How to Buy Real Estate in Mexico

With housing values falling all over America, many savvy investors have turned their attention to real estate south of the border. There are already approximately one million Americans living abroad in Mexico who have tapped into the potential for appreciation in this young market. Many trends suggest continued growth in the market, including 70+ million retiring baby boomers, an attractive climate and a growing economy. Before you jump head-first into Mexico real estate, there are some important things you need to know. This article will go over some of the required steps you will need to take to safely purchase property in Mexico.

Try Before You Buy

If you plan to make the property your first or second residence, you should spend time experiencing life in that area. You may determine that the community, location and infrastructure lack what you need to live comfortably. If it is an older property, have a third-party inspector examine it for issues that could jeopardize your investment.

Set up a Fideicomiso

The Mexican constitution restricts foreigners from owning land 50 km from the coast or 100 km from international borders. However the government recently amended the constitution to encourage foreign investment by allowing foreigners to own restricted land through a 50-year bank trust called a fideicomiso. Several major Mexican banks can set up a fideicomiso for you for a relatively low set-up and annual maintenance fee. A fideicomiso will legally grant you the same ownership rights of a Mexican citizen, except that the bank technically holds the title. This means you are free to inhabit, sell, lease, renovate or bequeath the property.

Use a Third Party Escrow

Never give earnest money to an agent or seller, unless you don’t expect to get it back. Instead hire a major U.S. title company that provides escrow services to hold your money and transfer it to the seller only when they have met their obligations.

Buy Title Insurance

A title search will be performed by the notario publico, a government lawyer who is required to review documentation of a real estate transaction. However, this provides no guarantee that the seller can legally sell the property to you. Title insurance companies can provide you insurance in the form of a contract of indemnity, meaning the title company will take on the liability if the title turns out to be invalid or if there are legal claims on the property by creditors.

Hire an Independent Attorney to Represent You

It is highly recommended to hire an English-speaking Mexican attorney who will work with the seller’s agent to draft the legal documentation to include the agreement of sale. Real estate agents in Mexico are not required to be licensed to sell real estate and because contracts are drafted in Spanish you may unknowingly sign something you don’t understand. It would be wise to have an attorney to represent your interests and guide you through the proper legal processes.