Sample Excerpt

From : Chapter 15 - "Purchasing Property in Mexico"

When purchasing property in Mexico what questions should I ask?

Keep in mind the old saying, caveat emptor or buyer beware. Don't let the Baja bug bite you so hard that you leave your brains at home and make decisions based on emotions. Don't be afraid to purchase in Mexico, just do your homework! You can avoid mistakes others have made by being knowledgeable. Use reasoning to find satisfactory answers for the following questions about the property:

• Be aware that real estate agents do not have to be licensed in Mexico. Make certain the one you use is reputable, professional and knowledgeable. Do not buy property without adequate representation. It may be wise to hire an attorney.
• Make certain the seller holds the deed for the property and has the right to sell it. Deed problems are rampant in Mexico. Many times they are exchanged from family member to family member without government recordings. This is called a puesta nombre. See page # about title insurance.
• Make certain to close with a notario who checks records not only in the town in which the property exists but in nearby towns as well. There have been cases where Mr.X sold property in 1950 to Mr.Y. Both Mr.Y and Mr.X have since died. This transaction was recorded in Rosarito, the town in which the property existed. But Mr. X's son showed the deed his father had prior to 1950 to a buyer, convincing the buyer he had title, but he insisted upon closing it in Ensenada instead of in Rosarito where the deed showed ownership by Mr.Y. The notario failed to check the records in Rosarito when the sale closed. Mr.Y's children have to take this case to court to settle the dispute.
• How long will I have to wait for the closing to take place? Expect it to take twice as long as in the States, especially if a bank trust is formed. Be flexible. Remember, this is Mexico. Time is not of the essence.
• What are all the fees and expenses in purchasing the property? Will they be higher than in the States? Fees will increase accordingly if a loan is issued or if a bank trust is needed. Get original receipts for all expenses and keep them for tax purposes.
• Is there an existing bank trust on the property? Is it an individual trust or a master trust? In order to form a new trust, you will need to have your FM-3 in place. Consider putting the property in the name of a corporation or family trust in order to shield your individual liability. Note: If the corporation is a sole entity, the next purchaser can buy the corporation, thereby eliminating the necessity of government recording. Hence, Mexican capital gains taxes can be avoided. See a lawyer.
• Check the location of the property thoroughly. Is it near vacant property that will someday be a fish factory or something that can adversely effect the value?
• Is it Ejido land? If it is, beware of problems. Do not purchase it on promises of clear title. Get expert legal advice.
• If it's in a subdivision, what are the restrictions as written in the CCRs or formal paperwork? Are they enforced? How? What are the homeowner monthly dues? What is the percentage of delinquent monthly payments? Ask for an accounting statement of assets and liabilities or plans to increase the payments. What is the history of the subdivision?
• Are there any liens on the property? The notario will do a search for official liens before closing, but have the owner sign a document verifying there are no unrecorded liens and that if any appear at any time, he will be responsible for them.
• Are property taxes current? Ask to see the original receipts for the last five years. Get copies for your file.
• There are no home inspectors in Mexico, so you will want a thorough inspection to be done by a qualified builder. Just as in the States, make the offer contingent upon your approval of an inspection by a person of your choice. Then ask for proper repairs on the items to be fixed. Make certain they are completed before you sign the final paperwork. Your signature on the final papers will be the only leverage you will have to get it finished. Do not sign final papers just on promises of completion. You will be the loser.
• Make certain the property is not built on landfill. A professional geological engineer can answer erosion concerns. Pay for an inspection, especially on waterfront property. It's wise to know what you are purchasing.
• Ask to see the original water bill receipts covering the previous five-year period and include copies in your files. Know the water source for the property and have the water tested for purity by a reputable company.
• Know about the septic or sewage system. Is there a treatment facility in the subdivision? Can the land pass a perc test for a septic system? Where does the waste go? How well does the system work in the house? Is the house lower than the drainage pipes? Is a pump used?
• Be certain to check that the utilities are connected to the proper meters.
• Are there telephone connections available? How much will it cost to connect? How long will it take to connect?
• What fire protection is available? How close is the nearest fire department? If it takes the fire department an hour to get to the property, you need to know that fact.
• Is there security on the property? Lights, dogs, guards or fence around the property? When was the last break-in?
• What is the history of the house? Have there been deaths or illnesses or drugs in it?
• If the house is sold completely furnished, make an inventory list of every item you want and have the seller initial every item. I know of a case where the real estate agent took the most valued antiques before turning over the keys to the buyer.
• If the house is on the waterfront, it's very important to know where the Federal Zone ends. Is any part of the house in the Federal Zone? Did the owner obtain a concession? If so, don't assume it runs with the land or that you'll be able to obtain a new one. Don't assume anything! Remember, it's the government that grants it, not the current owner of the property. Read the paperwork and find out costs and procedures from a knowledgeable representative before you sign on the dotted line.

Purchase Baja4u.

Read reviews of Baja4u.