Buying Real Estate in Mexico FAQ
Like anywhere in the world, Mexico has its own administrative processes for buying real estate. This process is neither difficult nor is it simple, but is a process where you need to be sure that you are being informed and advised impartially by a professional Real Estate Agent working and living in the area of Mexico where you are considering buying.
Our professional team is at your disposal for any questions or clarifications you have regarding real estate in Mexico, and more specifically in Baja California Sur, Los Cabos area.
1. Yes, a person of any nationality is able to legally buy, hold and sell real estate in Mexico. I have noticed whenever I travel within the United States of America or Canada or abroad to Europe, I draw attention and Mexican real estate questions, probably because I am always wearing some article of clothing or a hat with “Century 21 and Cabo San Lucas” on it. The most common question being asked is, "How I could be selling real estate in Mexico?" Usually followed by “I heard that ownership is restricted for foreigner’s owning property?” This misconception or confusion is probably due to the existence of a Mexican designation for certain areas called the "restricted zone" which I will address in more detail in another FAQ. .
There are several ways of acquiring property ownership in Mexico.
First, only a small percentage of Mexico is considered “the restricted zone”, outside of this area foreign ownership of any type of real estate is legal and the title is recorded on a fee-simple basis (known as an “Escritura”).
Second, when acquiring non-residential property, foreigners can take title again in a fee simple title (Escritura) through the establishment of a Mexican Corporation (these corporations can be 100% foreign-owned). Ownership under this method has two deed restrictions, 1) the foreigner(s) must submit to subject themselves to Mexican law, and that the property being held within the Mexican Corporation must be for non-residential use and registered with the Ministry of Foreign Affairs. This applies to real estate in and out of the restricted zone when taking title within a Mexican corporation.
Third, when acquiring residential properties within the restricted zone ownership must be within a Mexican Trust through the use of a Mexican bank as the trustee for the trust, also known as a “Fideicomiso” (pronounced Fee-day-ko-mee-sO).
2. Here in the Baja California our entire peninsula lies within the restricted zone. The Mexican Constitution definitions the restricted zone as all land within 50 kilometers (30.5 miles) of Mexico's ocean coast line or its inland lakes, or that land that lies within 100 kilometers (61 miles) of any borders with other countries.
Why ? Following a history of invasions, wars and losses of territory, and the regaining of their land from foreign occupancy, the power at the time created and wrote Article 27 into the Mexican Constitution rewrite of 1917. The Article was put into place to protect Mexico from again having to subject itself to foreign intervention and invasion. The Mexican Governments goal at the time was to create a mechanism to stop foreign interests from purchasing strategic coastal and/or border areas of the country which might leave itself vulnerable to attack and hard to defend. I have heard this called the cannon ball theory… from a ship a cannon ball could reach perhaps 50 km. inland and from land 100 km. While today the risk of foreign attack is low from Mexico neighbors and we are not using cannon balls in warfare any more, this law still remains a founding chapter in the Mexican Constitution. The new more progress congress it is rumored is dealing with the possible changing of this law…don’t hold your breath, but we who work and live here in Mexico are monitoring the progress of this proposal and will let you know as soon as it should happen.
In Summary: Today, the restricted zone is merely a legacy of Mexican culture and history and not a tool to stop foreigners from investing, owning or retiring here in Mexico. Mexico in order to re-enforce the message of Welcoming and Encouraging Foreigner investment in Mexico enacted on the 28th of December, 1993, the law which brought about Foreign Ownership through the “Fideicomiso”. This act protected the rights of foreign ownership within the restricted zones and ensures the same safe and legal purchase, acquisition, and succession rights of real estate afforded by all Mexican citizens.
3. If you are familiar with Bank Trusts or Family Trusts in the United States then you will find Bank Trusts in Mexico to be very similar.
a) As with all trusts there is a Trustee or Trust Administrator, whose fiduciary responsibilities are to administer the trust and its assets, in accordance to the instructions within the Trust document drawn by the parties who established the trust. Your Mexican Bank Trust is also drawn to your specifications and tailored to your needs for ownership (joint, right of survivor, LLC, etc.) and with your choice of Substitute Beneficiaries for your families succession planning.
b) Normally most trusts provide payment for the Trustee or Administrator for their services, and your Mexican trust also make this provision establishing a minimal annual fee paid to the Mexican Bank known as an annual “Trust or Fideicomiso fee.
c) In the states the Trust Assets do not belong to the Trustee administering the trust and in a Mexican bank trust, or “Fideicomiso” the real property or asset of the Trust is not owned or is it a part of the Banks assets either.
d) Bank trusts or “Fideicomiso’s" are not just for foreigners. Throughout Mexico many Nationals with money use this instrument as an Estate Planning tool for the ease of passing property to individuals who are not direct family and saving on Capital Gains taxes.
4. A lease is a contract generally with the owner of the property giving you the right of use for a specific length of time and you pay the Owner some compensation generally monthly and based on the market value of the property for that right.
As the lease holder:
a) Can you…Legally Sell the leased space to a another person…NO
b) Can you… Legally use the asset as Collateral for a loan…NO
c) Can you… Legally tear it down or remodel the property…NO
With the Fideicomiso or Bank Trust you have all these rights and much more…you be the Judge. Ownership or Lease ?
5. The current term of the Fideicomiso before needing to be renewed is set for 50 years. The renewal for another fifty years requires you to submit an updated Trust Application confirming your personal information and choice of beneficiary, a new Foreign Ministry permit fee, a bank renewal fee and recording fees. I can’t tell you how much that total will be in 50 years from now, but based on today’s information it comes to around $3000 U.S. dollars.
6. Yes. The Fideicomiso or bank trust gives you all the rights of fee simple ownership, including leaving the property to your family or friends. One advantage of having the Fideicomiso, is that as a trust you can pass your investment to a 3rd party simply by naming them as a secondary trustee. Thus allowing you to control the way and to whom the property would pass should that become needed, without risk of probate, inheritance taxes, etc.
7. The Notario Publico (Notary Public) has an important role in the purchase of real estate, much greater than in most other countries. He/She is first a practicing attorney, they have done another 2 years under the guidance of an already sitting Notario, then the person must submit an application for review of their knowledge and experience to the State office for consideration, after interviewing the applicant will be tested. When they have met and passed the all of the requirements for an official appointment, they are added to a list of qualified applicants waiting for the State Governor to make their appointment. Once that appointment has been made the Notario’s position is secure for the rest of their career. The Notario’s once appointed can no longer defend or litigate individuals, they take the role of advisory and are given the the authority and responsibility of authenticating new and existing title deeds, ratification of private Contracts of Sale, ratification of other public document needing to be recorded, calculating of Capital gains taxes on sales, and deed searches (for liens or other legal/financial issues), tax collecting, construction permit checks (if relevant), etc. The Notary is essentially responsible for ratifying all real estate transactions, hence if a property transaction is performed without a notary and not recorded in the public registry, it is invalid, placing the purchaser in a position where he/she could lose the property with no legal recourse.
8. Yes, there are several well known American Title Insurance companies that have been doing business here in Cabo for more than 10 years that I personally have worked with. We have Stewart Title Informational Systems, out of Huston Texas, Fidelity National out of New York City, and First American Title Insurance Company out of Florida. All of these companies operate international divisions that have local attorneys that perform and verify title search on all registered property documents, the company then underwrites and issues a Title Insurance policy enforceable within Mexico on your property.
9. Generally speaking, the typical real estate purchase process is very similiar to the USA or Canada. It begins with You finding a home or property, that great deal or the place of your dreams. In todays world much of the looking can be done over the internet. Like anywhere else where we might be thinking of buying property, we should figure out (the reality check)...How Much Can I Afford. Qualifying: this process can be before or after you find your property, however it's important to know if the property is within your means to pay cash or if you have the strength of income to qualify for a loan or perhaps we need to ask if this Seller is willing to help with carrying back a loan for part of the purchase price. Now that we figured out where or how the money is going to come for this deal, we can move to planning out how to structure your Offer to Purchase. Keep in mind not unlike other places we will need to submit a check made out to a third party escrow or a signed promise to deposit Earnest Money into escrow along with the offer in order to present it to a Seller for consideration. (for this moment lets skip any back and forth Counter Offer negotiations that may happen). We now have an accepted offer…Next step we move into the closing process. To find more detailed information about closings click the related topic link.
Offer Sample Good Faith Estimate of Closing Costs Earnest Deposit
Escrow Agreement Attorney Review SRE foreign permit The Signing Recording
10. Inspections: The two most common are: Home Inspection Services ($300 usd), and property Surveyor Services ($300 usd). These prices are approximate the actual will depend on the location of the property and the detail of service being requested.
. Cabo San Lucas is awash with real estate agents, brokers, builders, developers, promoters, advertising posters, flyers, reviews, magazines, etc... all trying to sell or tell you that their real estate is best. As in any important purchase, it is important that you feel comfortable with the people you are working with and that you feel confident that they are working in your best interest; and that you do not feel rushed into making a decision in which you are not comfortable. .
We at C21 Cabo Team, have more than a decade of experience in successfully working with individuals like yourself that are in Cabo on vacation... and we try very hard to respect that. It doesn't matter that you have arrived in Cabo prepared and ready for a working vacation. We certainly don't want to take any of the thrill or adventure out of the hunting for your dream property, but we will shorten the days, narrow the down the choices by using your specified criteria, and finally tour all of the qualifying homes you select. Our goal to find you the home or property while your here in Cabo and take the "WORKING" out of the vacation and hopefully allow you to replace it with more time for "FUN".
IF YOU ARE INTERESTED IN REAL ESTATE IN CABO SAN LUCAS OR WITHIN BAJA SUR…PLEASE GIVE US A CHANCE…or SIMPLY CONTACT US BY USING THE FORM ON THIS PAGE.