Costs of buying in Mazatlan
First, when we buy in Mexico as a foreigner, we
have three bills to pay.
1. The negotiated price of the house.
2. The Bank Trust (Fideocomiso). This charge is $2,600.00 USD, paid direct to the bank. A portion of that fee is for the bank, but the bulk is paid by the bank to the federal Mexican government. This includes all the trust documents, permits and the administration fee for the first year. All banks have a trust department, however we now use Banco Interacciones because they have a trust officer here in Mazatlan. We deal directly with the person who handles the trust.
3. The Closing costs. These fees are paid to the Notario Publico. They include, among other items: A. Title search to ensure the person selling the property is actually the owner or has the legal power to sell the property. B. Lien search to make sure there is not a hidden claim on the property. C. Avalu or appraisal to set the tax value only, not the market value of the property. (A statutory requirement within 6 months prior to sale.) D. A new Croque or plot plan showing the lot dimensions. E. A new Escritura or deed. Verifying all taxes, phone bills, water bills, electric bills are current and paid. F. Registration of the new deed once everything is complete and all fees have been paid. G. The acquisition tax, paid by the buyer in Mexico. This is fixed at 2.2% of the purchase price.
What are the actual costs? We know item one, the cost of the property, is fixed at your agreed purchase price. Item two is fixed at $2,600.00 USD through Banco Interacciones. Different people will quote you different prices, but it is usually "X number of dollars for the permit application, then later, X number of dollars for the issuance of the permit, and X number of dollars for this and X number of dollars for that." Trust us, it is going to cost a couple grand with any bank. Using Banco Interacciones, $2,600.00. Item three is the one that varies from sale to sale. We cannot give you an exact price beforehand. We can tell you, based on over a hundred sales, the cost should be approximately:
When the purchase price is under $60,000.00 USD, about $4,000.00 USD or about 6.5%. When the purchase price is from $60 to $80 thousand, about $4,500.00 USD. About 5% to 6%. When the purchase price is from $80 to $120 thousand, about 5% of the purchase price. When the purchase price is from $120 to $150 thousand, about 4.5% of the purchase price. When the purchase price is from $150 to $200 thousand, about 4% of the purchase price. When the purchase price is above $200,000.00 it drops, as a percentage, correspondingly.
This is because some of the fees are fixed, and some are based on the selling price of the property.
Taxes are based on the Avalu mentioned above. What we have seen is that the property taxes normally amount to about .01% to .02% of the Avalu appraised price. An $80,000.00 house will typically have a property tax of about $80.00 USD. A $200,000.00 house will be taxed about $400.00 USD per year. You can also get discounts if this is your primary residence, if you are over 55, and if you pay on time. Homes in Mexico are never sold for back taxes. If the taxes have not been paid for 3 years or I have even seen 20 years of back taxes, you can simply bring them up to date. Usually you can even negotiate a discount if they are severely in arrears.
When selling, you are exempt from any capital gains tax if, this is your primary residence in Mexico, if you have a current FM-3 which has been in effect at least six months, and if you have owned this property for more than six months. If both these requirements are not met, you are subject to a capital gains tax of 20% of the sales price, or 40% of the difference between the sales price listed on your deed, and the new selling price.
What papers must I have to buy in Mexico?
Currently in order to purchase property in Mexico, you must have a valid passport, a valid credit card (the bank trust charges are currently charged to this credit card), and if you are here, a tourist visa issued by the Mexican government when you entered the country. You do not have to possess an FM-3 Resident Immigrant Visa, however you will probably want to get one after buying a home here. An FM-3 costs about $130.00 USD per year, per person and is renewed annually. It allows you to keep a US plated vehicle in Mexico, to leave and return at will, open and maintain a Mexican bank account, as well as exempt you from the capital gains tax when selling.
The buying process
Typically it takes us 30 to 45 days to close from the date of acceptance. (This can fluctuate depending on problems encountered with individual paperwork, national holidays, vacations by Notarios, banks, trust offices, public registry, etc.)
We arrive at the end the same as in the US and Canada, but by a different process. Each broker in Mexico handles the process in their own way. Here is how we do it in our office. This process we have developed in order to protect our buyers:
1. When we find you that "perfect property" you tell us how much you want to offer and we create the 'Purchase offer' which must be in Spanish (we have an English translation). You put up an 'Earnest money deposit' of 5% of the purchase price, normally done by personal check. That check does not get delivered to the seller. We scan and print a copy so they can see it is a serious offer. The check will stay in our possession until the Notario has had a chance to review the papers and make sure this person is legally entitled to sell the property, there are no liens and no surprises. 2. Once the offer is accepted, we have the seller sign so a sales contract is created. 3. We take the seller to the Notario of your choice. (Remember, he works for you. His job is to protect your interests.) The Notario will examine the deed, all utility bills and tax statements to insure there are no hidden surprises. 4. After the Notario tells us everything is clear, we notify you as to how to transfer that 5% earnest money deposit to the seller. This can be the original check, via bank transfer to the sellers bank, or via bank transfer through Intercam Casa De Cambio S.A. de C. V. to their office in Mazatlan, in the sellers name to pick up here. 5. We deliver to the bank the copies of your passport, bank trust form, credit card, credit card authorization, etc. so they can begin the process for the bank trust. (If you are in Mazatlan at the time we take you to the bank. If not, we take scanned copies provided by you, to them for you.) 6. In about 30 to 45 days the permits for the bank trust are back, have been reviewed and approved by the bank and the Notario and we are ready to close. 7. We then take the seller to the bank and have them sign the form releasing their interest in the property. At this point, the Notario works for both you and the seller. After the seller has released his interest in the property, the Notario will not release the documents to the public registrar or you until you pay the 95% balance of the purchase price to the seller and he tells the Notario "I have been paid, release the papers." We then notify you where and how to send the 95% balance, as described in item 4. above. 8. You then sign the papers accepting the property and bank trust into your name, and the Notario records it and we are done.
Again, this entire process is completed in 30 to 45 days as a rule.
A few notes about the Bank Trust
Many years ago, to protect Mexico from having the wealthy countries buy all the desirable land away, they created the Fideocomiso or Bank Trust, for land in the 'protected zone' which is 50 Km. (about 30 miles) inland from the coast. Because this has a yearly administration fee, it has been misunderstood for years as a lease. It is not a lease. The land is put in a trust issued by the federal Mexican government. The trust owns the land. You own the trust. The bank administers the trust. The bank has no ownership rights to the trust. They cannot 'take it back'. When they were first started, trusts were for 25 years. (My late associate, Gonzalo Zayas Lalanai helped to write the trust laws.) Trusts were later extended to 30 years, and are now 50 years, with the right to renew for 50 more years at the expiration date.
There are many, many stories of people "losing their homes" in Mexico. NOT with a bank trust. All these stories are based in fact, but the facts are distorted. What has happened is many people have bought EJIDO land. The problem is, in general, a foreigner cannot own EJIDO land. The people who live on this land can never deliver to you a clear title, because they do not have a clear title. The land is actually owned by all the members of the EJIDO. We will NOT handle sales of EJIDO land.
If you buy correctly, with a good broker helping you, with a good Notario, and with a bank trust, you will have no problems. It is very safe. One of the advantages of having a bank trust is, when you fill out the trust forms, you specify who gets your home and what percentage of the the sale proceeds go to whom you designate. The bank, and the Notario, are duty bound to honor the form you filled out. No will, no probate, no contests, no arguments.