News, Information, and Opportunities on Mexico Real Estate Investment
Consult the National Agrarian Registry (Registro Agrario Nacional, or RAN) to check if the property is on Ejido land.
Ejido land is land that has been set aside by the Mexican government for community farmers and can not be owned unless it goes through a complicated process where it is converted to private land. However people have been duped into buying ejido land so it is wise to check with the National Agrarian Registry to ensure the real estate you are buying is not ejido land.
Obtain a certificate of nonindebtedness from the Mexican Treasury to ensure that no taxes are owed.
If the prior owner failed to pay taxes, the liability will fall upon you which could affect the cost of purchase. Generally property taxes in Mexico are a fraction of what they are in the US, but it would be prudent to obtain the assurances that no taxes are owed so there are no unexpected tax collectors at your door step.
Obtain a certificate from the public registry of property to check if any liens or encumbrances have been recorded against the property
It is also smart to have the public registry checked at the time of closing to make sure no additional liens were added. According to the National Law Journal “most of Mexico’s public registries of property have a “preventive” function that allows a purchaser to file a notice with the public registry of property prior to acquiring the real estate, in order to inform third parties of the pending acquisition and to make the purchase a matter of public record. The preventive notice is designed to protect the purchaser by freezing the file and not allowing any subsequent registrations against the property for the duration of the notice. A preventive notice usually lasts for 30 days, but this varies from state to state; some allow an extension for an additional 30 days or for a second preventive notice. Purchasers need to review local regulations to determine the length of time a preventive notice will remain in effect and the availability of extensions.”
Use an escrow agent
It is common in Mexico for the seller and buyer to execute a promissory agreement before the beginning of the due diligence period. At this time the buyer may request a deposit be made. If you pay cash you may never see your money back if you find the property unsuitable and withdraw your offer. However if you use an escrow agent, you can deposit the money in an account and the agent can transfer the money to the buyer when certain conditions have been met such as after the due diligence period has ended.
Purchase Title Insurance
Title insurance is probably the best risk minimizer and many lenders now require it. According to the Mexican law journal. An expert real estate attorney can negotiate with the title company on your behalf to lower the price and make sure that the policy has the least possible exceptions.
Source: Zaidman, Esther. “Buying real estate in Mexico has become easier.” The National Law Journal (March 31, 2008).
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Estrella Rodriguez is a 27-year veteran of the the Cancun and Riviera Maya real estate industry. She is an award-winning AMPI (Mexican Association of Real Estate Professionals)-certified broker with Prince y Asociados in Cancun. She took a few moments out of her hectic day to answer a few questions for www.mexicorealestateinvestment.org.
In your opinion, what is the current state of the real estate market in Cancun and the surrounding area?
If you look carefully, you’ll notice that condominium and apartment construction has slowed its rhythm. I think that the “USA Effect” has especially affected the sales of luxury properties (in the $1 million U.S. and over range).
In the last three weeks, though, there have been quite a number of buyers snapping up properties in cash, as well as people looking for opportunities to buy land to build on. Most of these products are priced under $200k (U.S.). I don’t know exactly what’s behind all of these transactions, except that it could be people shifting money from a poorly-performing stock market (both in the U.S. and Mexico) into investments they consider more stable.
What is the local real estate industry’s reaction to the situation?
Developments are using different marketing tactics to stimulate sales interest, such as increasing their commissions to brokers or holding holiday promotions and in Playa del Carmen they are even auctioning properties, each with varying degrees of success.
What does your crystal ball say about the area’s future in the short, medium and long term?
(laughing at crystal ball reference) My short term opinions depend a lot on the effects of the bailout in the U.S., along with the reactions of the economies of France, England and Italy, but I think that before this year is up, we’ll see investors buying here to secure their money.
Beyond that, I think we depend on the resolution of economic tensions all over the world, and the effects of China’s participation in the world economy. While many also have their eyes on Asia, I think that the Baby Boomers and their investment and retirement issues, climate change and the rhythm of construction are all important indicators to measure.
In the long term, I think that here we could see a shift to quoting prices in euros or even in pesos (as opposed to the current practice of quoting in U.S. Dollars) here in the state of Quintana Roo, to guarantee stability in terms of investment and profits. If we don’t build more hotel rooms (which is the industry that feeds us all), then we risk becoming another Mar de Plata, Argentina, where you only see life there in Summers and where there is a 2 to 6 ratio of hotel rooms to condominiums.
What about the effects of the crisis in the U.S. you mentioned earlier?
I think it’s possible we haven’t seen the worse of the side effects here with respect to the crisis affecting our neighbors to the north. Here though, many buyers, both foreign and domestic, are taking advantage of the fact that there are people who are desperate to leave and cash out, so they can buy cheap and turn the property around when the market picks up again. Land is selling well this way, all things considered, and developers are buying properties to tear down and build exclusive apartments or offices in their place, generally in older areas with high appreciation histories. The same goes for the purchase of foreclosed properties that have become a juicy treasure chest for small and large investors.
What gives you hope in times of market uncertainty?
I know that in difficult times, that by using new ideas or targeting unattended markets, we can find creative ways to sell our products. There are always people everywhere looking for opportunities. We just have to find the right way to talk to them.
Contact: Estrella Rodriguez- princeyasociados@yahoo.com
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