BUYING REAL ESTATE IN MÉXICO

Can foreigners really buy property in Mexico?

 Yes, Americans and other foreigners may obtain direct ownership of property in the interior of Mexico.  However, under Mexican law, foreigners cannot own property outright within the restricted zone.  Instead, a real estate trust must be set up to hold title for the foreigner.  Since foreigners are not able to enter into contracts in buying real estate, they must have a bank act on their behalf, much as a trust is used to hold property for minors because they cannot contract either.  The following is a brief outline of the law regarding such a trust, known as “fideicomiso,” but potential buyers should always get advice and have all real estate transactions reviewed by a licensed Mexican attorney.

 Who is involved in real estate transactions in Mexico?

 Normally, there are three to four players involved in any real estate transaction in the restricted zone:

• A real estate company
• The buyer’s lawyer
• A bank
• A public notary

 All four are helpful in their respective areas in assisting with real estate transactions.  Transactions outside the restricted zone do not involve a bank since it is not necessary to establish a real estate trust in those areas.  Otherwise, the transactions are much the same.  Because of the similarities of real estate transactions in general, it is easy to assume that the basic terms and principles which are familiar in the United States also hold true in Mexico.  This assumption becomes easier to make when United States real estate terminology is adopted for transactions in Mexico.  Much of the paperwork is similar, if not exactly the same, as that used in the US.  Although there are many aspects of Mexican real estate transactions that are identical to procedures carried out in the United States, there are many aspects that are completely different.  As a rule, a foreigner should assume nothing.

 Mexican real estate transactions are not carried out in the same manner as United States real estate transactions.  The buyer must retain professionals from different fields in order to assist him/her in the execution of the transaction.  Mexico has yet to regulate real estate transactions.  Real estate agents and brokers are not legally licensed in Mexico.  Consequently, a foreign buyer cannot always depend on the normal safeguards that would be applied to real estate transactions in the United States.  The old saying “let the buyer beware” is very appropriate.  Anyone can set up a real estate company in Mexico.  There are no special requirements or brokerage licenses to obtain.  A would-be real estate agent merely has to establish a Mexican corporation, obtain a work visa, and he is in business.

 There are good reasons why the real estate industry in the United States is highly regulated.  Until the real estate industry is regulated in Mexico, there will always be some real estate companies who prefer that buyers know as little as possible about real estate transactions.  After all, a buyer cannot ask questions if he doesn’t have any knowledge of the laws.

 Currently there is nothing similar to a Real Estate Commissioner or a Department of Real Estate in Mexico.  Some states are beginning to look at some kind of real estate legislation, but it might be some time before this is a reality.  The American embassy and the American consulates in Mexico are good places to start when trying to determine if a real estate company is reputable.  Some of the real estate companies have established quite a reputation for themselves at some of the consulates.

 Buying real estate in Puerto Vallarta

 The following information offers a simple and concise summary abut owning real estate in Mexico.  It is a supplied courtesy of Century 21 Giovanna and has been slightly revised by our editorial staff to focus primarily on purchasing real estate in the Vallarta area. 

 Alternatives

 It is a common misconception that foreigners cannot own real estate in Mexico, but they actually can.  Outside the restricted zone, defined below, a foreigner or a foreign corporation can acquire any type of real estate, holding the property as a direct owner complying with Mexican law.

 However, there is the restricted zone.  The Mexican Constitution regulates ownership of the land and established that “…in a zone of 100 kilometers along the border or 50 kilometers along the coast, a foreigner cannot acquire direct ownership of the land.”  These areas are known as the “restricted or forbidden zones.”

 Nevertheless, the latest Mexican Foreign Investment Law, enacted on December 28, 1993, provides a solution in the form of a fideicomiso.  Within the restricted zone, a foreigner or foreign corporation can obtain all the rights of ownership with a bank trust, known as fideicomiso.

 Any foreigner or Mexican national can establish a fideicomiso (the equivalent of an American beneficial trust) through a Mexican bank to purchase real estate anywhere in Mexico, including the restricted zone.  For practical reasons, even in unrestricted zones, many foreigners and Mexicans nationals for that matter prefer to hold their property under a fideicomiso.

 To do so, the buyer requests a Mexican bank of his choice to act as a trusted on his behalf.  The bank as a matter of normal course, obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust.

 The fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50 year period.  During these periods, you have the right to transfer the title to any other party, including a member of your family.

 The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary, who has all the benefits of a direct owner, including the possibility of leasing or transferring his rights to the property to a third party or pre-appointed heir.

 The trustee is responsible to the buyer/beneficiary to ensure precise fulfillment of the trust according to Mexican law, assuming full technical, legal and administrative supervision in order to protect the interests of the buyer/beneficiary.  Fideicomisos are not held by the trustee as an asset of the bank.

 Given the changes made for 1997 in the foreign investment law, and the fact that a buyer can now apply for and obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign Affairs before entering into any contract.

 The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone.  The purpose of the trust is to allow the trust’s beneficiary the use and exploitation of the property without constituting real property rights.  The beneficiaries of the trust (fideicomisarios) may be:

• Mexican corporations with foreign investment.
• Foreign individuals or legal entities.

 The law defines “use” and “exploitation” as the right or use or possession of the property, including its fruits, products, or any revenue that results from its operation and exploitation by third parties or from the bank/trustee.

 The law does not clarify how trust permits will be issued.  Article 14 of the law states that the Ministry shall decide on issuing the permits…considering the economic and social benefit, which the realization of such operations imply for the nation.  “The basis criteria used to determine such benefits are likely to change somewhat with the publication of the new foreign investment regulations.  However, it is reasonable to anticipate that some of the unwritten rules used by the Mexican government in the areas of real estate trusts will be included in the new foreign investment regulations.  It is also possible that some of the confusing elements will be eliminated.  It is important to understand the application of the current regulations even if they are going to be replaced, as well as some of the unwritten policies the government has used in the past, to better understand what criteria will be used by the Ministry in the future.

 The Ministry of Foreign Affairs must grand any petition for a trust permit that complies with the stipulated requirements within five working days following the date it its presentation to the Ministry’s central office in Mexico City.  It must be granted in 30 days if the application is submitted to one of the Ministry’s states offices.  The Ministry of Foreign Affairs must confirm the registration of any property acquired by foreign-owned Mexican corporations a maximum period of 15 days following the filing of the petition.  In both cases, if the maximum period passes with no action by the Ministry, the trust permit or registration are considered authorized.

 There is a common misconception among foreigners investing in Mexico that once a trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust.  This is not the case.  On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that my result from the use or sale of that property, even though he does not hold title to the property.  Under Mexican Law, the bank as trustee, has fiduciary obligation to respect the rights of the beneficiary.

 A real estate trust is not a lease.  The beneficiary can instruct the bank to sell or lease the property at any time.  The beneficiary can develop and use the property to his liking and benefits, within the provisions of the law.  Generally, the law allows most activities engaged in by foreigners.

 A Mexican attorney should be involved to draw up contracts and to review the conditions and terms of sale.  Additionally, an attorney can do a title search and point out any problems or alternatives a buyer may have.  The buyer should always have his or her own attorney rather than using the attorney used by a real estate company free of charge.  As the old saying goes, you get what you pay for, and usually if someone’s services are offered free of charge you are probably paying for them in some other way.  Legally, only a licensed Mexican attorney should provide advice on the law.  If an attorney is licensed in Mexico he should be able to produce a “cedula profesional.”  This document is a registered license to practice law in Mexico, a foreign buyer should ask to see the attorney’s license, or have the attorney’s license number included in a retainer agreement before employing any services.

 American attorneys are not licensed to practice law in Mexico and should not give advice on Mexican Law.  I should clarify, here, that I am referring to individuals who are licensed to practice law in the United States, and not merely individuals who are citizens of that country.  There are currently very few Americans who are licensed to practice law in Mexico.  The fact that a person is licensed to practice law in the United States in no way allows him or her to practice law in Mexico.  Mexican or United States law.

 Besides formalizing your real estate transaction, an attorney can be very helpful in saving you money.  This is because attorneys are involved in many different transactions and have contacts with banks, notaries, and the Mexican government on a regular basis.  Because of this they are aware of the most competitive cost and fees involved in a transaction and can make sure that the buyer is given the best possible prices.  An attorney can also inform the buyer regarding his or her legal options and by doing so can make sure that no opportunities are missed:  tax planning considerations, closing costs which should be paid by the seller, and ways to taking title to the trust rights which make sense for the particular circumstances of a specific buyer.  Very often one piece of good advice can save the buyer thousands of dollars in tax savings when the buyer eventually sells the property.

 When looking for an attorney it is important to remember that any Mexican attorney can normally handle a real estate transaction.  The buyer is not limited to only the local attorneys where the property is located.  All real estate transactions involving a trust are governed by federal law.  This means that all such transactions are carried out the same way, regardless if the property is in Cancun or Los Cabos.

 The restricted zone and the fideicomisos

 The law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals.

 The Mexican Constitution prohibits direct ownership to real estate by foreigners in what has come to e known as the “restricted zone.”  The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline.  However, in order to permit foreign investment in these areas, the Mexican government created the “fideicomiso,” (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust.  Essentially, this type of trust is similar to trust set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has Title to the property and is the owner of record.  The Mexican government created the fideicomiso to reconcile the problems involved in developing the restricted zone and to attract foreign capital.  These enables foreigners, as beneficiaries of the trust, to enjoy unrestricted use of land located in the restricted zone without violating the law.

 A fideicomiso is a trust agreement created for the benefit of a foreigner buyer, executed between a Mexican bank and the seller of property in the restricted zone.  Foreign buyers cannot own real estate in the restricted zone due to constitutional restrictions.  The bank acts on behalf of the foreign buyer, taking title to real property.  The bank, as trustee, buys the property for the foreigner, then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary.  The trust beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property.  The foreigner is entitled to use, and even sell the property that is held in trust at its market value to any eligible buyer.

 In order to allow foreigners to enter into the agreement contained in the Calvo Clause, Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign affairs prior to contracting to acquire real estate in Mexico.  This is currently done by the trustee/bank at the time a real estate trust is set up.

 Multiple Listing Services

 A couple of electronic multiple listing services (MLS) are now operating in Mexico.  Producciones Viva, the company that publishes the Real Estate Guide, has been offering MLS services to Vallarta for the past 12 years, available in a print catalog and online at mlsvallarta.com).

 Escrow, Title Insurance and Home Insurance

 It is the public notary who, in effect, acts as a “holding agent” for the involved parties, so there are few escrow companies in Mexico. 

 At the present time there is no general use of title insurance in Mexico, although some American companies are providing coverage in some resort areas of the country.  On the other hand, insurance companies do provide full home coverage throughout Mexico. 

 The most commonly used title insurance company in Vallarta is Stewart Title.

 Purchase-Sale

 Process

 Most real estate transactions are “opened” after a written purchase offer is accepted by the seller and when a purchase-sale agreement (promissory contract) is signed by both parties.  In most cases, a deposit is required by the broker to transmit the offer to the seller.  (If the transaction is being conducted directly with the seller, it is highly recommended that a real estate broker or lawyer be consulted before signing any papers or handling over any money.

 It is common practice to deliver to the real estate agency or an escrow agency (i.e. Stewart Title), as an advance payment (deposit) the equivalent of 10% of the total price upon signing the purchase-sale agreement, which should contain a penalty clause applicable in the case a breach of contract by one of the parties.

 Normally, when signing the escritura or official deed, which needs to be certified by a public notary, the balance is paid and the property is delivered.  This should not take more than 45 days.  It is recommended that an escrow account be used for all real estate transactions.

 The Public Notary

 A public notary is a government-appointed lawyer who processes and certifies all real estate transaction, including the drawing and review of all real estate closing documents, thus ensuring their proper transfer.  Furthermore, all powers of attorney, the formation of corporations, wills, official witnessing, etc. are handled and duly registered through the office of the public notary who also is responsible to the government for the collection of all taxes involved. 

 Another alternative is to purchase non-residential property through a Mexican corporation, which under certain conditions can be 100% foreign-owned, with a provision in its by-laws that the foreigners accept being subject to Mexican laws and agree no to invoke the laws of their own country.  Also, they agree that the real estate acquired be registered with the Foreign Affairs Ministry and be used for non-residential activities.  In other words, under these conditions foreigners can directly acquire properties destined for tourist, commercial and industrial use.

 The Real Estate Industry

 Status

 The real estate industry in Mexico is similar in many ways to that of the United States, which is probably the most advanced in the world.  It is developing quickly, taking advantage of today’s technology; however, it seems to be paralleling the system as it exists in the US.

 The only national professional real estate organization in Mexico is the “Asociación Mexicana de Profesionales Inmobiliarios” (Mexican Association of Real Estate Professionals) or “AMPI” with 24 chapters in 38 cities.  This organization is somewhat similar to the National Association of Realtors (NAR) in the United States.

 Licensing

 At this time, there are no government license laws regulating real estate brokerage and sales in Mexico.  Anybody can, in effect, offer properties for sale.  Therefore, caution should be taken to select an established and reputable real estate company.  A potential buyer may want to check with the local Chamber of Commerce associations or a prominent law firm.

 Financing

 Historically, due to lack of capital markets and high Mexican interest rates, most transactions were made in cash.  In 1993 and 1994, the Mexican economy picked up to such an extent that annual inflation went down to one digit and interest rates were more or less accessible.

 Banks introduced attractive mortgage programs and, consequently, sales proliferated throughout Mexico.  Due to the devaluation in December 1994, the situation has reverted and the few banks that offer mortgage do so at such high variable interest rates that very few buyers are in a position to take advantage of them.  However, this is changing.  Recently, Scotia Bank Inverlat introduced long-term mortgages at rates between 15-17%. 

 These mortgages, however, are only available to foreigners with FM-2 immigration status.

 In connection with real estate transactions, the public notary, upon request, receives the following official documents, which by law, are required for any transfer:

• A non-alien 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.

 Closing cost

 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.  Since January 1, 1996, the federal law regarding the real estate acquisition tax, which was 2% in all of Mexico, was modified to allow each of the Mexican states to determine its own tax.  The rage now may be from 1-4% of the tax appraisal value, the rest of the closing costs, which exclude the transfer cost mentioned above, vary from 3-5 % or more of the appraised tax value, depending on the particular state.  These percentages are applied to the highest value of the following:

• The amount for which the property is sold.
• The value of the official tax appraisal.
• The value designated by the property assessment authorities.

 Cost of the fideicomiso

 Based on the present tariff, the bank charges the person desiring the Fideicomiso an initial fee (approx. $500.00 USD) for drawing up the agreement and establishing the trust, plus a percentage based on the value of the property.  In addition, the bank charges an annual fee (depending on the value of the property) to cover its services as a trustee.

 Real Estate’s Broker’s Commission

 Most real estate companies in Mexico charge a 6-8% commission based on the actual sale price of the property.  However, in resort areas broker rates are usually higher because of increased broker expenses.

      THE 2007 MEXICAN TAX CODE RELATING TO CAPITAL GAINS IN THE SALE OF YOUR HOME

 To explain these changes, we would like to point out first, how these new regulations affect all Mexican nationals.  Then, how a foreign person may in some case apply to obtain these benefits:  The new year brought in significant changes as to the conditions that you could apply in order to reduce the payment of capital gains taxes when selling your home.  (Please note that the maximum tax on total income a person is liable in Mexico has been reduced from 29% in 2006 to 28% in 2007).

     A.    You are not subject to capital gains taxes if the amount of the sale is less than 1,500,000 UDI’s (or approximately $5,7000,000 pesos.  About $500,000 USD).

B.    If the sale value of your home exceeds the amount of UDI’s mentioned above, you can also be exempted from paying these taxes, only if you prove you have lived in your home for the past five years.  Note:  This rule applies only if you have not sold a property within the last 12 months (fiscal year).

 As before, it is mandatory that all transfer of property be made before a notario público or notary public.  The notario is held responsible by law, to ascertain that all property titles are clear of all encumbrances and that the corresponding amount of due taxes have been withheld and in turn, paid to the authorities.  Also, prior to the transfer of any property he may have to obtain written confirmation from the government tax office that the seller has not sold another property within the last 12 months. (fiscal year).

 How this law applies to non-Mexican residents:

      1.)  If you now hold “Inmigrado” status (FM-2), you can also apply for the above mentioned benefits.

2.)  At time of this writing, there were no clear rules as to the conditions that these tax changes apply to holders of (FM-3) status.  Therefore, it is suggested that you consult your NOTARIO as to the latest legal aspects applicable to this immigration category.

 *An “UDI” ia a Mexican peso unit that for investment purposes is tied to the annual national inflation rate.  (Value of an UDI on January 10, 2007 = $3.7971 pesos)

 Note:  The above basic tax explanation was written based on the latest legal advice obtainable.  You must be aware that some changes in these regulations may take place, due to reviews being offered before the Mexican courts.

 (January 2007)

 REAL ESTATE TRENDS IN 2007

 The growth of the Vallarta real estate market continues to be very strong, with sales tripling for the local real estate association’s MLS (Multiple Listing Services) and doubling for developers compared to the 2005-2006 season.

 This type of growth is unprecedented for Puerto Vallarta and there doesn’t seem to be an end in sight.  If anything, as many realtors and developers state, there are strong reasons to believe it’s here for a while.  “This is just the beginning of something really big.  We haven’t even got going yet,” says” Wayne Franklin of Tropicasa Realty and the president of the Vallarta real estate board.

 In 2005 there were an estimated 4300 million USD in new construction sales and nearly 4100 million USD in sales for the MLS service.  That total of $400 million is destined to be surpassed in 2006, with $250 million in sales already registered by developers and realtors as of the beginning of June.  Roughly two-thirds of this new development is condominiums.  Larger projects of 150 or more units are being built around the bay, with smaller boutique projects scheduled for the South Shore as space and availability allow.

 Strong demand has created a weak supply of both homes and condominiums in the $200,000-$400,000 USD price range.  Most condominium development’s staring point for view properties is not at or above $250,000.  The increase has been driven by a demand for larger units and better quality construction and finishing.  Units with more than 3,000 sq. ft. are now common, whereas 10 years ago it was a 1,500 sq. ft. cookie-cutter, two bedroom standard unit.  Buyers now expect full end suites, sub-zero appliances, marble flooring, a third bedroom and perhaps a TV/study, as well.

 Although the strong Mexican economy has created a market for national buyers once again, the buying that is taking place is predominantly by Americans, especially on the North Shore, Nuevo Vallarta and along the hillsides of the South Shore.  The new condominium towers in Marina Vallarta and now in the Hotel Zone, however, are the preferred real estate choice for the national market.

 Across the board, most realtors say the buyers they are working with today are more sophisticated, less intimidated by the trust/purchase system and ready to make a buying decision quickly.  Today’s buyers come into the office with a good understanding of the market, so less time has to be spent explaining how purchasing real estate in Mexico takes place.  They have a lot of confidence in the Puerto Vallarta real estate market and are ready to make a buying decision.

 In Mexico the economy is surprisingly robust.  The budget deficit has been reduced each of the past four years, and a balanced budget is expected in 2006.  Economic growth is well on track, expected to exceed 3.88%, and inflation should drop below 4%.  So far this year, the peso has proven itself to be as strong as the US dollar.

 Why Puerto Vallarta?

 The variety of real estate available by price, type, area and location, make Vallarta very desirable when compared to other destinations, such as Los Cabos and Cancun.  But the primary reason is the people.  Carl Timothy Fuller & Associates explained this very well, “When you are in large cities, such as Los Angeles or New York, you feel that people just want something from you, the people are takers.  In Puerto Vallarta it’s the opposite; the people are giving, and you can feel that throughout the community.”  Therefore, it is primarily the people of Puerto Vallarta that make it such a wonderful destination for tourist and second-home buyers.

 Condominium Towers

 Bay View Grand started it all a few years ago with their 14-story condominium project in Marina Vallarta, and then following it up with 15-story Porto Fino.  Extremely successful, BVG sold out just over two years, proving there was a strong demand for these types of developments.  Shangri-la soon followed with 18 floors, and now two projects have pushed the envelope even further with 24-story towers, breaking ground beside the Holiday Inn.  Although these two projects are just getting started, they have already generated more than $25,000,000.00 USD in sales.  With this kind of success, it seems the trend will be for more towers in the future.

 Price Appreciations

 Appreciation has been a strong trend for the past three years and quite consistent over the past 15.  We are still below competitive markets like Hawaii and Los Cabos, so this trend should continue, especially for beachfront properties.  Average condominium and homes sales in the MLS showed a 25% increase since 2002; however, this increase would be even higher if it included the recently constructed projects, which have selling prices above the MLS resale market.  Strong demand will continue to drive up prices, at least until supply can begin to catch up, which doesn’t look like it will happen anytime soon.

 Multiple Properties Buyers

 In active real estate markets, it is common for people to take advantage of quickly increasing appreciation by buying multiple units in condo projects and then doing what is commonly referred to as “flipping” the units.  This practice was very popular while Marina Vallarta was being built, for example.  Today, buyers are again purchasing more than one property, but in a different manner.  They are buying a home for themselves and then a second or third property that may consist of raw land or a home that needs to be fixed up.  The difference is that the buyer of the pat did it purely as an investment, a passive investment.  Today’s buyers are pro-active.  They are buying the properties so they can be involved in the construction process of building or renovating.  It follows another trend:  People are moving to Vallarta to live, but not to do so passively by spending time on the beach, tennis court or golf course.  They want to be kept busy, and real estate development is an interesting outlet for them.  It has also proven to deliver a much better return than they have traditionally earned in the money and stock markets.

 CLOSING COSTS FOR BUYER & SELLER

 Closing costs for the buyer are different from what many foreigner buyers first expect in Mexico.  Because the majority of the Bay of Banderas is in the restricted zone, a foreigner buyer must own his residence in a trust.

 This trust is administered by a Mexican bank and has its own costs.  A buyer may consider a new trust for 50 years, renewable, or assume an existing trust.

 “A thing is worth whatever the buyer will pay for it.”  Publilius Syrus, first century B.C.

 The notary gives the estimate of closing costs for the trust and associated fees.  It is customary for the buyer to select the notary.  The costs are given in pesos at a conversion rate selected by the notary or requested by the buyer.  The rate is adjusted closer to closing, when the final payment is made.  Customarily, the buyer pays a deposit of 50% of the estimated costs, so that the notary can start the application for ownership and order the appraisal.  The appraisal is not a market appraisal, but one from which the city calculates the property taxes. 

 The seller should know before closing if he has capital gains costs.  However, many times this information is learned upon the written agreement of a sale, when the seller’s documentation is taken to the notary.

 For a foreigner to be exempt from capital gains tax on a Mexican residence, he must have a permanent visa, such as an FM2 or FM3 and satisfy the notary with documentation of expenses, such as gas or electric bills for the property that he is selling.

 If the seller has an existing trust, the bank charges a fee to cancel it, if the new buyer is not assuming it.  The seller can also be responsible for the payment of the real estate commission, including IVA (sales tax).

 The seller should pay also, the proper portion of property taxes, his current trust fees, utilities until the date of closing, condo fees and assessments, contributions to city services being charged to his neighborhood, and what other costs are negotiated between buyer and seller.

 The buyer will work off the estimated statement from the notary, and when the final 50% is paid, should receive a formal paid receipt.

 The closing costs estimate from the notaries all follow a common format:

 The property value of sales price is given in dollars and the selected exchange rate.  The property value is then given in Mexican pesos.

 The notary’s fee is a percentage of the sales price in pesos and averages from 007-01 percent.  This includes the professional fee, a charge for office supplies and IVA.  The notary’s fee is sometimes negotiated.

 The transfer or acquisition tax is approximately 2% of the appraisal value.  The notary will order the appraisal to be done by an authorized appraiser.  This value will also establish the basis for the yearly property tax.  The law changed in 2002, whereby the transfer tax is charged on the appraised value instead of the sales price.

 Additionally, there is the cost to apply or register the trust in Mexico City.  Foreigner ownership of real estate is recorded at the Foreign Affairs Registry in Mexico City.

 The buyer pays for the cost of certificates to show that there are no liens of record prior to sale and that the property tax has been paid.  An additional certificate will show that the water bill (Seapal) has been paid, if the property has this city service.

 The bank will also charge a set up fee or assumption of the trust, plus the first year administration fee in advance.  There is a yearly fee for administration of the trust, due on the anniversary date of the formation of the trust.  These fees currently run from $450-$900 USD per year, depending on the bank.

 The cost for closing for the buyer who has a trust average 4-6% of the sales price.  The sellers in this area consider the transfer tax and trust cost to be the responsibility of the buyer.  A Mexican citizen does not have the cost of a bank trust, but pays the other normal fees charged by the notary.

 For many first time buyers, it is a shock to realize that closing costs are more than is typically paid in the US and Canada.  It is important to budget for this expense when you are determining the overall cost of the purchase.

 If a bank or title company escrow account is used to hold to purchase funds, there is an additional one-time charge averaging $500 USD.  Title insurance can also be selected and can be 1% of the sales price.  Currently, no Mexican companies offer title insurance, but insurance can be obtained from US companies registered in Mexico.

 If you are building in an area that is overseen by an environmental impact agency, there is a cost for an ecological study before a permit to build will be issued.

 Additionally, if you have an attorney working for you, you will have the cost of his fees as well.

Although closing costs for the buyer can be substantial, I recommend that you not try to take a short cut.  To protect your purchase, you need to have the trust and public deed.  To do this, you must go through the proper channels with a notary.  The majority of pre-existing homes for sale, whether they are villas or condominiums are offered furnished.  There is no large discount in price to exclude the furniture. 

 If your purchase is adjacent to a federal zone, such as the ocean, a river or a federal highway, you should have the concession researched.  If you want the private use of the federal zone, you enter into a lease agreement and pay an annual fee.  By paying for the concession, you have the use of the federal zone under certain guidelines.  Many homes have terraces, beach palapas, pools or landscaping on the federal zone.  Construction of part of a permanent structure, such as a room of the house, is not permitted in the federal zone.

 Writte by Harriet Murray of Cochran Real Estate.  This article is based upon legal opinions, current practices and her personal experiences in the Puerto Vallarta-Banderas Bay area.  She recommends that each potential buyer conduct his or her own due diligence and review.

 Taking Control of Trust Fees

 Watch out for boilerplate trust agreements.  Over the years, many foreigners frustrated with the fees they have to pay to the bank acting as their trustee have contacted me.

 Unfortunately, I usually find that when their trust was set up they had unwittingly agreed to pay the fee the bank charges and also authorized the bank to unilaterally modify these fees.  By the time they contact me, they are already so angry with their bank they want nothing further to do with them.  In these cases, the only way out is to transfer the property to a new trust, which means expensive closing costs and taxes.  How can you avoid this?  If you already have a trust set up, you may want to renegotiate its terms.  If you are just setting up your trust, then you need to watch out for boilerplate agreements.

 The procedure for purchasing property in Mexico is very foreign to most Americans and Canadians, and they usually try on top of what is going on so their purchase does not become one of the many horror stories they have heard.  They get so wrapped up in the details of closing that they often fail to really understand the trust agreement.  They’re too busy checking whether the title to the property is clear, if the property taxes, electrical, phone and water wills have bee paid, if they have their finances in order to make a cash purchase, how much annual expenses will be, whether there are any structural, plumbing or electrical problems, whether title insurance can be acquired, and just basically trying to understand a foreign way of transferring title to real property.  Once all of the above is in order, it’s time for closing.  Documents are signed, payments made and the parties extend congratulations on the purchase and sale.

 You have just closed on your new property.  Congratulations!  Oh, but wait, you also have just agreed to the bank’s boilerplate agreement, which was designed by some very experienced attorneys working for the bank.  As you can imagine, this agreement is written extremely in favor of the bank that now holds title to your property and it sets the rules governing your relationship with them.  In working with most of the banks that set up trust for property in Mexico’s restricted zone, I have found the following stipulations:

1.The bank has the authority to modify the annual fees it charges whenever it deems necessary.  These fees are either a percentage of the value of the property or a fixed dollar amount.  If they are calculated as a percentage, the bank authorizes itself to reappraise your property whenever it sees fit and adjust you annual fees accordingly. 

 I recommend you make sure your trust does not use the percentage method; instead, ensure it is set in dollars and that it can only increase if you are in agreement or in accordance with inflation of the USA.  Often, banks will want to set the fees in dollars and then establish that they can increase in accordance with Mexican inflation.  Do not let them get away with this.  If dollars are being used, then inflation should be set to US inflation.  If they want to use the inflation of Mexico, they should set the fees in pesos.  Most banks will not want to set fees in pesos because if the peso devaluates, which it often does, they lose.

2.The bank can charge late interest or fines for not paying your administration fees on time.  I have seen agreements that charge late interest as high as 3% per month, which is 36% a year!  What is worse is that the bank has no obligation to notify you when payments are due or where they should be paid.  Often you got to your bank to make your payment and the teller has no idea what you want to pay or how to do it.

To avoid this, make sure the account information where you have to deposit the fees is clear.  Also make sure you know the due dates, and most importantly, make sure that the bank charges no late interest or fines unless they notify you fees are overdue and where you can deposit them.

 3.  The bank will set fees for signing powers of attorney and the sale of the property.  These fees usually seem responsible; however, what many people don’t see is that the bank has the authority to charge more for what they consider “unusual circumstances.”  From my experience, it seems that the bank finds “unusual circumstances” in just about every case.  An example of this was a power of attorney a client recently needed to defend him against a legal claim.  The trust document said the bank could charge $300 USD for granting powers of attorney.  The bank charged $650 USD, stating there were “unusual circumstances.”  If my client did not pay the $650, the bank would not sign the power of attorney and he would lose the legal battle by default.

You need to make sure the amounts the bank can charge for signing powers of attorney or the sale of the property are clearly established.

4.The bank has the authority to determine the fees for any other types of services, such as reviewing documents, authorizing federal zone permits and authorizing mortgages.

Do not give this power to the bank.  Set a fixed price for reviewing and signing documents other than power of attorney or the sale of the property.  I usually establish a charge of $300 USD.

 5.The bank can refrain from signing documents if fees and fines or late interest are not paid.  This type of disposition goes completely against the concept of having a fiduciary or trustee responsibility; however, it is in just about every boilerplate agreement and the bank always uses this type of policy.

This type of disposition should be allowed only regarding the sale of the property; other than that, it should be taken out of the agreement.

When you close on a property, you do so before a notary who charges fees to set up the trust and have it registered.  In most cases, the notary will use a boilerplate agreement given to him by the bank modifications to the agreement.  To make modifications, you need to either do it yourself or hire someone to do it for you.  Spending a little before you sign the agreement will save you a lot in the future.  You may also want to ask the notary what extra fees he would charge to handle this negotiation (he may not even charge you).  Make sure you get in writing the modifications that will be made.

If you already signed the trust agreement before a notary and are unhappy about what the bank is charging, you need to determine whether negotiating modifications to the existing agreement is feasible.  You need to either contact the bank personally or have an attorney contact the bank to determine what needs to be done to modify the agreement.  You also need to determine if the cost of the negotiation and modifications will be more than they are worth in the long run.  I recommend that you pay an attorney or someone familiar with trusts to determine the possibility of modifying the trust and an accurate estimate of costs to make the modifications.  Make sure you get the estimate in writing and that it covers all costs and fees.  Modifications to existing trust are difficult, but not impossible.  These modifications need to be dealt with on an individual basis and only after having read and understood the terms of the existing agreement.

The bank has a fiduciary responsibility with you and they charge for these services.  Do not let them give you a boilerplate agreement that authorizes them to determine, at their own free will, what these fees will be.  If you have already signed an agreement that does allow them to charge whatever they see fit, you many want to negotiate a modification and put a stop to increasing fees.

Why AMPI?

Do I really need a real estate agent to help me buy or sell a property in Mexico?

The answer is YES!

When you’re ready to think about buying or selling your property, you need to ask yourself the following questions:  Do you have the time, energy, sources of information, and contacts to buy or sell a property in Mexico?  If you were one of the “do-it-yourself” people, would the results be as good or better than they would be if you had professional assistance?  Would it have gone smoother?  Would it have given you more personal time?  Would you have purchased for less, or sold for more, if a real estate agent was involved?

Read the following information and learn how a real estate agent can help you understand everything you need to know about a real estate transaction.

The buying process

The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity.  If you give a real estate agent some basic information about your available savings, income and current debt, they can refer you to lenders best qualified to help you.

Finding

Once you know how much you can and want to invest, the next step is to find the properties that most nearly fit your needs.  This is the time to choose a real estate agent, one who is also an AMPI/Multi-list member.  A member of the Mexican Association of Real Estate Professionals (AMPI) and Multi-List Vallarta agrees to abide by a strict code of ethics.  Our members have many resources to assist you in that search.  Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

Selecting

Your job is to make the final selection of the right property for you.  This is when excitement and emotion run high.  Your real estate agent can assist you in the selection process by providing objective information about each property.  Agents who are members have access to a variety of informational resources.  Members can provide local community information on utilities, zoning, school, etc.  There are two things you’ll want to know.  First, will the property provide the environment I want for a home or investment?  Second, will the property have resale value when I am ready to sell?

Negotiating

There are a myriad of negotiating factors, including, but not limited to price, financing, terms, date of possession, and often the inclusion or exclusion or repairs and furnishings or equipment.  The purchase agreement should also provide a period of time for you to complete appropriate inspections and investigations of the property before you are about to complete the purchase.  You agent can advise you as to which investigations and inspections are recommended or required.

Financing

As soon as you are reasonably sure the property is right for you, the process of obtaining financing, if necessary, begins.  You agent can help you in understanding different financing options and in identifying qualified lenders.  This is something relatively new in Mexico, but financing is available.

Closing or Settlement

Finally, there is the closing, or settlement, as it is known in different parts of the world.  Every area has its own unique customs.  Your agent can be the best source of information regarding a swift and secure transaction.  Again, your real estate agent can guide you through this process and make sure everything flows together smoothly.  This can actually be the most important part of the whole process, and ensuring that your title is transferred properly.

It also involves establishing a trust account with a Mexican bank, which foreigners need to use in order to own a real estate along the coast of Mexico.  The trust system has been used for over 25 years in Mexico, offering a manner in which foreigners can actually obtain property in the country.  Your broker can help explain this in more detail.

Property Management and Maintenance

If you purchased a property for investment purposes, your agent can be instrumental in the realization of your financial goals through a continued representation of your interests.  All member agencies have “in-house” property rental programs featuring marketing, tenant screening, collections, automated payment services, maintenance programs, etc. that can be tailored to your specific needs.

Selling Your Real Estate

Pricing

This process generally begins with a determination of a reasonable asking price.  Your real estate agent can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and conditions of competing properties.  These are key factors in getting your property sold at the price, quickly and with minimum hassle.

Marketing

The next step is a marketing plan.  Often, your agent can recommend repairs or cosmetic work that will significantly enhance the salability of the property.  Marketing includes the exposure of your property to other real estate agents and the public.  In many markets across the country, a large percentage or real estate sales are cooperative sales:  that is, a real estate agent other than yours brings in the buyer.

Your agent as the marketing coordinator, disbursing information about your property to other real estate agents through Multi list / AMPI associations or other cooperative marketing networks, open houses for agents, etc.  The Multi list / AMPI Code of Ethics requires members to use these cooperative relationships when they benefit their clients.

The Closing Process

Making the closing process run smoothly

For a real estate agent, the most important part of the closing process is that it goes smoothly for your client.  In my opinion, the best way to insure that happening is to be prepared.  If you are the selling agent, the best way to insure a smooth closing is to have your listing file complete at the time you sign the listing agreement.  If you are a buyer’s agent, you must know what items to request from each seller at the time you make the offer.

The listing file

A good listing agent will be able to tell their client exactly what will be expected from them when they sell their property.  A prepared agent should not only have a complete file ready at the point of listing, but should also be responsible for keeping the file current.  For example, if you list a property in 2006 and you still have it on the market in 2007, update the file with the 2007 documents.

To follow is a general idea of the kinds of documents I request from the selling agent (or seller) in order to adequately perform due diligence on the property.  These are the documents that should form the listing file and are the documents that buyers’ agents should be requesting from the sellers.

Houses

1. Deed of ownership-copy of the title deed showing that the person who supports to sell the property actually holds title.  This should include the recording information of the deed as well (datos de registro).
2. Power of attorney, if applicable-In the event the seller will not be present at closing, a valid power of attorney will be necessary.
3. Current Survey-Most title insurance companies will require a current survey, especially if the home is oceanfront.
4. Utility Bills-Copies of the latest payments for the services of water, drainage, electricity, telephone, etc.
5. Property Tax-Copy of the payment of the current property tax payment (current year).
6. Federal Zone Concession-On oceanfront properties, it is crucial to have the concession or evidence of application for the concession.  This is not optional if there are constructed areas located within the federal zone boundaries; remember these boundaries fluctuate.
7. List of Expenses-Most buyers want to see an average of how much it costs to maintain the home.

Condominiums (Including houses in condominium regime)

1. Deed of ownership-copy of the title deed showing that the person who supports to sell the property actually holds title.  This should include the recording information of the deed as well (datos de registro).
2. Condominium regime and amendments-In Spanish with recording information-this document will show the legal information of the condominium and the by laws that are applicable.
3. Power of attorney, if applicable-In the event the seller will not be present at closing, a valid power of attorney will be necessary.
4. Utility Bills-Copies of the latest payments for the services of water, drainage, electricity, telephone, etc.
5. Property Tax-Copy of the payment of the current property tax payment (current year).
6. Federal Zone Concession-On oceanfront properties, it is crucial to have the concession or evidence of application for the concession.  This is not optional if there are constructed areas located within the federal zone boundaries; remember these boundaries fluctuate.
7. List of Expenses-Most buyers want to see an average of how much it costs to maintain the home.
8. Homeowners minutes-Formalized minutes of the association meetings, ordinary and extraordinary) for the last three years, in Spanish and formalized before the notary public.
9. Financial statements-Copies of the financial statements for the condominium for the last three years.
10. Current HOA budget-Actual budget for the current year that clearly shows what is included in the maintenance fee.

Pre-construction projects

I am unaware of what the current rules are in AMPI with regards to the listing of preconstruction projects.  As you all know, in the state of Jalisco, the condominium regime cannot be filed with almost 100% of the project being completed and for this reason, unless the developer is using a different mechanism for selling the units, such as an administrative trust, the listing of these units can be dicey.  That said, preconstruction is hot and as long as your clients know the risks, they can be good investments for some.  To follow is a list of the minimum you should require from a pre-construction developer with regards to the project.

1. Construction permits
2. Ground use, feasibility studies and density approvals
3. Plans and specifications
4. If the development is located in a master condominium, authorization for the project issued by the condominium association
5. Deed of title to the land where the development is being built
6. No lien certificate on the land showing any encumbrances
7. Articles of incorporation and powers of attorney if the developer is a corporation
8. Condominium regime where applicable
9. Form purchase agreement and payment plans
10. Federal zone concession or corresponding application in the case of oceanfront properties
11. Developer guarantees if applicable or available (bond administrative trust, escrow accounts)

NOTE!!!

Seller’s agents:  When you list a property, get an estimate of the probable capital gains tax the seller will need to pay from the notary based on the list price.  This way there will be no surprises.

Buyer’s agent:  When you are going to submit an offer, get an estimate on closing costs for your buyer-again, the best surprise is no surprise.

Going to closing

You have an accepted offer and both parties are in agreement with the terms and conditions.  Hopefully, you have reviewed the necessary documents and you feel comfortable with them.  To follow, I’m going to quickly touch on what I feel are the most common problems/concerns people have with regard to the actual closing.

Signed offer

Get an originally signed offer, signed by all parties on the same document.  If there is ever a dispute that would need to be argued in court, you will need the original document-not a fax and no counterpart signatures.  A fax is fine in order for both parties to “feel” bound, but it behooves you all to circulate a couple of sets of originals so that each side has a fully signed original.

Escrow account

For US $550.00, an escrow is the best way to protect the good faith deposit for both parties.  Attorneys, notaries and real estate agents are NOT escrow agents and I’m sure none of you want to be part to a lawsuit in the event of a dispute over escrowed funds.

Choosing a notary

It is generally the buyer who chooses the notary since it is the buyer who pays the notary fees.  This does not mean that the seller cannot choose the notary-they would make that a condition to the accepted offer.  It also does not mean that the notary represents one of the parties; the notary is a neutral third party who is responsible for making sure that clear titles are transferred.  He or she is NOT responsible for making sure the parties have done their due diligence.

Closing cost

In Mexico, the buyer traditionally pays the closing cost and the seller the capital gains tax.  These fees include the notary fees, bank fees, no lien certificates and no debt certificate fees, recording fees, real estate transfer tax and foreign investment fees.  Since some of these fees are a percentage of the value of the transaction and others, such as the foreign investment and permit fees are fixed, it is difficult to say that the closing costs will be an exact percentage of the purchase price.  Most notary offices can give you a good estimate right away.

Explanation of closing costs 2005

The closing procedure generally takes from 30 to 45 days and these costs are paid by the buyer. 

Note:  All amounts are in US dollars, with an exchange rate of $10.50 pesos per dollar.

When a property is acquired through a purchase-offer or when a trust transfer domain is carried put before a notary public.  In order for them to be legally constituted they must meet with a series of permits and expenses, which are described as follows:

1. TRUSTEE FEES-These are charged on a yearly basis and are paid upfront.  They may vary according to the transaction and considering the property and the trustee.  Nonetheless, most of them charge $450 in properties prices under $700,000.00.  For properties prices up to $1,500,000.00 they charge $600, and $1,000 for properties priced over $1,500,001.

In addition to this, all the trustees collect the same fee for the Trust Acceptance, which is charged only once.

2. FOREIGN AFFAIS PERMIT (SRE)-This is a permit that the notary public or the trustee process through their agents and they may cost $1,100 as a maximum fee.  This may be in proportion to the agent’s fees, since the permit fee from the Foreign Relations Office does not vary.
3. NATIONAL FOREIGN INVESTMENTS REGISTRATION (RNIE)-The trustee has the obligation to process the registration of the deed within a 30 day period after the granting and the cost per fees and rights may vary from $285 to $330 depending on the trustee.
4. NOTARY PUBLIC FEES-These are regulated by a fee list authorized by the notary law valid in every state.  In the state of Jalisco the fee list is as follows:

From $1,000 up to $9,523 = 2%; from $9,524 up to $19,047 = 1.15%; from $19,048 up to $47,619 = .85%; from $47,620 up to $71,428 = .65%; from $71,429 up to $95,238 = .50%; from $95,239 up to $476,190 = .25%; from $476,191 and over = .20%

(Note: The fees can be for a lesser amount but never for an amount over this fee list)

5. PROPERTY ACQUISITON TAX:  this is a state tax.  The notary public is responsible to charge and declare it without surcharges in the case of the state of Nayarit, this takes place within a 30 day period after the granting of the deed.  It is 2% based on the highest value of the previously authorized construction appraisal.  In the case of the state of Jalisco it takes 60 days.  This tax is charged based on the construction appraisal value using different percentages and fixed amounts.  It is important to mention that in order to calculate this tax you must apply a special procedure and the real closing costs cannot be determined on your own, a notary must determine these costs.
6. APPRAISAL AND DIVISION-Your cost is calculated as follows:

On values up to $250,000.00 = 3%

$250,001.00 - $500,000.00 = 2%

$500,001.00 and up = 1%

(Note:  These percentages may vary according to the appraiser’s criteria.)

7. PUBLIC REGISTRY RIGHTS-This permit can be processed through the notary.  Once the corresponding rights are paid, the notary will be able to process the registration in the local Public Registry Office where the property is located.  The costs vary as stated by the valid law in every state. 

In the state of Jalisco, a $190 fee is charged per property.

8. NO LIEN CERTIFICATE

NO LIEN ON PROPERTY TAX, NO LIENS ON WATER OR MAINTENANCE FEES-The notary has the obligation to check that the subject property has no lien.  The notary will gather the certificates from the corresponding government office and from the condominium administration.  This charge is normally not more than $60.

9. OTHER CHARGES-This depends on the notary and these can be:  Travel expenses when there is need to sign documents.  Copies and other administrative costs.  This is usually not more than $767.
10. TITLE INSURANCE-This varies according to the value of the transaction and the insurance company but it should not exceed 0.5-0.7 %
11. ESCROW ACCOUNT-In order to manage the funds for the purchase of a property it is recommended to open an ESCROW.  The fees are $500 on opening costs.

It is important to mention that all the aforementioned expenses are mandatory and they must be made  In the case of a trust transfer domain for a purchase-offer you can omit steps 1, 2 and 3.

With this information our clients can determine the real closing costs.  Nevertheless, it is very important to visit your notary for assistance or if this is not possible, then you should go to a real estate agency which has qualified personnel to supervise your closing.

All of this information about closing costs is necessary in order to have an idea of what your closing costs may be and according to my expertise in this field, I prepared a chart which can help determine the approximate costs very fast.

(ONLY WHEN CONSTITUTING A TRUST)

Up to $20,000.00---17%

From 20,000.00 to $50,000.00---10 to 15%

From $50,000.00 to $100,000.00---7 to 10%

From $100,000.00 to $150,000.00---6%

From $150,000.00 to $250,000.00---5%

From $250,000.00 to $450,000.00---4%

From $450,000.00 to $1,500,000.00---3.5%

$1,500,000.00 and over---2.5 to 3%

The bank trust

All residential property located in the restricted zone must be held in a bank trust if the purchaser is: a) a foreign individual, b) a foreign corporation or c) a Mexican corporation with foreign shareholders.  Mexican corporations with foreign shareholders may hold real property in fee simple in the restricted one ONLY IF THE USE OF THAT PROPERTY IS COMMERCIAL BY NATURE (Yes, they CAN find out!)

The bank trust has received a bad rap but honestly it is a marvelous way to hold property.  The trusts have an initial term of 50 years which is renewable during the life of the trust.  You have effectively isolated your assets, as the owner of the real property it is the trust and not the individual.  You have created your Mexican estate planning document by indicating succession and substitute beneficiaries-no need for probate, and since the owner is a Mexican citizen (the trust), you are no more susceptible to governmental seizures than anyone else.

When purchasing a property in the restricted zone you have the option of forming a new trust or assuming an existing trust in the case where the selling party owns the real property through trust.  I usually recommended forming a new trust in the case where the trust is older or if the bank trustee of the existing trust is difficult to work with.

Who needs to be present at closing?

The general rule is that in the case of a new trust, only the seller needs to be present.  You need to check this since many banks are now requiring the presence of the buyers as well.  In the event you are assuming an existing trust, both buyers and sellers must be present, either personally or through power of attorney.

Miscellaneous

There are some items that are also a good idea to require at closing and will not be on the notary’s laundry list of goods.  These may include the following:

1. Employee liquidations-Even if the buyer is going to keep the staff, the seller must liquidate their employees and pay full severance.  These liquidations need to be formalized before the labor board and the original ratifications given to the buyer at closing.
2. Warranties-If the seller has any valid warranties on workmanship, appliances etc...they should be given to the buyer at closing.
3. Transfer of utilities-The seller, unless otherwise agreed, should sign letters transferring their rights in the utility services to the buyer.
4. Assignments of federal zone documents-Seller must assign his rights in the federal zone concession or applications although the buyer will need to apply for his or her own concession, the seller must give up his or her rights at closing.
5. Perorations and holdbacks-It is sometimes wise to establish a holdback of a few hundred dollars to cover any future bills that may correspond to the seller but that arrive post closing.

Mortgages in Mexico

HOME LOAN FINANCING NOW AVAILABLE IN MEXICO

With the ease of loan processing in USA

Home mortgages in Mexico are available TODAY!  Financing your Mexico home has never been easier.  Until recently, if you wanted to buy a home in Mexico, you had to pay for it all in CASH.  Needless to say, this was prohibitive for most people.

Finally, this problem has been solved.  Yes, you can now purchase your dream home in Mexico and not have to pay cash to get it.  Use your Mexico property as collateral for your mortgage loan and leave your other assets untouched.  Choose either a USD based loan or a peso based loan.  We have to mortgage loan options you’re looking for.  This opens up the Mexico real estate market to many more people who would like to own their own condo or home, or even build their own home.  Prices in Mexico are still a bargain, but as real estate becomes easier to purchase, values might well go up even faster than they already are.  If you are planning for retirement, or looking for a second home, NOW is a good time to act.

Here are some benefits:

• Loans available in USD or in fixed pesos (takes advantage of the peso devaluation to USD of 6-10% per year).
• Loan amounts of $50,000.00 USD to no upper limit-converted to pesos at closing for peso based loans.
• Up to 80% LTV-seller may pay up to 3% of closing costs.
• Low fixed or adjustable interest rate 10, 15, 20, 25 and 30 year term.
• Available to citizens of the USA, Mexico and citizens of other countries with FM3 visa status and history of income in Mexico.
• Close your loan in 45-60 days.

Financing is available throughout Mexico.

Broker inquires are invited.

Doug Jones has been in the mortgage industry for over 30 years and has traveled to Mexico for longer than that.  He knows mortgages and he knows Mexico.  Financing homes in Mexico right now, work with professional who is pioneering home financing in Mexico.

BORROWER REQUIREMENTS & DOCUMENTATION

Borrower requirements:

• Minimum $20,000.00 verified household annual income.
• 2 year verification of employment.
• If the applicant is an independent professional or business owner, a 2 year, minimum history in the same activity will be required.
• Home phone numbers, cell phone numbers, e-mail address and any other contact information.
• Foreign (non-Mexican) buyers will need a current passport for their country of origin.
• 35/40 ratios and a 680 minimum FICO score (No minimum FICO for MX peso loan but all outstanding obligations must be current.)

BORROWER DOCUMENTATION:

• Loan application (Standard form 1003):  Properly filled out and signed by the borrower and co-borrower.
• Credit report authorization forms filled out and signed by the borrower and co-borrower.
• Certified copy of marriage record of borrower and property owner if applicable. 
• Official identifications:  Passport or driver’s license.  (Good quality copies).
• Evidence of income:
  • Employee’s payroll checks:  payroll check stubs for the last four months.
  • Labor contract.
  • Business owners, shareholders, natural persons with business activity commission agents without flat salary.

Last 4 statements of account of checks accompanied by last yearly income-tax return.

• 2 year recent W2 or 1099’s
• 4 month recent bank statements (checking, savings or investments) showing activity and cash resources-originals preferred.