Can I own a home in Cabo San Lucas?
I am often asked if you can own property in Mexico and the answer is yes. We purchased our first home, Casa Oasis, ( a spec home) in 1997 and sold it in 2005. Our second home in Cabo was a fixer upper. After a year of renovations we moved in and continue to enjoy Pacific Ocean breezes and the fabulous weather in Cabo.
Casa Oasis is now in our rental inventory and we have many great memories of our time in Casa Oasis.
As in the US, when purchasing a home in Cabo, you should work with a reputable Realtor. Having lived in Cabo since 1998 I personally know a number of Realtors who I would recommend. I have featured a short list on this blog but have several more I would also recommend. The process is similar to the US with a purchase contract (in English and Spanish), negotiations between buyer and seller, transfer of funds, closing and possession. The following information will familiarize you with terms and people involved in the purchase of real estate.
Fideicomiso is a word you will want to know about. In the “restricted zone” of Mexico, which is 100 kilometers from the border and 40 kilometers from the coast, a foreigner may purchase property only by means of a fideicomiso (fee-day-coe-me-so), commonly known as a trust. A fideicomiso is a 50 year renewable bank trust granting a foreigner purchaser the right to use, improve, rent, sell or otherwise enjoy the property. The foreigner purchaser is the beneficiary of the trust. As the beneficiary, the buyer enjoys all the rights of home ownership, including the right to sell, lease, improve, mortgage or will the property. A fideicomiso can be extended by another 50 years at the end of its terms. To extend a combined 100 year term, the owner must apply for a new foreign affairs permit. A buyer may elect to be assigned the rights of the seller’s existing trust based on the time left on the trust. This process is called an assignment of rights (cession de derechos). A minimal annual fee is paid to the Mexican Bank for the trust.
A notary in Mexico is an important person in any real estate transaction. A notary, called a “notario publico”, is a licensed attorney certified by the state or federal government to act as an official and unbiased representative of the government of Mexico. A notary in Mexico has much more responsibility than a U.S. notary, with responsibility to both the buyer and the seller. The Notario Publico ensures the legality of the transfer of title:, calculates and retains the seller’s capital gains tax on behalf of the Mexican government; collects and pays the purchaser’s 2% acquisition tax; coordinates appraisals, certificates of no liens and certificates of no debt; and requests all corresponding permits. The notary must record the transaction at the public registry and tax (cadastral) office after closing. The buyer will be charged a fee based on the value of the property. Any real estate transaction not ratified before a notary and duly recorded in the public registry is considered invalid and not enforceable.
What is the Trustee Bank? This is the Mexican bank authorized to act as trustee. It must be a Mexican registered financial institution with an established trust department. The properties held in trust by the bank are not assets of the bank. We have used BBVA Bancomer and ScotiaBank Inverlat, S.A. personally. As a purchaser, you have the right to select any qualified Mexican bank as your trustee bank. Check with your professional Realtor for additional trustee banks.
Title Insurance? Yes Title insurance is an insurance policy for property ownership. Title policy is the only monetary indemnification a buyer can obtain to guarantee ownership of Mexican real estate.
How long does closing take in Mexico? Normally closing takes 60-90 working days. However, due to Mexican holidays, permit delays and the trustee bank delays may happen. Such delays are not considered defaults by the buyer or seller as they are beyond their control.
What does a closing date mean in your contract? This date is established in the Offer to Purchase or the Buy/Sell Agreement. It is important that you understand that this “closing date” is a target date as the actual final closing date is determined by the notary.
Hopefully this information has been useful to you who are considering purchasing property in Mexico. Our experiences in purchasing property in Mexico have been positive and rewarding.
