Owning in Mexico

We often receive requests for information regarding living, working and owning property in Mexico.  Below you find answers to a wide variety of questions as well as links to other sites where you can find additional information. 

Real estate, Land or Property Ownership in Mexico:

Q1:  What are the restrictions to Foreigners purchasing and owning Real Estate in Mexico?
Foreigners may directly own property in the interior of Mexico—not unlike holding the deed or title to a property in the US or Canada.  Non-interior areas (restricted zones), those areas as geographically defined as 60 miles from any Mexican border or within 30 miles of any Mexican coastline, require foreign ownership to be transacted and held via a Mexican Property Trust (Fideicomiso).  Cabo San Lucas, San Jose del Cabo, Todos Santos and La Paz are all located in restricted zones.

Q2:  What specifically is a Fideicomiso?
Simply put, it is a trust executed between a Mexican bank and the seller of property in restricted zones. Since foreigners cannot own real estate in restricted zones  the bank acts on behalf of the buyer taking title of the property. Acting as trustee, the bank buys the property for the foreigner, then has a fiduciary obligation to follow instructions given by the foreigner who is the beneficiary. The beneficiary enjoys all the rights of ownership while the bank holds title to the property. The foreigner is then able to use  and eventually sell the property to any eligible buyer.

Q3:  What are the terms of a Fideicomiso and how is it obtained. 
Most, if not all banks in Mexico, offer Fideicomiso services.  Your real estate agent will be able to recommend several and you can chose based on the fees and services offered (which are pretty standard).  The initial trust term is 50 years and is renewable (indefinitely) in 50-year periods.

Q4:  Who’s involved in the actual real estate purchase transaction?
As mentioned previously, a Bank of your choosing will handle the trust and conduct the purchase on your behalf.  Other players involved include the agents/brokers and the Public Notary.  Unlike the US,  where the transaction is usually just a Purchase and Sale agreement between parties, in Mexico all real estate  transactions are processed by a Public Notary.  It is also highly recommended that buyers secure title insurance from one of the several firms operating in Los Cabos.  Each offers essentially the same services and choosing one is usually a matter of who your agent/broker has a current working relationship—thus easing the process.  Most all of the real estate brokers, title companies and banks have closing services departments that will handle the administration of the paper work.  At the closing, you will be required to sign a number of documents as part of the transaction (this can be done via Power-of-Attorney if you desire). While it sounds complicated, the process is actually quite simple and stress free.

Be prepared for all documentation to be in Spanish.  This sometimes takes people by surprise.

Q5.  Should I have a lawyer?
Depends.  Some individuals feel more comfortable with the extra level of security that it affords.  However, in general terms of home,  condo or small land  transactions, it’s not necessary and only adds additional time and money to your closing costs.  Since the only way a foreigner can purchase property is through Fideicomiso and Public Notary approval, both of which are governed by Federal law, there is virtually no flexibility as to how the transaction is executed.   That said, any complicated transactions involving joining multiple lots, developments and or potential zoning issues may warrant the additional resources a lawyer can provide.

Q6 . What about the risk?
Historically, this was a major issue.  There are countless stories of unsuspecting foreigners being duped into thinking they could own just about anything by unscrupulous real estate “professionals” and/or developers.  Most of the fraud centered around two types of scams; people selling something they didn’t own in a straight buyer to seller cash deal and, in one particularly extreme case, of brokers providing escrow services for buyers and then making off with the funds.    Over the last decade, these types of risks in Los Cabos, Todos Santos, La Paz and Los Barriles have been virtually eliminated.  This is due mostly to the high level of professionalism currently offered in the local real estate markets.  Brokers (and their agents), banks, financial lending institutions and the title insurance companies are making the area a significant part of their businesses.  They are highly concerned that their investments are protected and, as a result, have created an environment that is virtually risk-free.   

In addition, there are two local organizations that the majority of real estate professionals are members of.  They both require a high level of standards for membership and are self governing to protect the market from individuals that are not acting in the best interest of their clients and the real estate profession on whole.   You can access their respective membership via the links below:

www.loscabosmls.com
www.ampiloscabos.com

More to come including:
Why Mexico?
Culture
Long-term real estate investments
The impending commercial real estate boom.
Business opportunities