CAN FOREIGNERS REALLY

OWN PROPERTY IN MEXICO?

Yes!  You can own property in Mexico, and we are here to help make the process easy and understandable. We will assist you step-by-step and introduce you to all the people and resources you'll need to purchase your property with complete peace of mind.

WHO'S 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/Seller
• A lawyer
• A bank (if using a Fidecomico)
• A public notary

All four are helpful in their respective areas in assisting with real estate transactions. Transactions outside of 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.

Mexican law has special exceptions governing property within 31 miles of the coast and within 62 miles of the border, an area known as the Restricted Zone. Most of the properties shown are within this zone.

There are 2 ways for foreigners to own property in these zones:

Fideicomiso

To acquire property in the restricted area which includes Merida and some areas of the Yucatan, you must engage a Mexican bank to excute and hold title to the property using a contract known as a fideicomiso. With this, you and the bank are both listed on the title papers.

The fideicomiso creates a trust contract for the benefit of the foreign buyer. The bank has a fiduciary obligation to the owner. The owner retains all the benefits of ownership and has the legal right lease, sell, and/or will the property to his heirs. Fideicomisos are currently 50-year documents. They can be renewed at the end of the 50-year term for an additional 50 years. There is no limit to the number of times the fideicomiso can be renewed. The renewal fee is currently about $900 USD.

Right now, the cost for initiating a fideicomiso is approximately $2,800 USD. There is an annual fee to the bank for maintaining the fideicomiso. The annual fee is based upon a percentage of the value of the home. An estimated figure for a home in the $100,000 USD range is about $600 USD a year. Current law does not allow a fideicomiso for properties larger than 2,000 square meters (approx.21,520 sq.ft.). You can apply for an exception to this law.

Foreign Owned Mexican Corporation

If your property is larger than 2,000 square meters, you may own property as a shareholder of a Foreign Owned Mexican Corporation. It costs about $1,500 USD to create a Mexican Corporation and legally register it with required governmental offices. You need to incorporate under the laws of Mexico and report your corporate earnings through an accountant. Accountant fees vary between $50 and $150 USD a month.

The corporation requires a minimum of two individual share holders that are at least 18 years of age. We can assist you by recommending the finest team of attorneys located here in Merida. You may also want to incorporate if you are going to run a business.

If you want to own property in the Yucatan, contact us today!

Closing

Once you select your property, we will write a simple preliminary purchase agreement with the basic details of the transaction - price, closing date (subject to formation of the Trust or Corporation), and special exclusions or any special conditions.

The final sales agreement will be executed by a Notario Publico, a respected attorney with special government recognition to act in real estate transactions. It is the Notario's responsibility to review the deeds and title to the property, ensure that there are no existing liens, assist the bank in the creation of your Trust, and then to formalize the final contract of sale, draft the new deed, collect and pay appropriate taxes and record the transfer as required by law.

It is customary in Mexico for most of the closing costs to be paid by the Buyer. Costs will be based on the appraised value of the property which may be lower than the actual sales price. There is a 2% transfer tax plus attorney's fees which will generally amount to 2-3% of the appraised value of the property. In addition, you must consider the cost of forming your Trust or Corporation.

Real estate commissions are generally paid by the Seller, unless we have been retained as your Buyer's Broker. In most cases commissions are 6% of the sales price.

It can take as little as a week to form a corporation and close a transaction. Formation of a fideicomiso takes two to three weeks, as a permit must be obtained. If the property is already in an existing bank trust, this process can be expedited and costs less - around $600 to substitute your name on Bank documents. However, there can be exceptions, particularly in the case of historic (or older) properties, which can take much longer to close. When documents are very old and title has not recently been transferred, there can be inconsistencies which have to be legally remedied before the bank can obtain a permit. Where inheritance is involved, the courts move very slowly and the system is cumbersome. In these rare cases, it is difficult to predict how long closing might take.