Cozumel Island Homes Real Estate Your Dreams Become Ours

FAQ's Buy a Home in Cozumel Mexico


 
Questions about Buying a Homes, let an Expert and Certified Home Specialist Assist YOU! 

 

 

 

Q-Can I own property in Mexico?
A. Yes, foreigners may obtain direct ownership of property in the interior of Mexico. Mexican foreigners can also own property along the ocean front. By Mexican law, properties within the 50 km of any ocean front and 100 km of any country boarder (the restricted zone) are acquired via a bank trust or via establishment of a Mexican Corporation.

Q-Can I as a Foreigner, purchase property within the restricted zone under a Mexican corporation entity? 
A. It depends, if you want to acquire for residence purposes you need to acquire with a bank trust. If you want to acquire for commercial purposes you can acquire via Mexican Corporation with certain procedures and requirements. If you want to acquire for other purposes other than residential, you can acquire via Mexican Corporation with certain requirements and procedures.

Q-What are my rights as a buyer?
A. The Trust is a legal substitute for fee simple ownership, but in many cases, the Trustee is the legal holder of the property. As Beneficiary, you have the right to sell your property without restriction. You may also transfer your rights to a third party or pass it on to named heirs.

Q-Can I own property near or in front of the ocean?
A. Yes, laws passed in 1973 and 1993 have made it possible for foreigners, foreign firms, and Mexican firms with foreign participation to acquire interests in coastal real estate through a bank trust.

Q-Do I need an FM-3 to buy property in Mexico?
A. Anyone, even someone in Mexico on a tourist visa, may buy property. It is stated that: If you sign a contract, rent a house or condo, buy a house or condo, or lease property (i.e., campo's), you are no longer a "tourist" and therefore, are invited to apply for an FM-3. But in order to acquire property, it is not necessary to possess an FM3.

Q-Can the Mexican government confiscates my land?
A. Foreigners often worry about their land being expropriated by the Mexican government. Under the North American Free Trade Agreement, NAFTA, Mexico may not directly, or indirectly, expropriate property except for a public purpose. This is the same as "Eminent Domain" in the U.S. Where it is necessary to expropriate land, swift and fair market compensation must be paid, together with accrued interest.

Q-How long can a foreigner reside in Mexico per year?
A. When you arrive to Mexico, a tourist visa is issued. The maximum amount of period on these visas are 6 months. These can be updated at the local immigration office. You also have the option to apply for a FM3, which has 12 month periods of validity. FM3s can be obtained if you are a property owner or if your employer is a Mexican Corporation and for several other special cases.

Q- What is an FMT?
A. An FMT is the tourist visa that is obtained when first entering into Mexico. These can continually be renewed by simply leaving Mexico within the allotted six month period and then reentering.

Q-What is an FM3?
A. A fm3 is a document for a person who wants to live at least part time in Mexico, but does not necessarily intend to make this their permanent home . To be granted  FM-3 status, you must prove you have sufficient resources to be financially independent, or meet certain requirements to be able to work or own a business in Mexico. FM-3 "Rentista" status is available to anyone with a monthly income (from investments, social security or other retirement) of not less than $1,000 USD plus $500 USD for each dependent. If one owns property in Mexico, the amount of income required is reduced by nearly one-half.

Q-What is an FM2?
A.  A FM2 is a document for a person who intends to permanently reside in Mexico, with qualifications only slightly more stringent than FM-3 estatus. After five years of successfully meeting the requirements of FM-2 (including restricted time out of Mexico), one may apply for "Inmigrado" status, which allows you to enjoy most of the rights and privileges of Mexican citizen, the primary exception being the right to vote. Inmigrado status does not require you give up your native citizenship, but holders may freely work and remain in Mexico without annual renewals of immigration paper.

Q-How can I know the estimated closing cost and other expenses?
A. I always advise to my clients an approximate rate of 5-7% of the title transfer amount is what should be expected for total closing costs.

Q-What kind of options for financing are available in Mexico?
A. Only recently have new financing tools become available for Mexican foreigners. If using Mexican property as collateral, the rates may be higher, but it leaves home country equity free for other capital raising options.

Q-What is the price expected for the different properties available in the Riviera Maya
A. The pricing per square meter is a constantly changing figure. Especially in the past 2 years, the price has been jumping constantly as this zone continues to be a booming area. Contact me for the latest figures.  

Q-When buying or selling a property in Mexico, who pays the closing costs?
A. It is common that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary's fees and expenses, while the seller pays his capital gains tax and the broker's commission.

Q-Is there financing for foreigners in Mexico?
A. In Mexico, historically and in many occurrences today, when buying real estate, the transactions are cash operations. Mexican Banks are only recently starting to offer mortgage tools for property acquisitions for the Mexican nationals. Only within a few months ago this year, have major Mexican financial institutions begun offering options to Mexican Foreigners basically for Americans, Canadians, and English. Most Mexican foreigners have used home equity or other assets from their home countries to raise capital for investing here in Mexico. With the new tools now available, allowing for Mexican Property to be mortgaged, many foreigners are now discovering new exciting options to purchase their Mexican ocean front homes.
Q-Can I use my own bank to carry the mortgage?
A. Yes, you can finance, raise your capital from any bank in the US or Canada that will allow for such operation. In other words, here in Mexico there are no restrictions, it is basically the banks who are processing the loans who will advise to you whether or not they have a program to finance property, in another country. I will send you another email with an introduction to multi-national bank here in Mexico, who has just purchased a chain of banks up in the USA. They do offer mortgaging to Americans for properties down here in Mexico, using the Mexican property asset as collateral. Read up, and forward your questions.

Q-When should I make an Offer?
A. Once you have found the right property, let the sales professional know as soon as possilbe that you're ready to reserve or to write an "offer to purchase" - a written document that declares how much you are willing to pay for the home provided that certain conditions are met.

Q-What does the offer include?
A. Your offer should have a time limit for the seller to accept it, reject it, or make a counter-offer. You should also include the date, if you plan to use an escrow account, outline conditions, amongst other items. If a counter-offer is made, you will have some time to respond. Often, several offers go back and forth until an offer is accepted, or one party decides to end negotiations.

Q-Does the offer to purchase include money?
A. Yes, it is usually accompanied with an earnest money check.

Q-What is earnest money and how much is needed?
A. When you sign an offer to purchase document, the sales agent will ask you for "earnest money." This refers to a monetary commitment that shows that you the buyer are serious about wanting to buy. Usually, you will be asked to write a check for 5 up to 10 percent of the sale price.

Q-Who receives the earnest money?
A. The earnest money on most occasions is made out to the notary, the sellers listing real estate agency or into escrow.

Q-Do I always need to retain legal counsel?
A. Not always, but many people prefer due to the fact that many of the legal contracts and other paperwork involved in buying a home in Mexico are complex and can be confusing to the general public , many people prefer to work with an attorney. An attorney can review contracts and make you aware of special considerations and potential problems, and can also coordinate and accompany you to the closing.
Q-Can I hire an Attorney from USA or I need to hire one from Playa del Carmen?
A. Investors should hire competent Mexican legal counsel when contemplating any real estate investment. Mexican laws and practices regarding real estate differ from those in the United States.

Q-What are the steps/documents needed for a closing?
A. The buyer must make sure that:
    • the seller holds valid, unencumbered title to the real estate;
    • there are no taxes due on, or liens attached to, the property;
    • the terms of the sale are evidenced by a written purchase contract or promissory contract if money is paid in advance of closing;
    • the Fideicomiso agreement correctly describes the terms negotiated with the seller and the bank;
    • the buyer obtains a certificate of no liens; certificate of no amounts due on water,
    • the buyer obtains an appraisal of the real estate;
    • the SRE issues a permit for the Fideicomiso;
    • the  Fideicomiso Agreement and the escritura/deed is registered in the Public Registry of Property.
Q-Who should be responsable in collecting these documents?
A. If you have legal counsel, they will coordinate the collection of these documents, otherwise the Notary Public will administer.

Q-How do I know that all this documents are legally correct?
A. The Notary Public is educated and well prepared to review and ensure proper and authentic documentation.

Q-What is a Bank Trust?
A. The Mexican Constitution does not allow direct ownership of real estate by Mexican foreigners in what is known as the "restricted zone." The restricted zone includes all land located within 100 kilometers of any Mexican border, and within 50 kilometers of any Mexican coastline. In order to permit foreign investment in these areas, the Mexican government introduced "fideicomisos," (FEE-DAY-E-CO-ME-SOS) , which is, roughly translated, BANK TRUSTS. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Bank Trusts has enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land on the coastlines, in order to realize improvements, expansions, and to profit from the sale of the property without restrictions.

Q-Who can provide me with this service?
A. Any Mexican Financial Institution. Today, such institutions include a variety of multi-national organizations such as Citibank of Mexico, Scotia Bank of Mexico, HSBC of Mexico, Banorte, Bancomer to  name a few.

Q-What can the foreigner beneficiary expect from the Bank Trust Agreement?
A.
1) The beneficiary can occupy the property for the life of the trust.
2) Title to the property can be transferred to the foreign beneficiary in the event that he acquires legal capacity to hold such property, or to any legally qualified person he/she may designate.
3) The trust can also be inherited to your family by naming them as Secondary Beneficiaries in the event of your death.
4) The property can also be sold to a person legally authorized to own land or to another foreigner via a trust.

Q-Is the Trust Renewable?
A. The "fideicomiso" Bank Trust, is set up through a Mexican bank for a period of up to 50 years and can be renewed multiple times for other 50 year periods. To acquire the land the purchaser must obtain a permit from the Ministry of Foreign Affairs.

Q-Do I lose possession of property after 50 years have transpired?
A. No. The beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property. Under Mexican Law, the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary. With the expiration of a 50 year bank trust, the same beneficiary has a contractual right to renew the bank trust for another 50 year term. Such renewals can occur on multiple extension requests.

Q-What happens to my fideicomiso if the bank fails?
A. The Fideicomiso will be transferred to another authorized Bank. The Bank does not own the Fideicomiso, you do!

Q-How does the Trust function?
A. Title of the real estate is transferred to a Bank Trust with a Mexican financial institution acting as Trustee. The Trust Agreement is formalized by the issuance of a permit from the Mexican Ministry of Foreign Affairs. The buyer is designated as First Beneficiary in the Trust and the beneficiary rights and transaction are recorded as outlined by Mexican law, in the public record by a Notary Public.

Q-Who is involved in a Bank Trust?
A. In the trust there are three parts: The Trust Settler (Fideicomitente) which may be a physical or legal Mexican national, who is the owner/seller of the property which is to be placed in trust; the Trustee (Fiduciario) which, by law may only be a government approved financial institution who will hold the raw real estate; and the Beneficiaries (Fideicomisarios) the legal or physical foreign persons who are the FIRST BENEFICIARIES of the trust who obtain the rights for use and benefits of the said property.
Q- What is the First Beneficiary in the Bank Trust?
A. First Beneficiaries are also known as "owners". These are the investors that make the decisions. Multiple people can be listed as first beneficiary. If multiple listed First Beneficiaries, all must sign for any future transactions whether selling, transferring, improving etc..

Q- What is the Second Beneficiary in the Bank Trust?
A. The Second Beneficiaries are also known as "beneficiaries of the owners". You will need to establish Second Beneficiary for each one of the First Beneficiaries. If one of the First Beneficiaries  want to inherit to other of the First Beneficiaries, this needs to be explained too. Certain percentage ownership, or instructions can be instructed, but it is a good idea to keep the document simple. Currently, there are no inheritance taxes. Changing the Second Beneficiary into First Beneficiary status is not considered a sale in Mexican Law therefore no taxes are liable although Bank fees and Notary fees will be incurred.

Q-What is this permission and why do I need it?
A. In order to allow foreigners to begin establishing a Bank Trust, Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs. This is currently done by the trustee/bank as the initial step at the time a real estate trust is set-up. The Ministry of Foreign Affairs must grant any petition for a trust permit that complies with the stipulated requirements within 5 working days following the date of its presentation to the Ministry's central office in Mexico City. It must be granted in 30 days if the application is submitted to one of the Ministry's state offices.

Q-What do I need to get this permission?
A. Fill out an application form provided by your Bank, as well as filling out the documents for setting up the Trust. In such document copies of your official identification are needed as well as naming First Beneficiaries, along with naming of Secondary Beneficiaries.

Q-What is a Notary Public?
A. The training, function and responsibility of a Notary Public in Mexico is completely different than that of USA and other countries. In Mexico, a Notary Public is appointed by the governor of a Mexican state for life in a given geographical location (a town, a district).. To seek appointment, the person must be a Mexico licensed attorney. This involves attending law school in Mexico, obtaining a law degree, passing an exam and being admitted to the bar in Mexico. The prospective Notary Public must then work as an apprentice for several additional years with a Notary Public.

Q- What are the Notary Public's  responsibility during the property transaction?
A. A Notary is required to close on any real estate transaction. His responsibilities include reviewing all documents of importance with respect to the sale of real estate, they also attest to the fact that the correct people have signed the particular documents. A notary does not act as an escrow service. The Notary Public's job is to see that certain formalities have taken place and also collects all taxes and is responsable that such monies are forwarded to the Mexican Tax Authorities. Although a notary is always an attorney, it is not the notary's job to provide any party with legal advice. Any buyer or seller who wishes detailed legal advice should hire a separate lawyer licensed in Mexico.

Q-What are the fees of a Notary Public?
A. The Notary charges fees realize his services. Services such as drawing up the documents, process all the paperwork, request all certificates, request appraisal, request permit, collect and pay all the taxes, collect all of the signatures, and register the deed. Closing costs are normally 4.5% - 6.5% . As the purchase price lowers the percentage goes up and as the purchase prices raises the percentage goes down.

Q-Which are the Taxes that the buyer needs to pay?
A. Buyers customarily pay the following fees: 1) two percent transfer tax based on the higher of the sale-price or appraised value; 2) appraisal fee; 3) bank trust fees; 4) notary fees; 5) Secretary of Foreign Relations fees; 6) title insurance premiums; and 7) Public Registry , deed recording fees. Attorneys should also be taken into account when calculating costs
.
Q-Which taxes are paid in a closing?
A. Closing costs average approximately 6.5%. The 6.5% is an aggressive number and on many occasions we have actually realized the operation in the 4.5%. I prefer to prepare with higher quotes and to ensure conservative figures for your calculations.

Q-How much is the transfer tax?
A. Transfer taxes vary from state to state here in Mexico. In Quintana Roo the rate is 2%.

Q-What are the property taxes for Playa del Carmen area and that general region?
A. They are running a roach factor of about .010%. Or in other words, for every $100,000 usd in property value you will pay $100 per year in taxes. Very very low compared to USA. You might use the factor of $150 per every $100,000 of property value. Being more conservative.

Q-Who pays the Capital Gains Taxes?
A. Capital Gains tax is paid by the Seller. Although in very rare situations, these expenses are covered by buyer as a negotiation tool.

Q-Do I need to be present for the signing of the title transfer?
A. No. You can establish a power of attorney on your behalf. It is recommended that the person you designate to be Mexican National to allow for more efficient process.

Q-What is the Public Registry?
A. The Public Registry of Property is a government office where documents are filed allowing for research for actual ownership of land titles and shows if any liens on such titles exist. In Mexico deeds, known to be public instruments, can be researched at these offices  which is open to the public. There is a Public Registry of Property in the majority of cities and towns of Mexico. When the notary public prepares to verify and certify a transfer of property ownership, he realizes a 10 year search of the title to verify that there are no liens or encumbrances recorded against the property and also verifies that the seller has the capacity to transfer ownership.

Q-When do I receive my Title?
A. The Notary, during the title transfer process, will obtain a certificate from the local City Hall to prove that the annual property taxes have been paid to date. They will also realize a 10 year search on the title identifying any liens on said property. A public instrument must be researched, finalized and signed by the Notary Public. The new title will typically list the parties involved in the transaction including the notary, seller, buyer, and the trustee bank. It will also identify the property. Once the new title finalized and signed by the notary, by the seller, by the bank as trustee (if a bank trust is involved) and by the buyer (who will also be the trust beneficiary if a trust is used), the balance of the purchase price changes hands. Taxes and notary fees are then collected to finalize the operation. A few weeks later, a certified copy by the new owner can be collected for files.

Q-Will I own title to the land?
A. Mexico enacted the Foreign Investment Law (the FIL) opening up land ownership for foreigners in Mexico. The FIL and its regulations outline the process for foreign investors to acquire properties in Mexico. If the property is not within the Restricted Zone, foreigners can obtain direct ownership with notification to the SRE (Exterior Relations Secretary, Secretaria de Relaciones Exteriores) so long as the foreigner abides to the Calvo Clause item. Properties within the Restricted Zone destined for non-residential activities (i.e. tourism, real estate development, commercial or industrial purposes), can be acquired through a 100% foreign-owned Mexican legal entity which needs to be authorized to have foreign ownership by the SRE and whose by laws contain the Calve Clause items. If the property is within the Restricted Zone and is destined for residential purposes, foreigners can acquire the rights to use, improve, enjoy, and profit the property through a Fideicomiso.
Q-If I decide to sell my property, can anyone buy it?
A. Yes, you can sell to either a Mexican national, or Non-Mexican Foreigner. A Non-Mexican would also be required to set up a bank trust