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Differences in the Real Estate Process in Mexico
By Harriet Cochran Murrray • Cochran Real Estate - March 2010

The following is a summary of major differences in buying real estate in Mexico versus the rest of North America.

Foreigners are unable to directly purchase beachfront property in Mexico. * The Mexican constitution prohibits foreign purchases within 30 miles of the ocean high tide line or 60 miles from the national boundaries dividing Mexico from the rest of the Americas.

Most Mexican real estate is purchased with cash, although more mortgages are available for purchasers than in the past. A typical profile of all resort areas in the world show that most purchases are in cash.

Collateral for a loan may be the Mexican real estate and not US or Canadian assets. The newer mortgage products offer more attractive down payments, interest rates and terms. US, European and Mexican lenders are active in the market.  Seller financing is now available more than in the past.

Escrow companies are rare in Mexico. Escrow does not exist in the sense of how Americans and Canadians use it for third party holding of funds. Registered US companies offer escrow services to hold purchase funds and issue title insurance. These escrow companies are limited in their scope of work. They hold and disburse the purchase funds for a fee. They do not handle any part of the payment of closing costs, payment of utilities or repairs.  

Notaries transfer ownership through deeds and they also notarize legal documents. These specialized attorneys are appointed by the government for life, unless removed for ethical and legal reasons. They are required to check the identity of the seller, conduct a basic title search, make sure the water bill and condo fees are paid. Notaries conduct a lien search against property before it’s transferred. Lien certificates are valid for 30 days and often renewed in the time it takes for a closing to occur.

Real Estate licenses are not required in most states in Mexico. ** The government believes in the right of individuals to have jobs, so technically any Mexican citizen can sell real estate and collect a fee. Many agents who are professional and have full time careers in real estate are members of AMPI (La Asociacion Mexicana de Profesionales Inmobiliarios).

The real estate process in Mexico involves two or three contracts: there is a promissory agreement which is more informal and is considered “an agreement to agree.” This type of contract is not used in the US and can be confusing to foreigners. There is also the purchase-sale agreement where the issue of escrow can be included. The final contract becomes the escritura deed which is signed before the notary and recorded in the public registry.

Ejido land is government-owned and cannot be purchased by a foreigner. This communal land is leased to large ejidatarios for agricultural purposes or fishing. The government has realized that ejido land can be very valuable and it has implemented a process to privatize it for resale.  Privatization of ejido land has been completed in many sections of Mexico where there is high tourist demand. A large part of Puerto Vallarta was ejido originally.

Closing costs for buyers are higher in Mexico than the rest of North America. There are more documents to obtain during the closing process. A good rule of thumb for cost is 4 to 8 per cent of the value of the property. The cost can be higher with title insurance, and legal fees of your own attorney. Traditionally, the lower yearly property taxes help offset these higher costs.  Two significant taxes owners pay are acquisition tax (a little over 2%) at purchase, and capital gains upon resale.

* In the interior of Mexico, foreigners can purchase real estate with a deed, and not be required to use a bank trust (fideicomiso).

** Mexican state of Sonora does require real estate agents to join a registry before conducting business within the state's boundaries. Email to a friend

Harriet C. Murray
E-mail: harriet@casasandvillas.com.

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