Welcome to the exciting world of real estate in Mexico!
Before you embark on your property purchasing journey, there are some essential things you should know, especially about the Fideicomiso system, which is crucial for foreign buyers.
Talk about Fideicomiso
A Fideicomiso, or trust, is a must for foreign buyers interested in properties within Mexico's 'restricted zone'—100 kilometers from the border and 50 kilometers from the coast. This 50-year, renewable trust grants you, the buyer, the right to use and enjoy the property, including the ability to rent, sell, or bequeath it. As the beneficiary, you hold all the rights akin to fee-simple ownership. The Fideicomiso involves three parties: the Trustee (a bank), you (the Purchaser/Beneficiary), and the Seller.
**Renewing Your Fideicomiso**
Wondering about renewal? Rest assured, your 50-year Fideicomiso is renewable, and you can extend it for another 50 years. At the end of a century, you would apply for a new permit to extend the term.
**Fideicomiso Documentation**
The Fideicomiso is drafted in Spanish, but you'll receive a certified English translation for your records. This ensures you fully understand your rights and responsibilities.
**Setting Up Your Trust**
Creating a trust is straightforward. The closing Notario, a government-certified legal representative, will draft your trust. They collaborate with a closing coordinator to ensure it's set up correctly.
**Importance of a Water Bill**
In Mexico, a water or electricity bill helps determine if the seller must pay capital gains tax, as it indicates whether the property was their primary residence.
**If a Beneficiary Dies**
Should the unfortunate occur, and a beneficiary passes away, the primary beneficiary's appointed successors can assume control. They must provide proof that estate proceedings have begun in their home country.
**Role of a Notario**
A Notario in Mexico is a highly qualified attorney with responsibilities far exceeding those of a Notary in the U.S. They authenticate documents, calculate capital gains tax, and ratify all real estate transactions. An invalid transaction is one not ratified before a Notario.
**The Notario's Real Estate Duties**
The Notario is tasked with ensuring the legality of title transfers, retaining capital gains tax, collecting acquisition taxes, coordinating appraisals, and much more. Their fee is proportional to the property's value.
**Choosing a Trustee Bank**
A trustee bank is a Mexican financial institution authorized to hold your property in trust. It's key to note that your property is not an asset of the bank. Selection often depends on the bank's local presence and the quality of trustee services.
**Bankruptcy of a Trustee Bank**
Should a trustee bank go bankrupt, your property is secure. Federal laws ensure your property would simply transfer to another trustee bank.
**Titling Your Property**
You have various options for titling your property, similar to those in the U.S. It can be in your name, a trust, or a corporation. However, titling for residential purposes must comply with Mexican law, and using a Mexican corporation has specific legalities.
**In-House Closing Officer**
Our in-house closing coordinator is like a title and escrow agent in the U.S. They oversee the sale process, ensuring all documentation and due diligence are completed accurately.
**Receiving the Title**
Title transfer is official when signed by all parties. It's recorded publicly, a process that takes about three months post-closing. You'll then receive a final closing binder with all pertinent documents.
**Possession of Your Property**
Unless negotiated otherwise, you receive possession of the property when the title transfers and funds are released to the seller.
**Final Closing Package Contents**
Your closing package will include your deed, translation, purchase agreements, escrow documents, final statements, and any other related documents.
**Funding to Seller**
Your escrow funds remain secure until the trust is fully executed and ownership is officially transferred.
**Escrow in Mexico**
Third-party escrow is crucial as it ensures that funds are only released under agreed-upon conditions between buyer and seller.
**Closing Timeline**
Most real estate transactions in Los Cabos can close within 45-90 days, though this can vary due to holidays, permits, and other factors.
**Closing Costs**
Closing costs in Mexico, typically ranging from 3.0% to 5% of the purchase price, include acquisition tax, notary fees, and other related expenses.
**Closing Facts**
In Mexico, the buyer bears the responsibility and cost of transferring title. All closing costs are deductible against future capital gains tax.
**Title Registration**
Your title is registered at the local Public Registry office and updated at the local tax office.
**Public Registry**
The Public Registry maintains the official record of property ownership.
**Personal Information Confidentiality**
Only the Owner’s name(s) are of public record. All personal information requested, such as date of birth, social security numbers and address is maintained in confidence by the Notary and Trustee Bank.
