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Q. How does the process of buying a place in Mexico differ from buying a home in the U.S.?
A. Along the coastline and near the border of Mexico, foreigners can hold title through a fideicomiso (often called a “bank trust”) vs. Mexicans who can purchase this property outright (or “fee simple”). The property is held in a trust through a Mexican bank, wherein the bank is the trustee, you are the beneficiary and you designate substitute beneficiaries upon your demise. The fideicomisos are active for 50 years and are renewable after that. (Do not be confused, this is NOT a “lease”.) In fact, the original fideicomisos were effective for 30 years and many are currently in the process of being renewed to 50-year fideicomisos at this time. The process of renewal is relatively simple and inexpensive. Furthermore, in the event of death, the heirs do not need to go through probate as the property is in trust and they are already designated as the substitute beneficiaries. There is a process that is necessary with accompanying fees, but it is fairly simple.
While the offer process itself is relatively similar, the escrow and title processes are somewhat different. The offer process is effectively the same with the exception that most agencies use a dual-column bilingual format so that the contract is in Spanish and in English, with the Spanish side prevailing under Mexican law. A counter-offer process follows and is very similar to that of the U.S., with the exception of back-up offers and multiple offers.
Once an offer has been agreed to by all parties, an earnest money deposit is placed in escrow with a reputable title company, such as Fidelity National or Stewart Title. These companies will hold the escrow funds (which are 10% of the purchase price for the earnest money deposit and the subsequent 90% funds for the balance of the purchase) until the closing and will disburse these funds according to a mutually agreed upon letter of disbursement signed by both the buyer and the seller.
In the event you have a loan secured by your Mexican property, the lender will require that they either have a mortgage (“hipoteca”) against your property or, more commonly, establish a “fideicomiso en garantia” (referred to as a “guaranty trust). The lender will be placed in first position as the first beneficiary and you, as the borrower, will be on title as the secondary beneficiary. You still have the substitute beneficiary according to your designation.
It is important to note that anybody can be your substitute beneficiary, they do not have to be blood relatives. In addition, you can even have a charity as your substitute beneficiary, but the documentation will be extensive. If you wish to do this, you will need to plan ahead and provide this information to the Notario as soon as possible so that the fideicomiso bank will have sufficient time to review and approve the documentation.
The entire process can be as short as 30 days and most commonly is between 45 and 60 days. If the escrow includes any holidays, please make sure you plan accordingly, as governmental offices, including Notarios, may be closed, thus causing delays.
All of this is coordinated through your Realtor and the Notario Publico. While it sounds somewhat complicated, a good Realtor will make the process virtually effortless for you, only requesting certain documentation that will be necessary to complete the process. Pursue the adventure and enjoy the process of buying your new home in Mexico!
Q. What questions should I ask when selecting a Realtor in Mexico?
A. Selecting a Realtor is as important as selecting a doctor, attorney, or other professional advisor or confidant in your life. Purchasing a home is the single most important financial decision you’ll make in your life, so it stands to reason that selecting the professional that is going to guide you through that process is the most important aspect of making the right real estate decisions and getting the proper guidance. When selling a home, the Realtor selection process is perhaps even more critical.
Let’s look at the purchasing side first. Since purchasing a home is a lengthy process overall, from reviewing the market, to previewing the properties, to deliberating and negotiating once you’ve found the right property, to the entire escrow and closing process, a relationship is being formed with you and your Realtor. It is important that you are working with somebody that you trust and feel comfortable with as you’ll be very closely connected with them for months at a time. Often times, the bond that is created with a Realtor will continue on for years after as a friendship can easily be formed during this entire process.
The Realtor with whom you’re working must also understand you and what you’re looking for in a home. A good Realtor will listen to all your needs and wants in your prospective new home and will create a picture in their mind. From that picture they’ll rely on their research materials, such as the MLS, and their connections in the industry, to properly describe your desired home to others and search through all the listings available, weeding out those that don’t fit the primary criteria and alerting you to those which are most likely to suit your needs.
In the home search process, your Realtor should be able to respond to your questions, and/or get you the information from reliable sources that you need to make an informed decision. A seasoned Realtor knows that it’s not about making a sale – it’s about providing you with all the tools to make the proper decision for you. Only then will the sale come. Therefore, a good Realtor will not resort to pressure tactics. However, it is important to keep in mind that while you may be pressured in a particular situation because “another offer is coming” or “somebody else is interested in this property”, it may simply be the Realtor keeping you informed, and not intentionally applying pressure.
From a selling side, experience, expertise, and professionalism would be the most critical elements to consider. While these are valuable in a buying situation, they are essential in a sales side. How many years has the agent been in business or in the area? How are they determining the value of your property – verifiable comps or “from the air”? What type of presence and reputation does he/she or, perhaps more importantly, their brokerage have in the community? Since the MLS is a primary means of marketing a property, are they a member of the MLS and the local real estate board (in Mexico, it’s called AMPI)? Have they sold your type of property before or, in some cases, your price range? What will they do for you in the realm of marketing? Will they be present at showings or are they just going to hand out keys? These are only some of the questions to ask and to have responded to with your satisfaction in order to determine who the best Realtor would be to work with in regard to selling your property. Of course, sometimes it just comes down to a gut level feeling and that’s OK too.