Buy a Home – The Process
We are thrilled to welcome you to Tropicasa and extremely pleased that you have chosen us to help you find the home of your dreams. We pride ourselves not only in our proficiency and knowledge but also our attention to detail and response to our clients. We will do everything in our power to ensure that your experience with Tropicasa is pleasurable! We have put together this easy-to-consult reference on the different aspects of buying property here in Mexico and in most cases, in an area called the Restricted Zone. Our FAQ section of the website will answer most of your questions regarding ownership of property in this area. It is our goal to see that any questions or concerns regarding the purchase of your new home are addressed completely and immediately.
Many Buyers or potential Buyers are reluctant to “waste an agent’s time” if they feel that they are not quite “ready” to buy. Tropicasa understands that the process is different for each person and the key is for the Buyer to feel comfortable, know when the time is right, feel familiar with the market and what is out there and most of all to be confident that they are making the right decision. That is what a Realtor does.
Before you start your search, your Realtor will be able to prequalify you in order to know exactly what price range of properties you should be searching and the availability of financing. Your Tropicasa agent will initially sit down with you or if you are not in Puerto Vallarta, speak with you or correspond with you about what you might be interested in seeing, your current needs and needs for the future, property “must-haves” and any other special requirements. They will explain the process to you, answer questions about payments and financing and generally be there to answer any of your concerns. When you are here in Puerto Vallarta, your Realtor will take you on a tour, showing you the properties he or she thinks fit your needs. Your agent will listen to you regarding each property in order to refine the search criteria for your dream home.
Making An Offer
When you decide that it is the right time, your Tropicasa agent will help you prepare an offer. Our offers are prepared in a double-column format in both English and Spanish so that you are not signing something you do not understand. Our standard offers will establish price and terms, a list of contingency items that must be satisfied in order to close and will set the closing date for the transaction, generally 30-45 days following the acceptance of the Offer. If you are not physically in Puerto Vallarta, the signed offer may be scanned and e-mailed to your Realtor who will then present the offer to the agent that represents the Seller of the property.
If you receive a counteroffer to the original offer, it may contain, among other things, a request for a new price and terms, an answer to information you might have requested and other items. Your agent will consult with you on whether or not to respond with another counteroffer, not responding at all (and letting the deal expire) or accepting the counteroffer as written and thus accepting the offer! Congratulations! This can all be done via fax or e-mail with original signatures required once we have the final accepted offer.
You and the Seller have reached an agreement – what great news! Before we can proceed with the closing process, we need to review the contingency and due diligence items that we have requested in the initial offer and see which have been satisfied. To follow is a standard list of documents we request in all offers, certain items would not apply in certain situations:
- Escritura* (Deed of Title) – We need to know that the Seller is the owner (either fee simple or in fideicomiso) of the property.
- Current Property Tax Bill* and if possible, its corresponding payment. - It is important to see how much the property taxes will be each year. Property taxes are notoriously low here. Figure on paying around $100 USD for each increment of $100,000.00 USD of the value of the property, i.e., a condo that is valued at $300,000.00 will pay around $300 USD per year in property tax.
- Inventory/Exclusion List – Resale properties typically include all major furniture but do not usually include art, art objects and personal effects. Brand new developments will typically include some kind of appliances but not furnishings. You need to know what the property includes for the price you are paying.
- Property Disclosure Statement and Statement of No Pending Litigation – Statements from the Seller as a disclosure on the property. These are not required by law, but Tropicasa requires these for the protection of all parties.
- ID Requirements Format – This is a new format required under Mexican law which is basically a summary of the documents and information required by the Notary to close a transaction. We provide this to our clients at the beginning so that they know what to expect.
- Privacy Statement – Again, a new requirement under Mexican law and we provide a privacy statement to each of our clients in an easy-to-read bilingual format.
- Federal Zone Concession – This applies to oceanfront properties only. If you are considering an oceanfront property, please discuss this important clause with your agent.
- Copies of Utility Bills (recent) – We will need to see the services on the property to show the Buyer as well as to prepare the transfer document to transfer the utilities to the Buyer at closing. Utilities are never turned off and then on again but instead simply transferred to the new owner.
- Rental Calendar and Income and Expense Statements – For those that rent and may be marketing the property as an investment property, this will be important. The calendar is also important in the event you have reserved the property for dates that will be post-closing, as a Buyer will be due those rentals and/or deposits.
- Condominium Documents (in Spanish):
- Condominium Regime – The Notary will need this document to close and it is also important to review as it usually includes the Bylaws. The Spanish recorded version is the binding version so it is more important to see that version rather than an English translation.
- Bylaws – The document will show the Buyer whatever restrictions may exist against pets, noise, etc.
- Copies of Minutes of the Meetings for the Last 2 Years – This is important to see how the condominium is run, any issues that might be pending, any modifications to bylaws, etc.
- Condominium Financial Statements for the past 2 years – Important to see the finances of the condominium, how are the maintenance fees used, who is paying and who is not, and if there is a reserve account established.
- Current Budget – All Buyers want to know what to expect insofar as monthly maintenance.
- Survey – Pertains to lots especially, but can also apply to private residences if abutting a Federal area (highway, waterfront, etc.)
- Proof of Service Letters – Generally, in the case of lots, we request letters from each utility company showing that service is (or is not) feasible on that lot.
- Feasibility of Construction and Zoning – Especially for lots, often it is key to know what you can or cannot build on a certain property or what can be added to existing construction.
- Certificate of No Liens – To show that there are/are not liens against the property and if there are, the nature of the lien. Offers state that a property will
- Closing Cost Estimate – Your agent will obtain an estimate for closing costs from the Notary office once we have an accepted price. Closing costs are anywhere from 3-8% of the price. In Mexico, the Buyer pays for all closing costs while the Seller pays the real estate commissions and selling capital gains tax.
During the Due Diligence Period
During the time you are reviewing these and other documents on the property, you will also have a chance to make construction inspections, obtain financing if that is a contingency and otherwise determine whether or not you feel comfortable going forward with the transaction. We usually allow for a period of 15 days for due diligence (longer if the property is commercial or more complicated). At the end of the due diligence period, you will either make the determination to go forward or you will decide against the purchase and any escrow deposits you have made will be returned to you.
It is the standard here in Mexico for the Buyer to make a good faith deposit into escrow in an amount equivalent to 10% of the agreed upon price. We use well-recognized title companies such as Fidelity Title, Stewart Title and others to hold escrow and the cost is usually about $650.00 USD. A few days prior to the closing, the Buyer will deposit the balance of the purchase funds into escrow where funds will be held until the closing date when Seller transfers title to Buyer.
The Closing Process
Escrow is open and contingencies are removed! What does this mean? This generally means that the Buyer has deposited the required 10% good faith deposit into the escrow account and is satisfied with the due diligence and has removed the contractual contingencies. This means we are going forward to closing. Tropicasa works closely with the Notary to coordinate all closing aspects of the transaction.
Do I need to be present for the closing? As the Buyer, you may or may not need to be present at the closing – check with your agent on this. If your presence is required, you can be here personally or grant a power of attorney to someone that you trust to sign documents at closing on your behalf. Your real estate agent cannot act as your representative in this aspect as it would be a conflict of interest. If you cannot be present, the power of attorney can be prepared for you to sign.
If you are in the United States, you can have the power of attorney notarized by a local notary and then “apostilled” by the Secretary of State of the state in which you sign. If you Google “apostille + secretary of state + (the name of your state)”, information will come up on how to get this done. It is very simple.
If you are Canadian, you will have to have the power of attorney signed in the Mexican Consulate nearest you and each consulate has its own format and rules. This link shows the information on the consulates in Canada. http://embamex.sre.gob.mx/canada_eng/index.php?option=com_content&view=article&id=55&Itemid=35
What else to I need to do for closing?? You will need to prepare to take ownership of the property and anything that that might entail; hiring staff, hiring a property manager, preparing to assume the payment of the bills that correspond to the property once closing has taken place. Your agent will provide you with a proration statement prior to closing to show what expenses were prepaid and must be reimbursed by you to the Seller at closing, if any.
The closing date is here! Finally! The closing date is here. The Notary office will set the time of closing according to the schedules of both Buyer and Seller and based on the Notary office workload and availability. Generally, closings take place after 10 am and before 5 pm. Up to three days prior to going to the Notary, the Buyer will usually do a walk-through of the property just to make sure everything is in place. Once the Seller leaves the property after the walkthrough, they will not return.
At the Notary office you will review the paperwork with the Notary and closing coordinator to make sure everything is in order. Aside from the deed transferring title from the Seller to you, you will be signing disbursement instructions to the escrow agent which instructs the escrow agent where to send funds. Once documents are signed, the Notary will send the escrow agent the disbursement and copies of the deed and funds will be released. You will get the keys from the Seller and the closing is complete! You will receive your final recorded “escritura” (deed) within about 6 months of the closing. In the meantime the Notary will provide you with a copy for your records.