Buying Property Safely in Mexico

Buying Property Safely in Mexico



Purchase Process 

The process for foreigners buying properties in Mexico is similar to the United States and Canada, yet some extra steps are required. The most notable of these extra steps are the requirements of registering and obtaining permission from Mexico’s Secretary of Foreign Relations, and if you are buying in the “Restricted Zone”, which is the area within 100 kilometers of any national border and within 50 kilometers of any coastline, establishing a bank trust or Mexican corporation.

Local, state, and federal laws outline real estate transactions and property rights in Mexico; however, the protection for the parties is not as detailed and as regulated as in the United States or Canada. While many people may see this as a deterrent, in reality all transactions can be as safe as back home as long as you have a good and experienced real estate team representing and protecting your interests.

A very popular real estate product in Mexico is the option of purchasing properties during the pre-construction phase. This option allows buyers to receive additional benefits such as substantial discounts and, sometimes, the option to customize the home to the buyer’s tastes and needs. The main difference in the process of purchasing a pre-construction property versus an existing structure focuses around the time of delivery. An existing building in general, is ready for immediate transfer of the physical possession as well as legal possession to the new owner. On the other hand, a pre-construction project will have a date established in the future for delivery of both the physical and legal possession. This introduces an identifiable risk to the buyer, but this is compensated by discounts on the property price.

Later we will go into the details of the advantages of each and also discuss the role of escrow accounts in a normal Mexico real estate transaction.



The specific process will depend on factors like location, price, type of property, etc, but we can summarize the steps like this:

1. Find an agent, start looking for properties online

2. Plan a visit to tour the properties.

3. If you find one that you love, make an offer!

4. If the offer is accepted, talk to your lawyer to draft a purchase agreement.

5. Make a deposit.

6. Get permits, appraisals and all documents needed for the closing. 7. Sign the Title Deed at the Notary Public 

Let’s see each step in detail. The first step is always to find a trustworthy and reputable real estate agent. If you are visiting the area you are interested in investing in, ask local people for recommendations, but you can also start your research online.

Prior to your visit to Mexico you can also check out properties online to give you a more comprehensive idea on the neighborhoods, properties available, prices and legal processes. Once you have a couple of options, plan a trip to the area to tour the properties.

After finding the right property, an offer to purchase is drawn up. Usually at this point you will need to make a deposit (about 10% of the sales price), but sometimes the deposit is made once the offer is accepted. In both cases, read carefully the conditions of the deposit and find out if it is refundable if the transaction is cancelled. The offer process itself is relatively similar to what a buyer could expect in the U.S. or Canada, with the exception that many agencies use a two-column format so that the contract is in Spanish and in English, with the Spanish side prevailing under Mexican law.

In the event that the offer is accepted by the seller, a purchase agreement must be drafted by a real estate attorney; this agreement must contain terms, conditions and obligations assumed by the parties.

Some brokers will offer you the option to use an escrow. Escrow services from well-known American, Canadian and Mexican companies are available as well and are recommendable to use when possible. It is an extra expense, but it can be worth the added security. The drawback is that some sellers do not understand the escrow concept, and also that most developers don’t accept escrow as they use the funds to build.

Once an offer is accepted, the deposit is made, and the contract is signed, the closing process will begin. For foreigners, purchasing in the restricted zone, which covers all land located within 50 kilometers of any coastline and within 100 kilometers of any national border, must be done using a Mexican bank trust (fideicomiso) or a Mexican Corporation. If you are purchasing a property within the restricted zone, then your next step is to fill out the application for the trust permit and present the required documentation. It normally takes 3 to 4 weeks for the permit to be issued once all required documentation is received. You can see more information on this subject in Chapter 2 - Bank Trust and Restricted Zones. Also, please note that your lawyer can help you to create the bank trust.

Outside the restricted zone, the transfer of property will be made directly into a fee simple deed, with the only extra step of completing the paperwork to obtain the Secretary of Foreign Relations (SRE) permit to purchase property in Mexico.

Permits, appraisals, certificates indicating there are no liens on the property and that taxes have been paid, are required with all documents presented to the notary public for incorporation into the deed of transfer, either in fee simple or using a bank trust.

In Mexico, real estate closings are handled by Notaries, which are government appointed attorneys, and they have the authority to handle the complete closing transaction. So, before closing, the Notary will revise all documents to make sure everything is in order, as well as do the title search to make sure the property has clear title. If everything is in order, the private purchase and sales agreement must be formalized through a deed issued by a notary public. After executing such deed, the same will be recorded in the public registry.



Purchasing pre-construction means that the property to be acquired is in the process of being built – therefore there is no finished product. On the other hand, a resale is the purchase of a property that already exists and has been owned by another person. This property could be a house, condo, lot or commercial space. If you are buying pre-construction in a condominium project, keep in mind that title cannot be transferred until the condominium regime is complete, which usually happens after the construction is finished. In a resale, title can generally be transferred upon payment in full either in cash or with a mortgage. If buying pre-construction make 100% sure that the lot is private property and that it has a title.



If you choose to buy pre-construction, the first and most important thing to do is to research the developer’s background. What do you know about the developer? Have your Buyer’s Representative help you respond these questions.

• Have they completed other projects in the area?

• Do they have experience building on the beach?

• If they have had issues in previous buildings, what are they doing to improve yours?

Purchasing in a new development can be a dream come true if you use prudence and sound judgment. Work with an experienced and reliable real estate agent to help you review documents, contracts and act as your advocate.

There are some advantages in buying pre-construction. During this stage the developers usually offer a lower price as an incentive for you to invest, and you often have the option to customize finishings, i.e. tile color and type etc. However, you must ensure you have a contract which outlines payment schedules, the completion date and any penalties if the property is not finished when it was supposed to.

Typically, developments have a form purchase agreement. Ask to see the boilerplate agreement and look for the following items to be included:

• Plans and specifications of your particular unit and the common areas

• Date of physical and legal delivery and penalty clause in case of non-compliance

• Rules and regulations for the condominium

• If buying a custom home, payments can be set based on milestones; otherwise, a payment schedule should be outlined

If the sales team is promising specific amenities, these should be detailed in the contract. Also make sure it’s explained how these funds are going to be used.

• If the developer is using these funds in order to build the project, what kind of security will he offer in order to insure the project will be completed?

• If the payments are directed to an escrow account, how will they be released? In custom homes, verifiable levels of completion or milestones would protect you better than calendar dates during construction.

These are just a couple of tips to help you choose a project to invest in. As we mentioned before, it is a good idea to work with an experienced real estate agent or buyer’s representative to help you and guide you through the process.



Escrow accounts serve as a safety factor for the buyer, since they are used to hold funds and have them in custody during the purchasing process.

An escrow account is used when a property is complete and ready for titling. Realtors recommend it when someone has made an offer on a property and needs to pay a deposit, since the money is kept safely in the account while the closing papers are drawn up.

Usually these funds are a 10% of the purchase price for the earnest money deposit and the subsequent 90% funds for the balance of the purchase. Putting funds in escrow shows a firm commitment on the part of the buyer, but it’s also a safety factor for them, since they should issue specific instructions as to when and under what conditions the funds are to be released to the seller.

In the case of a resale property, once an offer has been agreed to by all parties, an earnest money deposit is placed in escrow. The Escrow Company will hold the funds until the closing, and they will disburse these funds according to a letter of disbursement signed by both the buyer and the seller.

In the case of pre-construction properties, many developers receive the deposit and following payments directly and most do not use escrow services. In this case it is important to ask your broker about the reputation of the developer in question, and, better yet, contract an attorney to represent you for the purchase transaction before giving any deposit monies.



In this chapter we discuss details of the process by which foreigners can buy property in the restricted zones. We describe what legal structures exist for foreigners and the process involved in purchasing through these options.

The restricted zone is described in the Mexican Constitution as a 50-kilometer strip along all of the Mexican coastlines and the strip of land along all of the Mexican borders with the United States and Central America, including all areas within 100 kilometers of the borders.

In this guide we introduce the two methods available for foreigners to hold title of real estate within these zones: the Bank Trust and the Mexican Corporation.

We outline the details and advantages of the Bank Trust. It is also important to point out that owning a property through a bank trust is as safe and valid as direct ownership, including all the same rights and privileges; in some ways it is even safer.




The trust system was established by the Mexican government to protect foreigners wishing to purchase real estate in the restricted zones, where they are prohibited to hold title in their names. As we commented before, the restricted zone is 50 km (31 miles) from the coast and 100 km (62 miles) from any border. If a foreigner is purchasing outside of this area, then the trust is not necessary.

Do not be confused: a Bank Trust is not a “lease”. Much like living wills or estate trusts in the U.S., the Mexican bank, or Trustee, takes instruction only from the Beneficiary of the trust (the purchaser). The Beneficiary has the right to use, occupy, lease and possess the property, including the right to build on it or otherwise improve it.

The Beneficiary may also sell the property by instructing the Trustee to transfer the rights to another qualified Purchaser, or bequeath the property to an Inheritor. The initial term of the trust is 50 years, however the trust can be renewed for additional periods of 50 years indefinitely, providing for long term control of the asset.

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. 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 passing.



No, there is no need to use a bank trust to acquire property in Mexico outside the restricted zone. Nevertheless, there is a requirement to fulfill, which is to give a notification to the Ministry of Foreign Affairs prior to formalizing the purchase. Such letter must contain information of the purchaser, property to be acquired and, most important, a declaration from the purchaser mentioning that he will consider himself a Mexican in relation to the property.

Now, even when a foreigner can acquire direct ownership of the land “fee simple”, there are benefits to the bank trust and even in the interior zone, some buyers choose to own their property in trust. Some of the benefits are that, as part of the closing process, the bank’s attorneys review the deed and are able to sign on your behalf, and it is always nice to have another set of trained eyes review your deed before signature. Also, the trust separates the asset legally, much in the way a “living trust” does in the United States. Finally, in the event of the death of the beneficiary, the property automatically reverts to the substitute beneficiaries, avoiding lengthy and costly probate procedures.



In most cases it is best to use a Bank Trust. But if the buyer is going to use the property strictly for business, owns multiple properties, or if he is planning to run a business here, then it may be best to set up a corporation.

It is a good idea to speak to a lawyer for the best advice in this matter, since both have advantages and disadvantages.



In Foreign Owned Mexican Corporation


• The corporation is a Mexican entity and has the right to hold title to real estate.

• It allows for the purchase of properties larger than 2000 square meters.

• There is no limit to the number of properties it may own.

• It allows for one or more of the stockholders to live and work in Mexico legally year round.


• The corporation requires more hands on attention than the bank trust.

• It does not have the ability to avoid capital gains taxes when it sells property.

• It requires a minimum of 2 stockholders. If foreigner, the managing partner must have a Temporary or Permanent Resident visa. He can also be a Mexican citizen. The requirement in either case is that the managing partner has FIEL (electronic tax ID).

• It involves monthly reporting of financial activity through a certified accountant.


Bank Trust Advantages


• The bank trust gives you the rights and the vehicle to hold title to the property in perpetuity.

• It is a 50-year trust agreement that is renewable every 50-years by you or your heirs.

• You can transfer your rights in the bank trust to a foreign buyer.

• You may rent, sell, remodel or dismantle the improvements on the property.

• Your heirs can inherit the rights to the bank trust, effectively by-passing probate, should you depart without a proper will.

• There are also tax advantages pertaining to capital gains taxes when you sell. • The bank trust is easy to maintain by paying the annual fee to the bank.


• It is restricted to hold a property of no more than 2000 square meters. There are exceptions, but it is a complicated process.

• It is limited to one specific property. Sometimes you can put two adjoining properties into the same bank trust. But, generally speaking, the bank trust only is usable for one piece of property.


In this chapter we take a closer look at the document called the Offer to Purchase. The Offer to Purchase is basically the first document used to begin the process of transferring a property from seller to buyer, and lists the main points of a future transaction.

If the buyer is a foreigner buying within the restricted zone, the normal flow of contracts to be prepared are as follows:


The first contract is usually drawn up by your buyer’s representative, the second one by your lawyer and the third and final instrument, the “Title Deed” (escritura), will be drawn up and legalized by the notary public, and subsequently registered and filed at the public registry. If buying outside of the restricted zone, and the protocol can be executed immediately, the Offer to Purchase and the Promissory Contract might be avoided.

As discussed and presented in the previous chapters, different regions in Mexico or different brokers have their own routines and practices, adapted to suit the needs of different property and client situations. Is there one single correct or best answer? No. The methods described in this eBook are all correct in the path to a safe and efficient legal transfer of properties.

Keep in mind that some real estate agents with strong legal backgrounds and experience will protect their buyers with their existing contracts, while others prefer to use a legal team for coordination. Also, the agents can have varying suggestions as to what to include on an offer.

At the end of the day, the Offer to Purchase and/or the “Reservation Agreement” can be as complex or as simple as the buyer feels is necessary; it is the preliminary agreement containing the basic information to execute the transaction. Any money released at this time such as “earnest money”, should be refundable during this phase, and a reasonable amount of time should be allowed so that buyer and/or legal counsel can research the property documents.



The most important information that an offer must include is the name of the prominent purchaser, the property to be purchased, the purchase price offered and general conditions that the prominent purchaser would like to offer to the seller. But if you’re more into details, here’s a list of items to include:

• Names and personal info of the parties • Description of the property • Price and payment terms

• Provisions for escrow (if applies)

• Terms and conditions of the offer

• Offer to Purchase

• Promissory Contract

• Title Deed • A timeline noting the dates of signature of the contract, estimated dates for signing the deed and for receiving physical and legal delivery.

• Name of person responsible for closing costs (typically buyer), real estate fees and capital gain tax (typically seller)

• Responsibilities of the parties

• A clause indicating that the title shall be passed free and clear of liens or encumbrances

• Penalty clause in case of non-compliance

• Property condition

• Inclusions

• Term of effect

• Jurisdiction

• Signature of the parties and witnesses



Yes it is legal, but it does not need to be notarized. Once signed and accepted by both buyer and seller, it creates a binding commitment for the buyer to acquire and the seller to sell. It can be signed before a notary or before two witnesses, and it should be in Spanish and in English.



The agent representing the buyer generally prepares the offer to purchase and the agent representing the seller generally prepares the counter offers, if any. It can also be drafted or reviewed by a lawyer.



The Promissory Contract is one of the most important documents to be elaborated and reviewed during the real estate acquisition process. Many people know this document as the “hard copy” and will hold the details such as legal description of the property, agreed price, penalties and other items. Of the contracts you complete, you will need to depend on this one the most, because it is the first document to outline the terms and details for the future execution of the real estate transaction. Our recommendation is if the closing cannot occur within 14 days, use a promissory contract; but of course each real estate agent has their own guideline and variables from their region that must be taken into consideration.

On the other side, the Title Deed is in essence the last contractual document required to transfer the rights of the property into the new buyer’s possession. This contract may be structured in various models such as a real estate trust agreement, an assignment of real estate trust or a reserve title contract; the model depends on the details and method of how the property will be transferred.

It is important to note that both the Offer to Purchase and the Promissory Contract are intended to give the details and preparation for the transfer of the property, but the Title Deed is the instrument exercising the actual, legal transfer.

The Title Deed is the document which the notary public will use in following the protocol to transfer the property legally.



It is the agreement where terms, conditions and obligations of the purchase are agreed upon. It is a more formal document, outlining the terms and conditions of the acquisition and sale, which could have timing or conditional clauses.

It is used when it is uncertain what you will buy or how much you will pay, and it is especially important when title transfer may take time, such as in pre-construction, where the final steps of transferring legal possession may not occur for several months or years into the future.



The promissory contract should clearly set forth the specifications that will eventually be contained in the purchase sale contract, most importantly price and terms. But there are more items that must be included. Here’s a list of information that you should make sure is included in your Promissory Contract.

• Name of purchaser and seller

• Full legal description of the property

• Purchase Price and payment schedule

• Date of delivery of possession and transfer of title

• Penalty clauses in the event of default



It is prepared when the negotiations have finished, after the Offer to Purchase contract has been accepted and the final selling price has been agreed on.



If properly structured, it is very binding and fully enforceable in a court of law. Make sure to double check with your real estate agent and attorney that everything has been properly prepared, otherwise it won’t protect you if the other part breaks the contract.



It is the final contract, the transfer from seller to buyer. In the case of the purchase sale of real estate, it is formalized in a public document before a notary public, either in the form of a purchase sale contract or a trust deed, as the case may be.

The deed is the notarized sales contract or trust. This is also a sales contract prepared by notary, which can be very different from the Title Deed. The deed is usually about property description and price. All other terms in the Title Deed are performed before closing.



Always. This is like your deed of Title in the US. And it always needs to be signed in front of a Notary Public and recorded at the public registry. The promissory contract only gives the parties the obligation to enter into the future contract, i.e. the obligation to take an action. The Title Deed is the final action.



Even when Mexico has clear regulations for the purchasing process of a property, these regulations can be difficult to understand or fulfill by foreign buyers who don’t speak the language. Therefore, you can think of your team as your safety net here in Mexico. Your buyer’s representative, realtor or agent will help you search for properties and coordinate your acquisition process. Their experience and knowledge is a factor of key importance.

Make sure to ask about both experience and qualifications while you interview and search for a real estate agent. It’s also very important that you feel comfortable working together and that he will best represent your interests.

Therefore, the real estate agent is your point guard, he will not only help identify properties that fit your criteria, he will help you qualify property options, and will also help you recruit the remainder of your team. Another key player is the Notary Public, who has the greatest responsibility of all in the closing process.

In this chapter we explain who the important players are in a real estate transaction and their roles during the process.

Experience comes from hands-on participation in hundreds of transactions; this allows experts to learn from “cases,” to witness problems first hand and discover various methods of applying solutions to avoid such pitfalls for future operations. So, along with experience, make sure to qualify prospective buyer’s representatives by reviewing their diplomas, certificates, and classes in order to assure that they are trained and updated in a continuous manner.





Alisting agent is the agent who is representing the seller and the buyer’s agent (or buyer’s representative) is representing the buyer. By having two different agents to represent the different parties, the seller and the buyer, each one’s interests are more likely to be represented fairly.

The buyer’s agent has a fiduciary duty to inspect, disclose and represent the buyer in all areas of the acquisition. For this reason finding the right agent is super important!



It is extremely important. The purchase of a home is likely the single largest financial commitment you will make in your lifetime. When coupled with the fact that you are investing in a second home in a foreign country, it is imperative that you have a knowledgeable, experienced, professional real estate agent representing your interests.

Look for a knowledgeable agent with a good reputation and don’t be afraid to ask for references. The agent or the company he belongs to should be certified and experienced, and may also belong to AMPI, which is now affiliated with the U.S. National Association of Realtors (NAR), the Canadian Real Estate Association (CRE), and the International Real Estate Association (FIABCI).

Don’t be afraid to ask questions about your agent’s experience. There are numerous real estate agents that do not understand the legalities of a conveyance of property. Their actions can create problems during the transaction, which can fall through or be delayed. So, there is no rush. Take your time to choose your agent; choose somebody with whom you feel confident and comfortable, making sure that he has a good knowledge of the local area, knows the local community, and has resources in both English and Spanish.

The right agent will:

• Listen to your dreams and needs

• Find the best property to suit your requirements

• Negotiate the best price for the property that you want

• Share information about notaries, attorneys, accountants and all professionals you need to close successfully need after you buy your property

• Provide information about architects, builders and other service providers you will need after you buy your property



The notary is a government appointed official, and their services are required for the transfer of real estate property in Mexico. The notary public is an attorney of record and an unbiased, official representative of the government. A notary public has a fiduciary responsibility to both parties and sanctions that contract from a tax and legal point of view. He is also legally responsible for the accurateness of the transaction.

The Notary Public will check all paperwork on real estate transactions and confirm the correct people have signed all the necessary paperwork. They collect taxes that need to be paid and register the property in the public register of properties.

There are profound differences between a notary public in the US and the notary public in Mexico. In the US, the notary public might be a bank clerk, secretary at the office, or practice any other occupation. In Mexico, the notary public must have a law degree, verifiable experience, pass a rigorous exam and is appointed for a lifetime term by the governor of the state. In Mexico, all legal documents, such as deeds, wills, powers of attorney, constitution of corporations, establishment of trusts and other legal transactions must be made before a notary public in order to be valid. If the document is not notarized by a Mexican notary public, it is not legal!

As part of the closing process, the notary public will verify the following official documents, which are required by law for any transfer:

• A no-lien certificate from the public property registry, based on a complete title search.

• A statement from the treasury or municipality regarding property assessments, water bills and other pertinent taxes that might be due.

• An appraisal of the property for tax purposes.

The notary public also is in charge of registering your new deed with the public registry, and issuing a preventative notice of the sale with the registry. It is important to remember that the notary public is an independent third party to your transaction. They will not be able to advise you on details in your contract such as: price, location, financing, and terms of sale. For that reason, you should seek the advice and counsel of a certified real estate agent, who can act as your advocate.



C losing expenses in Mexico are usually higher than in Canada and USA. Much of these extra expenses are associated with the acquisition taxes due by buyer. The federal and state governments collect taxes at a rate of 3% - 4% of the operation value, depending on the state where the property is located, but that percentage is doesn’t cover all the closing expenses. It’s more accurate to calculate between 6 to 11% of the cost of the property. Although the closing costs are higher than what American or Canadian buyers are accustomed to, the annual property taxes in Mexico are surprisingly low; this has been a determining factor in making Mexico the number one destination for second homes or retirement.

If you are considering purchasing a property in Mexico, you need to do a calculation of all expenses in order to have a clear idea of what your budget is and to assure that you present an offer that will be feasible. In this chapter you will get a list of expenses, item by item, that you should expect during the closing process.



Following is a list of items that will be paid by the buyer:

• Property acquisition tax

• Added Value Tax

• Public registry rights

• Appraisal by authorized valuator

• No liens certificate • Notary’s fees and legal expenses

• Attorney’s legal expenses

• Bank Trust fees • Notice for Mexico’s Foreign Affairs Department • Escrow fee (if applies)

The seller is responsible for certain fees as well:

• Capital gains tax

• Tax property certificate

• Any unpaid utilities

• Property taxes

• Sales commissions

All these fees need to be paid on or before the time of closing. Consider that bills that go unpaid will accumulate penalties and late charges; make sure that they are paid before signing any papers, since once the transaction is closed the new owner will inherit those bills. Finally, if the seller is a foreigner and he is holding title with a bank trust, they will need to pay a fee to the bank to cancel the bank trust when the property is transferred if the buyer is a Mexican citizen.



Usually the total closing costs will be around 3% to 11%, depending on the State where you are purchasing and upon the value declared in the operation: the lower the value, the higher the percentage. Closing costs can also run higher depending upon the vehicle used to hold title and what attorneys you use. Ask your real estate agent for more details and recommendations.



Yes, there is the possibility of a “reverse capital gain tax” for the buyer if the property appraisal comes in more than 10% below the purchase price. This is extremely rare, but can happen.

Other expenses that could arise are consultation fees to clear up any unexpected situation and home inspections.

Now that you have reviewed this eBook, Buying Property in Mexico Safely, you know the central aspects of buying real estate in Mexico as a foreigner.

To wrap up the content of this eBook, you have seen the following items:

• The principal steps involved in a purchasing process

• The definition of the Restricted Zone and how you can buy in this area using a Bank Trust or a Mexican Corporation

• An overview of the Offer to Purchase

• The importance of the Promissory Contract

• The list of key players in your real estate purchase

• Closing costs estimates

These are the key elements which distinguish the Mexican purchasing process from that in the U.S. or in Canada; getting familiar with these elements, and understanding them, will help you buy real estate safely in Mexico.

This information is a starting point. From here you, as a buyer interested in purchasing a property in Mexico, can move in different directions. One option is to continue the search of information relevant specifically to the type of purchase you are interested in. For example, perhaps you are thinking of buying for retirement, or maybe you are interested in investment.

The other option is to do some research related to the part of Mexico you are interested in. Living by the beach will bring certain needs to fulfill, while choosing a home in a small colonial town will have other conditions for you to consider.

As you continue your research, you will be able to find more detailed information and different aspects of Mexico’s real estate market. You can also find additional information specific to your needs and interests from our experts.

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