Buying Punta de Mita / Puerto Vallarta Real Estate
It’s bound to happen on any vacation to Mexico – sometime after the pace of life has slowed to a more sane and pleasurable level you find yourself looking around and asking yourself, “I wonder if I could live here….”
A: Article 27 of the Mexican Constitution states that non-Mexicans cannot own property within 100 kilometers of the border and 50 kilometers (about 30 miles) of the coastline. This is a protectionist measure, put in place after foreign invasions repeatedly threatened the country’s sovereignty at the end of the 19th century. Today, foreigners may directly own real property in the interior of Mexico subject to certain limitations on specific agricultural tracts.
As time has passed, and as Mexico has embraced the philosophy of globalization, the Mexican government has come to realize the benefits of opening these attractive areas up to foreign investment which has led to the modification of this constitutional restriction. Since 1973 foreigners (non-Mexicans) have been able to purchase coastal and border properties if done through a Mexican bank trust, known as a Fideicomiso.
A: Essentially, it is like a Trust in the United States or anywhere else in the world. The bank holds the legal title to the property, with all rights and privileges of ownership, including exclusive use and enjoyment, held by the Trust beneficiary-the foreigner. The beneficiary enjoys all rights of ownership enabling him to occupy, rent, gift or transfer title to the property to any legally qualified person he may designate. The actual document is a Trust Deed and is public document registered in the local land registry. This is not a lease or anything at all related to a lease.
These Trust Deeds have an initial term of 50 years. They are legally renewable in perpetuity at any time or at the end of the 50-year period for a filing fee (less than $1,000 US) for additional 50-year periods. The property may be sold at any time, with the seller being responsible for paying his capital gains taxes on the appreciated value. This process is designed to protect the rights of foreigners, and ensure that property transfers are made in a legal manner.
A: To establish a real estate Trust, (fideicomiso), banks will charge a predetermined fee, plus a percentage of the property’s value, to cover the costs of preliminary studies and the drafting of the Trust agreement. The bank also charges an annual fee for maintaining the Trust, roughly averaging $500 per year, providing there is no financing
The Trusts are carried as off balance sheet assets by the banks who act as trustees. The Mexican Government specifically set the trust system up to allow non-nationals the security of ownership without having to change their 1917 constitution.
Most real estate agents can refer you to a reputable Mexican bank trust department, which generally have English-speaking personnel, as well as publications, available to answer questions about Trusts.
A: Financing is relatively new in Mexico . Our agents are trained in the process of obtaining mortgage financing with several experience lending institutions who are very willing to lend on any property located in Punta Mita. The terms are generally similar to what is available in the US and the loan is fully secured by the Mexican property.
Closing costs to the buyer tend to be higher in Mexico than they are in the U.S. or Canada , averaging 4 to 5 percent of the purchase price. Closing will take from 30 to 45 days depending on contingencies and financing requirements. Escrows are now starting to be available via private escrow companies specializing in this function and will run from $1,500 to $1,800 U.S. per transaction.
In most cases, the buyer and seller need not be present at closing, but may be represented by their sales agent via a power of attorney.
Public Notaries are the agents of record for all transactions registered in the Land Registry Office. The notary is also responsible for collecting any taxes that may be due at closing.
Q: What about the availability of insurance on the transaction (title insurance), as well as the property itself?
A: To date, there are no home inspection agencies nor home warranty policies available in Mexico, however in recent years, title insurance is available. Since 1996 Stewart Title Guaranty Company has been offering and underwriting title insurance for Mexican properties. Consult with your agent as to how to proceed with this process although in many cases a title policy is included with your purchase in Punta Mita.
Other types of insurance, including property, theft, flood, liability, hurricane, damage, and earthquake, are all readily available in Mexico and policies can be written to pay claims in U.S. dollars.
A: For the buyer, the subject of real estate taxes generally comes as good news, especially in the Puerto Vallarta area, real estate taxes tend to be low. Known as ‘Predial’, the tax is calculated as a percentage of the assessed value determined at the time of sale, paid every bi-mester,. Property taxes have historically been low in Mexico because they have never been considered a source of governmental revenue, however, this is subject to change.
A:If you are not planning on living full time in Mexico, property maintenance will need to be considered for the time you are away. For condominium owners, maintenance and security is handled by the Condominium Owners Association, paid for through monthly fees.
Homeowners may want to consider a property management company. Many of the leading real estate companies, especially in Mexico’s resort areas, offer this service. Mita Residential offers this service for your convenience, within Punta Mita.
A: One of the major differences in buying property south of the border stems from the fact that Real Estate agents in Mexico are not subject to any national certification or educational requirements. As such, the best advice you can act on is to always deal with an established Real Estate Agency, whose references you have checked personally with several former clients.
For 20 years La Punta Realty / LPR Luxury has offered the highest assurance of professional real estate practices.
Punta de Mita’s pristine beaches, perfect climate and primitive beauty have combined with the acclaimed standard of service of the Four Seasons Resort, and the St. Regis Resort to create a community of distinctive resort living. Punta de Mita is recognized as an enclave of distinction, signifying prestige, privacy, and a pristine environment of unmatched natural beauty.