do you purchase property in Mexico?
1973, non-Mexican citizens have been able to purchase property
in Mexico, with only coastal and border properties owned through
a trust deed established with a Mexican bank. Foreigners may directly
own rural or urban land in the interior of Mexico, with certain
limitations on specific agricultural tracts.
estate transactions in Mexico are generally cash transactions,
with limited cases of owner financing available. The high cost
of money (interest rates) has made financing properties unattractive
to most. Until recently, there has been an absence of mortgage
company services in the Republic. There are now foreign companies
making medium term loans available. You may wish to investigate
Deed Ownership in Mexico
does the trust deed work?
bank (known as the trustee) holds the trust deed for the person
who is purchasing the property (known as the beneficiary). This
property is not part of the bank’s assets and cannot be subject
to a lien or attached for bank obligations. The beneficiary has
all ownership rights to the property and may sell, lease, mortgage,
pass to heirs, etc., or do any other legal thing with the property.
trust deed ownership?
trust agreement was established by the Mexican government for
foreigners interested in owning property in Mexico. It has the
benefit of the bank "overseeing" the deed. A further
benefit has been that co-owners can be listed on a trust deed
using "and/or," solidaridad activa. Upon the demise
of one the property automatically goes to the other and probate
is avoided. The importance of the designation "and/or"
cannot be understated as this allows either to sell the property
and does not require the agreement and signature of all parties.
Another advantage is that a beneficiary can be named, which also
avoids probate. This beneficiary may be unrelated to the owner.
long does the trust deed last?
of 1994, trusts may be granted and extended in 50-year periods.
If you purchase property currently held in a trust deed, a new
50-year period can be established or the existing trust deed may
be assigned. Trusts are renewable at any time by simple application.
Multiple properties may be held in one single trust.
was never the intent that the properties pass back to the government
at the end of the trust period, which has been a common fear of
purchasers. This just does not happen.
is an annual fee charged by the trustee bank for management of
the trust. The amount charged varies. Ask your real estate professional
for current bank fees.
are trust deeds established?
"fideicomiso" or trust is established by a Notary. In
Mexico, the designation of an attorney as a Notary represents
a high level of legal standing, and their services are required
for the transfer of real estate. Because of the large number of
foreign-owned properties in Mexico, and especially in areas such
as Ajijic, establishing a trust has become a routine procedure.
It is not a complicated process, and standard forms are utilized.
As part of the escrow process, your Ajijic Real Estate will assist
you in your dealings with your notary.
deed is the history of the property and will indicate who is the
legal owner. The Direct Property Deed (Escritura Publica en Dominio
Directo) is outright ownership of the property. The buyer is listed
on the deed as the direct owner. There is no yearly or administration
fee, as there is with a bank trust. However, with a Direct Property
Deed there is a process of application for each foreigner who
is registered on the deed. The process of receiving a notice for
a direct deed from Relaciones Exteriores takes a minimum of two
weeks and is taken care of by the buyer’s notary of choice.
of September, 1995, a beneficiary can be designated in a Direct
Property Deed. Probate is no longer automatic with a Direct Property
Deed and a will is not essential to pass on the property when
an owner of record dies. A beneficiary in a Direct Property Deed
must be a spouse, parent or offspring. There is no "and/or"
designation in a direct deed. For all property owners a Mexican
will is strongly recommended. A notary can help you structure
your will. If you live in Mexico a will is recommended.
Once an "Offer to Purchase Agreement" has been accepted,
the closing process begins.
offer to purchase is always validated by a ten percent (10%) deposit,
held in a U.S. dollar escrow account by Ajijic Real Estate when
the offer is in dollars and in a peso account when the offer is
in pesos. The balance is payable upon the signing of all papers
at the office of the "Notario" or Notary. Funds are
held in escrow during the time needed to complete the closing
order to obtain the deed for your property, your sales associate
will work with the Notary to complete the following steps:
Ensure the property is free and clear by checking the Land Registry
Office. This is guaranteed by obtaining a no-lien certificate
and tax statement from the Treasury Department (Hacienda). Additional
checks are made to ensure there are no outstanding water bills
or municipal taxes.
Obtain a permit from the Ministry of Foreign Affairs to establish
direct deed ownership (if applicable). You must apply for this
several weeks before the closing.
Establishment of the Bank Trust or Fideicomiso.
Obtain the appraisal for the assessed value of the property.
Prepare all documents for both buyer and seller.
all of these items have been completed, the buyer transfers the
remaining funds due into the escrow account and the Notary presents
the legal transfer papers to be signed. The Notary is the attorney
of record and the unbiased, official representative of the government.
The Notary has a fiduciary responsibility to both parties and
sanctions the contract from a tax and legal point of view. The
buyer and seller need not be present at the closing, but may be
represented by their Ajijic Real Estate Sales Associate via a
power of attorney. The buyer chooses the notary, as pays the notary
fees and attendant closing costs directly.
Closing costs are paid by the buyer, and to
some extent depend on the value of the property. They include
a transfer tax, legal Notary fees, a property registration fee,
and fees for the tax certificate, title search fees and property
appraisal, as well as miscellaneous clerical expenses. Your Ajijic
Real Estate Sales Associate can supply you with a detailed pre-closing
cost estimate from the Notary once an offer is made.
seller pays all capital gains taxes and real estate fees. Simply
stated, capital gains is a thirty-five percent (35%) tax on the
difference between assessed values at the time of purchase and
sale, with adjustments made for inflation. Your Sales Associate
can provide you with detailed information on future capital gains
taxes, and assist you in your tax planning.
Your Property In Your Absence
condominium owners, maintenance and security is usually handled
by the Condominium Owners Association, paid for via monthly fees.
owners who will be away from their homes for any length of time
may want to consider a property management company. Ajijic Rentals
can provide full property management services for you, which may
include maintenance and repairs, pool cleaning, payment of employee
salaries, payment of utilities, payment of taxes, forwarding mail,
etc. They can also find renters for you, collect the rent, and
maintain your home. Ajijic Rentals may be contacted at 52 (3)
taxes are very low in Ajijic, and in Mexico as a whole. The property
tax rate, known as "predial," is eight-hundredths percent
(.08%) of the assessed value. If paid annually it is discounted
further! The assessed value for property tax purposes is determined
at the time of sale. An example would be that a condo purchased
for $150,000 USD would be assessed about $100 USD annually in
services, including water, gas and sanitation, are lower than
comparable services in the United States of America or Canada,
with electricity being similar, depending on usage.
Ajijic, there exists a very strong rental market for both homes
and condos, and Ajijic Real Estate has an experienced rental agency
that can manage your property for you. Good properties that are
well maintained can be expected to rent quickly and easily.
various types of insurance, including automobile, property, liability,
damage, and earthquake are all readily available in Mexico, at
low relative costs.