allows both parties to work out the details of the final purchase contract.
Obtaining the trust and closing the contract
A notary will initiate the process of obtaining the trust by checking that taxes, utility bills, and other encumbrances are properly paid. A very important step is to verify the legal status of the property, that is, that the land you are buying is not an “ejido” land, a communal land reserved for agricultural use. It is also required to verify that the seller has the actual right to transfer the property and the terms and conditions of the contract.
As a buyer, you will need to provide a copy of your identification, a bill that shows your current address, and a document that validates your legal status. You can purchase property in Mexico with visitor status. The notary and the bank will collect the documentation to finalize the procedure.
Before the payment transaction, the seller must cover the taxes on the purchase. As a buyer, you will sign the property deed at the notary office and pay the seller and notary fees. Once the process is completed, the notary must send a copy of the deed to the Public Registry of Property to avoid any fraud or illegal possession of the property in the future. When the deed is closed and the final payment covered, the title will be officially handed over to the new owner or the bank trust.
Finally, keep in mind that an attorney can handle the entire purchase process, so you don’t need to be in the country for every step.
By granting a power of attorney to a lawyer, they can assist you and help you walk through every stage of the process in a professional, reliable way.
Delivery of the unit
It is crucial to do a walk-through upon delivery to make sure that your new property is in good condition. Once you are satisfied, you’ll sign a delivery agreement, which will detail the official delivery date of the unit. You are the lucky owner of a property in Mexico, Congratulations!
Some important concepts you should be aware of if you want to buy a property in the Mexican Caribbean:
– Fideicomiso / Trust
In short, he fideicomiso is a long-term irrevocable bank trust. A Mexican fiduciary bank holds the title to the property and cedes the rights to own and occupy, remodel, sell, give away or leave to your heirs. Mexico’s Foreign Investment Law allows a beneficiary to have a trust for 50 years, with the application for extension or renewal for 50 more years. Once a 100 year term is done, your heirs can still apply for an extension.
– Trustee Bank
The Trustee bank is the Mexican Bank authorized to act as Trustee (Fiduciario). The Trustee Bank must be a Mexican registered financial institution with an established trust department. The role of the trustee bank is to act as the trustee of the property held in trust, however, property held in trust or Fideicomiso by a trustee bank is not an asset of the bank. In the rare case that the bank goes into financial difficulty, the property is transferred to another trustee bank.
– Additional requirements.
Remember that you along the process, you will be required to pay some taxes and fees, such as notary fees, acquisition tax, trust permit and foreign investment registration fee, as well as the attorney’s fees. You may negotiate other expenses with the seller, such as the certificates of no encumbrance, no tax lien, and appraisal fees.
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