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FREQUENTLY ASKED QUESTIONS ABOUT BUYING REAL ESTATE IN MEXICO |
Investing in real estate has always been an excellent investment option. Throughout history, great personal wealth has been attained through real property ownership, but for most of us, it has been limited to investment in a primary residence. While Mexico real estate can be a lucrative investment, some foreign investors may feel uneasy about buying "south of the border." Purchasing real estate in Mexico is not like buying property in the United States. There's much more to foreign real estate sales than simply showing property to prospective purchasers. Issues such as property transfer, taxes and legal matters raise concerns for first-time buyers of Mexican real estate. For this reason, we have put together a list of answers to the most frequently asked questions about buying real estate in Mexico.
 Can a USA or Canadian citizen own real estate
in Mexico?
Can
I own property near or in front of the ocean?
Who
is involved in a Bank Trust?
How
much does the Bank Trust cost?
Are
there additional fees for the Bank Trust?
How
does the Trust function?
What
are my rights as a buyer?
Is
the Trust renewable?
Who
is involved in Real Estate transactions in Mexico?
What
role does a Public Notary play?
What
are these official documents?
If
at a later date I decide to sell my property, can
anyone buy it?
If
the buyer is a foreigner, is his interest limited to the balance of
my 50-year period?
When buying or selling a property in Mexico, who pays the closing
costs?
How
much is the transfer tax?
How
much are closing costs?
Q: Can a USA or Canadian citizen own real estate
in Mexico?
A: Yes, by placing the property in a bank trust.
(Fideicomiso)
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Q: Can I own property near or in front of the
ocean?
A: Yes, laws passed in 1973 and 1993 have made it possible for
foreigners, foreign firms, and Mexican firms with foreign participation
to acquire interests in coastal real estate through
a bank trust.
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Q: Who is involved in a bank trust?
A: Three parties. The seller of the property is the Trustor, the bank is the Trustee (Fiduciario), and the buyer
is the Beneficiary (Fideicomisario.)
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Q: How much does the Bank Trust cost?
A: Based on the current tariff, the bank charges the person desiring
the Fideicomiso an initial fee of approximately $500 USD for drawing
up the agreement and establishing the Trust plus a percentage based
on the value of the property.
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Q: Are there additional fees for the Bank Trust?
A: Yes. The bank charges an annual fee to cover its services as
a Trustee. This fee is based on the value of the property.
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Q: How does the trust function?
A: Title of the property is transferred to a
trust with a Mexican bank acting as Trustee. The Trust Agreement is
formalized by the issuance of a permit from the Mexican Ministry of
Foreign Affairs. The lot or home buyer is designated as Beneficiary in the Trust and the beneficiary rights
are recorded in the public record by a Notary Public.
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Q: What are my rights as a buyer?
A: The Trust is a legal substitute for fee simple ownership, but
in many cases, the Trustee is the legal holder of the property.
As Beneficiary, you have the right to sell your property without restriction. You may also transfer your rights to a third
party or pass it on to named heirs.
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Q: Is the Trust Renewable?
A: Yes. According to the Foreign Investment Law
passed in 1993, trusts can be renewed for an indefinite number of
successive 50 year periods. In effect they run in perpetuity.
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Q: Who is involved in Real Estate transactions
in Mexico?
A: Normally there are four players involved in a real estate transaction.
These are the real estate company, the buyer, a bank,
and a Public Notary.
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Q: What role does a Public Notary play?
A: A Public Notary is a government-appointed lawyer who processes
and certifies all real estate transactions including drawing up and
reviewing all official documents to ensure the proper transfer of
the property.
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Q: What are these official documents?
A: The official documents which are required by law in order to
transfer the ownership of property in Mexico include a non-lien certificate
based on a complete title search from the Public Property Registry, a statement from the municipality regarding property assessments, water bills, and other pertinent taxes that might be
due, and an appraisal of the property for tax purposes.
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Q: If at a later date I decide to sell my property,
can anyone buy it?
A: Yes. If the buyer is also a foreigner, you simply assign beneficial
rights. If the new buyer is a Mexican National, you can instruct the
bank to endorse the title in favor of the buyer.
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Q: If the buyer is a foreigner, is his interest
limited to the balance of my 50-year period?
A: No. Upon application, a foreigner automatically receives his
own renewal 50-year permit. However, this is not mandatory.
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Q: When buying or selling a property in Mexico,
who pays the closing costs?
A: It is common practice that the buyer pays the transfer of acquisition
tax and all other closing costs, including the Notary's fees and expenses,
while the seller pays his capital gains tax and the broker's commission.
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Q: How much is the transfer tax?
A: The real estate transfer tax ranges between 1% to 4% of the
tax appraisal value, which is generally less than the sales value.
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Q: How much are closing costs?
A: The rest of the closing costs, excluding the transfer taxes,
vary from 3% to 5% of the appraised tax value. These percentages are
applied to the highest value of the following: 1) the amount for which
the property is sold, 2) the value of the official
tax appraisal, or 3) the value designated by the property assessment authorities.
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