Real Estate Closing Guide

For national security purposes, the Mexican federal constitution prohibits non-Mexican persons from owning real property within 30 miles of Mexico’s coastline, referred to as the “restricted zone.” The entire Riviera Maya, including Playa del Carmen, Tulum, and other desirable coastal lands where foreigners most want to purchase property, are within the restricted zone. In the early 1970s, Mexico’s government wanted to encourage foreign investment and began allowing foreigners to purchase coastal property through a “fideicomiso,” or trust agreement. The coastal property is held in trust by a Mexican bank. The bank acts on behalf of the foreign buyer, taking title to the real property. The bank then has a fiduciary obligation to follow instructions given by the foreign buyer. Contrary to a land lease, as the trust beneficiary, the foreign buyer enjoys all the rights of fee simple ownership and may sell, gift, lease, add construction, improve existing buildings, mortgage, and encumber the property. The fideicomiso technically satisfies the prohibitions in the Mexican federal constitution against foreign ownership of restricted-zone property. Foreigners have bought, owned, and sold Mexican coastal property through fideicomisos for nearly fifty years.

No, you do not need to be a resident to purchase property in Mexico. Utilizing the fideicomiso, the fideicomiso beneficiary can be the same as any entity holding property in the US, such as any other non-resident individuals, couples, groups of individuals, or through a US-based corporation (LLC).

This will depend on the individual and their desired use for their property. A fideicomiso is the best and simplest option for most foreign buyers. Certain factors will determine which vehicle is most suitable, such as if your property will be used to generate income, whether you plan to obtain residency in Mexico, and if you plan to purchase more than one property. Owning a Mexican corporation requires more reporting obligations than a fideicomiso and a minimum of two shareholders are required to form the corporation. Our team can model the right structure for your purchase depending on your objectives.

A notary public in the US plays a significantly different role than a notary in Mexico regarding real estate transactions. Notario publicos in Mexico are attorneys with at least five years of experience who have passed two rigorous examinations. They are appointed by the Governor of the State and by the Executive branch of the federal government and, as such, represent the governor in all real estate transactions. In Mexico, a number of legal documents—wills, deeds, powers of attorney, forming corporations, establishing trusts, and most importantly, real estate transactions – must be formalized before a notario publico to be valid. Once the promissory purchase sale or trust has been prepared, the buyer has the right to choose a notario publico to close the transaction. In some planned communities or developments, the buyer may want to consider using the seller’s notario because the notario will be familiar with many aspects of the transaction from experience with other properties in the development. There are a number of documents that must be prepared to bring to the notario publico. Proof of full names, places of birth and a passport; and, the ability to prove legal presence in Mexico, (VISA), if in Mexico to execute the closing documents oneself. The seller will also have to provide documents for examination and verification by the notario publico: the deed to the property and items such as up-to-date receipts for taxes, subdivision fees, water, and any other public utilities. When everything is in order, the notario publico prepares the deed of conveyance subject to the terms of the promissory agreement. It is important to note that even though the buyer selects the notario publico, it does not mean that the notario publico “works for the buyer.” The notario is an unbiased party in the real estate transaction, legally responsible for ensuring that all essential legal formalities are followed. These include identifying the property, the names of the buyers and sellers, and the capacity in which any signatory acts and incorporates this information into the public deed.

When you select to use a closing services firm such as Guardian, you can confidently purchase real estate in Mexico, knowing that at least one individual/firm is on your side. Many real estate agents in Mexico are not licensed or regulated and do not have the disclosure responsibilities or the responsibilities under “the law of agency” that real estate agents in the US & Canada have. The seller and their associated parties only have the seller’s interest to look out for. The notary’s role is to be a neutral party in the real estate transaction and process all documentation in accordance with the laws and regulations of the Mexican government. Having an attorney legally responsible for protecting the Buyer’s best interests is well worth the cost.

No, you do not need to acquire title insurance if you hire a competent lawyer to represent you during your purchase, execute a thorough due diligence, and ensure the transfer of rightful ownership of the property.

Title insurance currently does not exist in Quintana Roo, where Playa del Carmen, Tulum, Cancun, etc, are located.

In most cases, we strongly recommend using escrow services to secure your earnest money, deposits, or payments. Unlike in the US and Canada, real estate agents and lawyers in Mexico cannot legally hold funds in trust. The best and most favorable manner to handle earnest money, deposits, and payments involving Mexican real estate transactions is with a neutral third-party escrow services company that has a legal and fiduciary obligation and responsibility as the escrow agent. As your closing services coordinator, we oversee the proper preparation and filing of all paperwork necessary to open the escrow account that will be used to hold the funds for your transaction. We work closely with the escrow agent to ensure the funds are disbursed in accordance with the terms and conditions of the escrow agreement.

Many US and Canadian buyers are surprised by the closing costs of acquiring real estate in Mexico. There are fees associated with closing a transaction in Mexico that are not part of a real estate transaction in the US, such as acquisition tax, notary fee, registration fee, and the fee for the fideicomiso. For most properties, total closing costs range from 5% to 9% of property value. It is important to remember that while closing costs are higher than their US equivalent, property taxes are much lower, with an average of 0.3% of the property’s value.

Yes, you can purchase property through a US-based LLC. The LLC can be a shareholder in the Mexican Corporation or the beneficiary of the fideicomiso.