This article describes the “off-plan” property market in Mexico and some key considerations potential buyers ought to keep in mind before agreeing to buy a home in this way.

“Off-plan” properties offered by developers

Most “off-plan” property sales are offered by developers at the early stages of the project before construction begins, and/or during stages of the project’s physical construction.

Property developers like off-plan sales as it helps their cashflow and the project’s costs can be at least partly allayed before any ground is broken, or as construction begins.

Off-plan projects also help developers to gauge the level of interest for the project in the market and the price levels which buyers are prepared to pay for properties being offered as part of the prospectus.

Discounts and incentives versus off-plan risk

There is an additional element of risk with off-plan purchases that does not exist when buying a pre-built home, and in return for assuming the additional risks off-plan investors (buyers) are enticed with a number of incentives.

The most common incentives offered to buyers are:

• a discount on the advertised “market value” sales price,
• a custom choice of decorations and furnishings, and
• the opportunity to pick from the ‘best available lots’ within the development complex.

Off-plan investments have become more popular as property buyers have become more affable towards investment risks of various types in return for a higher potential reward.

The most sought-after element of off-plan purchases is a discount in relation to the advertised market price, offering the potential of a bigger capital gain from the outset. In some cases, buyers may try to quickly sell the property (called ‘flipping’) when construction is completed if the market is buoyant and buyers are willing to pay a premium when they see the completed project.

Securing a ‘good lot’ (that usually means a decent garden space and/or view) is also attractive to off-plan buyers as the location of the lot within a complex or the view offered by a particular unit on the development can add value and make it easier to rent out, and eventually sell.

Turning a profit in a rising market can be straightforward with off-plan investing; however, care must be taken to gauge market conditions and you must have an excellent understanding of true market values in the locality where you are buying in order to negotiate the right level of discount for the additional risk you are assuming as an integral part of the contract.

If you are buying off-plan you should negotiate a level of price discount that reflects the additional risk that you are assuming as part of the investment. The discount should be based on your own impartial assessment of the estimated value of the property when it is fully completed and delivered.

If you cannot see sufficient reward for the risk you are buying into, be prepared to walk away if you cannot negotiate an appropriate deal from the developer.

The process of buying “off-plan” in Mexico

The process of buying “off-plan” starts with the signing of a contract and with it, your agreement to buy a certain property based on an architect’s plan (a scale model might also be shown) using a defined set of staged payments.

In some cases, construction might have started already, and you will be able to visit the building site.  The final payment stage is usually held back until you are fully satisfied with the delivery of the property and facilities you expected under the terms of the contract.

Potential buyers should undertake due diligence before signing any contacts, and extend caution if a developer insists on being paid a substantial sum (as a percentage of the total sales price) in any of the staged payments.

Key considerations for buying “off-plan” in Mexico

There are several important considerations to reflect upon when you approach a property investment in Mexico and additional matters to consider when buying a property “off-plan.”

Check the developer

Check out the developer. What other projects have they worked on? What projects are they working on now, other than this one? When were their projects scheduled for completion and when did they complete? What is the local reputation of this firm? What are previous customers’ experiences dealing with the developer? Don’t be afraid to ask for references, and follow-up with those references.

Don’t take prominent or extensive advertisement placements in magazines and newspapers, or the presence of a modern website and social media following as proof of establishment or reliability.

Most “off plan” sales are offered before ground is broken, but some projects might already be under construction when you are offered a unit for sale. You should not assume that because construction has begun that the project will be completed.

Ask locally and do your research. Don’t be afraid to ask incisive questions that put the developer on the spot about their reputation, track record, and anticipated completion dates for the project they are inviting you to invest in.

Key points about buying “off-plan”

Here are some additional pointers to consider when contemplating a purchase of property “off-plan” in Mexico:

Understand the risk: remember that when you buy off-plan you are taking  commercial risks on the property development and the developer, as well as the wider market demand for property.

Due diligence: check the developer’s credentials, permits, and licenses; a local Notary Public will be able to ascertain the current legal state of a property development (you will need to hire their services at your own expense).

Don’t sign a contract you don’t understand: get a competent professional to review the contract and explain to you what is being agreed.  It will probably be written Spanish and you might need an interpreter.  Any contracts presented to you in English will only have legal force in their original Spanish versions—don’t rely on the seller’s translation if they offer one.

If the development is cancelled: the contract ought to be specific about what happens if the development is cancelled or left partially constructed and incomplete—and what happens to the staged payments you have already made.  What are the realistic prospects of getting a refund if things go awry? This is one of the key risks of buying “off-plan.”

If you need to withdraw: the contract ought to specify what happens in the event that you cannot complete the staged payments or if you need to withdraw from the contract due to unforeseen circumstances in your own personal situation.

Cross-check the development plans

It sounds obvious to say, ‘cross-check the plans,’ but some people really do buy “off-plan” on the face value of the marketing brochures, or pretty-looking model mock-ups on display at the sales office, or because they can see some construction taking place already and assume everything is in good order. It may work out fine, but not checking the plans significantly increases the risk of your investment.

When you are buying a pre-built property, a good Notary Public will check the plans and permits carefully and tell you about any legal problems that may be present with them before your complete the transfer.

Before you buy off-plan, you should consider paying for legal services to undertake the same checks as you would make with a pre-built property.  In all cases, the developer’s permits and licenses should be verified and your legal counsel ought also to verify that the transaction can lead to proper transfer of legal title.

Some plans never get approval from local authorities, some plans and construction projects come up against a plethora of other complications —too numerous to mention here— but suffice to say that an off-plan contract is just that: a plan, a proposal that is not yet realized—and you need to understand that when you sign the contract and begin to make your payments.

Purchase price and total cost of ownership

Buying any real estate entails more than just the price of the property; ‘closing costs’ (legal and professional fees) and any associated taxes also need to be considered, even when you buy off-plan.

If the property you are buying off-plan is part of a condominium building or a gated community of some type —and most off-plan offers tend to be one of these— there will be monthly management fees (homeowner fees) to pay in addition to any other costs of ongoing ownership.

Find out what the management charges are going to be and remember that these can (and usually always do) rise year-on-year. Check the contract and its covenants carefully and hire a qualified and experienced professional to check it and explain the conditions and the obligations that you are subscribing to when you sign the off-plan contract and eventually take delivery of the property.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

You don’t have to be legally resident to own a home in Mexico

You do not have to be resident in Mexico to own property here, so there is no need to qualify for residency status under the immigration rules to buy a home here— whether directly, or through a property trust.

However, when you sell the property there are certain property capital gains tax allowances that you may access if you are resident in Mexico.

Mexican law on property ownership

Mexican law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions provided that the law is followed, and you (most usually through a Notary Public) ensure that all necessary documentation is present and that the procedures are adhered to.

Mexican law provides for private ownership of land by foreigners, and its law is specific about the way in which land rights should be transferred from seller to buyer, and what type of lands are not eligible for public ownership.

A Notary Public will guide you through the details of these, but generally:

• Property may be purchased and owned outright for residential use by foreign nationals outside of the 100km (~62 mile) restricted land border zone, or outside of the 50km (~31 mile) restricted coastal zone;
• Inside of these restricted border and coastal zones, foreign nationals may own land through a fideicomiso (a property trust) which is set up through a local bank and provides for ownership of the land and property in all but name.

The Mexican Constitution forbade foreign nationals from owning property that was within the restricted border zones. This law was intended to protect Mexican soil from foreign invasion, and a property trust provides a means for non-Mexicans to buy and hold land and property if it’s physically situated within about 30 miles of the coast, or within about 60 miles from a land border.

Fideicomiso, property land trusts in Mexico

To enable non-Mexican persons to invest in land and property inside the restricted zones protected by the country’s constitution, the Mexican government introduced a system of land trusts—essentially a special type of investment ‘wrapper’ that enables you to legally and securely hold title of property in all but name.

In practice this means that any non-Mexican national who wants to buy home with an ocean view, or near the beach or a land border with Mexico, they can except that it will be by means of a special property trust, which is set up and managed through a local Mexican bank.

The trust holds the deeds to the property, and you and/or other persons named in the trust are sole beneficiaries to that trust—and by extension, to the property that is folded into it.

The trust gives full rights to do whatever you like with your property:

• it can be developed (in accordance with local planning regulations),
• rented or leased;
• sold, or given away.

In other words, this trust enables you to own the property in all but name.

The trust also enables you to name a beneficiary upon your death, and you do not need to have a Mexican Will for your wishes regarding the trust to be executed.

Some people choose to buy Mexican property through a trust even if the property is not situated inside the restricted zone, as part of their estate planning preparations.

The role of the Notary Public in Mexico

The Notary Public is the most important legal person you will deal with when you make a property purchase investment in Mexico.

Under Mexican law, the title deed to the property must be prepared by a Notary Public, and the Notary is also responsible for calculating and reporting tax duties owed to the Mexican tax authority arising from any property transaction.

As a buyer, it is your right to choose the Notary Public you wish to work with, and it should be your first port of call after you have agreed in principle to purchase a property in Mexico.

Experienced buyers choose their Notary Public, independent of the seller’s preference or advice.  The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed.

Read more about finding and working with a Notary Public in Mexico.

‘Ejido’ land and Title vs Possession in Mexico

You should be aware of ‘ejido’ land in Mexico, as there is a lot of it; and while many properties and developments now built offer a legal title deed, some properties continue to be transferred on ‘agrarian’ terms.

About Ejido land in Mexico

Ejido (agricultural) lands have a long history in how they came into being; these properties are akin to “commons land.”

The ejidos are usually owned by a community of local people and possession of the land is passed down through generations within the communities which own the parcels.

These land parcels do not have legal title (property title deeds – see next section) and any matters and disputes related to them are dealt with by local comuneros, at agrarian courts, usually termed Asambleas —assemblies— that meet about once a month and are led by the elders of the local community.

Legal Title vs Possession

There is a distinction between ‘commons’ land and land that is registered with a Title Deed recognized and enforced by Mexican civil law courts.

Some types of property in Mexico, especially rural or semi-rural properties —and some that are quite desirable— are only available for purchase under Agrarian terms, and while this type of property transfer gives you possession, it does not offer legal title.

Read more about buying and having property without title deed in Mexico

Title insurance for your Mexican property

Some buyers consider taking out title insurance on the property they buy in Mexico. Title insurance covers you should the property you buy subsequently turn out to have liens associated with it.

This is especially relevant if the property you are buying has been privatized, having previously been classified as being “ejido” (or “common”) lands (see previous section); but even if this is not the case, title insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the title deed.

Rates for title insurance are around the equivalent of USD $5-6 per USD $1,000 of the property’s sale value; payable once only at the point of purchase, before you close.

Consult a realty agent or other legal or consulting professional regarding matters relating to title insurance. There are several insurance companies that now offer title insurance for Mexican property and, as the number of providers increase, rates should become increasingly competitive.

Choosing the right location for your purchase

As with property purchase in any country, the location in Mexico where you choose to buy is all-important. It’s better to buy ‘less house’ in an optimum location than to purchase ‘more house’ in a sub-optimal location.

Choosing places to live in Mexico

To help you discover and explore potential places to live here, Mexperience publishes a curated list of locations to consider for living, working or retirement in Mexico—organized by popularity and notoriety and classified by the location type

Do the (back)groundwork

It’s unwise to buy on impulse in an area based on your first impressions, especially if you’re on a leisure visit there.

It’s prudent to be familiar with the area and the locale in that area where you intend to invest. Also ask yourself how marketable the property is in its current condition and location, especially if you are planning to rent it, or should you want to sell it later.

You may want to rent something nearby to start with and get a feel for the place. Once you’re living locally you can assess things like the atmosphere, the neighborhood in general, and get to know the locals so that you can get a genuine understanding for what it’s like to live there.

Match your needs with your location

Consider your current and changing lifestyle needs as you make your choices about the location for your property investment.

Real estate purchases require patient capital in Mexico as not all markets are as fluid as places in the US, Canada, or Europe can be—it might take more time to sell a property than you imagine.

Ongoing management of your property

Learn more about maintaining and securing your home in Mexico here on Mexperience.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

To participate, you buy (or finance) a Timeshare contract by paying a substantial upfront fee, and its closing costs. You also agree to pay annual maintenance fees.

In exchange, you are given a right to visit the resort or property each year and occupy defined accommodations there in accordance with the terms of the contract.

Timeshare property types and contracts

Timeshare properties are most commonly offered at popular resorts or condominium buildings situated in desirable Mexican resort towns and cities with the properties close to, or overlooking, the ocean.

Timeshare contracts come in various forms and with different terms, ranging from fixed weeks at a specific property, contracts with floating dates, and some timeshare contracts offer occupancy across a predefined group of properties managed by the Timeshare company.

If the Timeshare contract has legal jurisdiction in Mexico, we recommend that you hire the services a local Notary Public or a lawyer specializing in contract law, to revise the contractual terms before you sign.

Timeshare is NOT property purchase or rental

Timeshare has key differences in relation to property purchase and property rental contracts.

Timeshare is NOT:

• fractional property ownership, whereby the investors in the property own a percentage of the physical asset through a property trust with distribution of shares; or
• legal title or possession—it doesn’t offer legal title or possession of any physical property; or
• a type of long or short term property rental; or
• a vacation rental property of the type you can find using online marketplaces like Airbnb, VRBO, and HomeStay.

Advantages of Timeshare

These are some benefits that Timeshare sellers typically cite to buyers:

• The concept of having access to a property without the responsibilities of physically owning and managing it. (But note that you’ll need to pay annual service fees in addition to the upfront cost.)
• Timeshare is one way to access a self-catering stay in a ‘turn-key’ property with fully equipped kitchens, bedrooms, bathrooms, living and dining areas, and private balconies—and some properties also offer other amenities on-site like swimming pools and gyms.
• Some Timeshare contracts offer the ability to swap locations or resorts if you want a change from the property or resort your Timeshare contract stipulates—although additional fees might apply to do this.

Disadvantages of Timeshare

Timeshare carries risks and disadvantages which ought to be taken into consideration before committing to a signing contract.  These include:

• They are not a property investment: Timeshare does not give you legal title or possession, nor a share of a physical property as fractional ownership does.
• Instead you are buying a right to make use of a resort property (or group of properties) for a defined period as stipulated in the contract and its terms.
• In addition to the upfront cost of the Timeshare you will need to pay closing costs and annual dues (maintenance fees).
• Annual maintenance fees tend to rise every year and you are contractually obliged to pay these, even if you don’t travel to the resort that year.
• Some Timeshare companies sell loans to pay for the initial capital sum, which increases the total cost of the arrangement.
• If you need to pay the upfront sum, financing, and annual fees in a currency other than your home currency, you’ll also pay for the costs involved with foreign currency exchange.
• You can find vacation properties to rent on a range of online marketplaces that offer turn-key properties without any upfront costs and with no strings attached.
• Prices for Timeshare contracts on the second hand market are usually lower than their original cost—keep this in mind if you need or decide to sell.

Timeshare sales seminars in Mexico

Some Timeshare companies offer their potential customers artificially-low priced vacation breaks at popular resorts in exchange for you attending a Timeshare sales seminar during your visit.

Sometimes, instead of a vacation package, they will offer free tickets to popular events, or dinner at a fancy restaurant to people they approach who are already vacationing at the resort in exchange for attending a seminar.

These seminars are staffed by professionally trained sales teams who approach attendees with the sole intention of getting them to commit to and sign a Timeshare contract.

If you decide to attend a Timeshare sales seminar in Mexico, we recommend:

• you take someone with you who is not emotionally or financially involved in the potential purchase; and
• regulate, or best avoid, alcohol intake at the event; and
• tell the sales team you want to refer the contract to your legal counsel (Notary Public) before signing anything.

By signing a Timeshare contract, you are legally committing yourself to the purchase—as well as the related costs and annual fees that accompany it.

Selling your Timeshare

Circumstances can change, and people holding Timeshare contracts sometimes want to sell.  When you decide to sell:

• Check the contractual terms of your current arrangement as some contracts cite restrictions about how and where they can be sold.
• Keep in mind that Timeshare contracts on the second hand market usually sell for less than the original cost of the Timeshare contract.
• Although you might sell your Timeshare privately (if the contract allows this), most people find an online brokerage that specializes in the sale of Timeshare contracts on the second hand market.
• Brokers present your listing online to potential buyers and offer legal transfer facilities in exchange for the sales commissions you pay when your Timeshare contract is sold.
• Whatever method you use to sell your Timeshare, you can expect to pay contract exit fees and/or sales commissions to dispose of the contract.

Learn about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

Prices may be agreed in US dollars, but official amounts are documented in Mexican pesos

In many towns and cities across Mexico, house prices are quoted in Mexican pesos when they are offered to the market for sale. However, in a few places —and most notably in Los Cabos, Puerto Vallarta, San Miguel de Allende, Ajijic/Chapala, and Cancun/Riviera Maya— home prices can often be seen quoted in US dollars.

Even though the sales transaction may be marketed (and agreed between the parties) in US dollars —or some other foreign currency— the amount to pay to close the transaction will be documented in Mexican pesos and the title deed will express that amount at the exchange rate prevalent on the date of the closing.

When you sell the property, any capital gains are calculated only in Mexican pesos and therefore shifts in the exchange rate can influence your tax liability as expressed in a foreign currency.

The ‘exchange rate effect’ when you sell

The best way to understand the ‘exchange rate effect’ is through an example.

Suppose you agreed to purchase a home in Mexico for a peso-equivalent value of US$500,000 dollars years ago, when there were $10 pesos to the dollar:

• your title deed shows a sale value of $5 million pesos;
• if you agree to sell the home today for the same US$500,000 dollars (with around 20 Mexican pesos to the US dollar), the peso value sales equivalent is close to $10 million—creating an effective $5 million pesos ‘capital gain’ on the property;
• so in this situation, even though you have realized zero gain in US dollar terms, you have realized a capital gain in Mexican peso terms, and you’re liable to pay capital gains tax on that peso gain when you sell.

If your home’s market value has doubled over that same time period, and you agree to sell for one million dollars:

• your sale price would be calculated and documented at about $20 million pesos creating a capital gain of around $15 million pesos ($20m less $5m pesos);
• in this situation, your gain in US dollar terms is US$500,000 (10 million pesos, at $20 pesos to US$1); however,
• your capital gain is calculated in pesos, on around $15 million pesos—equivalent to ~US$750,000 dollars;
• which means your capital gain is calculated on a sum that’s about 50% higher than your capital gain in US dollar terms.

Worthwhile tax allowances are available for residents

If you’re resident in Mexico and have a tax ID here, you may be able to avail yourself of some worthwhile tax exemptions and deductions that may reduce or eliminate any capital gain tax liabilities, but you cannot avoid the effect of the ‘capital gain’ expressed in pesos brought about through the exchange rate effect when the sales value was based in US dollars.

Keep this in mind when you are ready to sell if you purchased a home in Mexico negotiated using a US dollar value, because your tax liabilities are always calculated on the amounts documented on the title deeds in Mexican pesos, not any foreign currency equivalent.

Learn more about property in Mexico

We publish a range of free eBook guides about property and real estate in Mexico:

• View the latest articles about real estate in Mexico
• Free eBook: Comprehensive guide to buying and selling real estate and renting property in Mexico
• Free eBook: Guide to finding and working with a realty agent in Mexico
• More: browse all our Mexico real estate-related eBooks, available for free download.

This article describes the principal ways in which homes for sale are typically marketed in Mexico.

Using a realty agent to market and sell your home

Most sellers will enlist the services of a real estate agent to help them sell their home—either on an exclusive or non-exclusive basis.

The better realty agents in Mexico are expert at ‘networking,’ and you ideally want to find one that has been operating for a considerable time, knows the local market, and has an extensive network of relevant contacts. Some agencies are affiliated with agencies outside of Mexico and might market your home to foreigners seeking property here using these affiliate networks.

How will the agent market your property?

Ask the agent how they intend to market your property before you sign-up with them.  These are the types of services good agents will offer sellers:

• Visiting your home to take professional photos and video of your property for use on your listing.  Some agents will use a drone to take aerial footage of the property as well.
• Adding a professional and attractive listing to their own website with a full and accurate description of the property.  The listing ought to be published and read well in Spanish and English to maximize the potential pool of buyers.
• Using their social media and other contact networks to promote your listing and get your property seen by as many potential buyers as possible.
• Promoting your property to the list of potential buyers they are working with.
• Adding your property as a listing on Mexico’s main property listing websites, especially Vivanuncios, Immuebles24, and MetrosCubicos.
• Advertising your home as integral part of their ad placements in local magazines, newspapers, and newsletters.
• Featuring your property in their window showcase displays at their local offices.
• Some agents will also market your property through overseas agents’ sites offering property for sale in Mexico, if they are affiliated to other agencies in that way

Exclusive and non-exclusive contracts

If you sign an exclusive contract with a realty agent, you ought to be clear about what active marketing the agent will do on your behalf, and the exclusivity should have a reasonable time limit set before it expires (6-12 months is common).

Non-exclusive contracts enable you to enlist several agents to market your property, which may give you a wider reach to potential buyers, but agents usually ask for a higher commission on non-exclusive contracts and they might invest less in advertising your home for sale if they don’t have an exclusive listing.

Realty agent commissions

Commissions are paid by the seller on the closing price.  Rates are set by negotiation and will typically range between 4% and 8%, plus Mexican sales tax (IVA) at 16%.

Most agents charge around 6%, with the lower range (4%-5%) offered to more expensive houses and the higher range (7%-8%) charged on the lowest valued homes.

The marketing, project management, and paperwork required to sell a $50,000 dollar home is almost identical to that required to sell a $5 million dollar home, and so the scale of commissions is negotiable for this reason.

When you factor in the sales tax, a 6% commission rate will add just under 7% of the home’s sales value to your closing costs.

Seller-led property marketing

Some sellers choose to bypass the services of a local realty agent and do all the marketing themselves.  This is feasible, but be aware that the agents undertake the project management related to the property transaction and if you don’t hire an agent, you’ll need to do this yourself.

When you put your home up for sale, let all your friends and family know, and direct them to your agent’s website or to you personally if there are any interested buyers.

If you want to use an agent and invest in some additional marketing, you can pay to advertise your own home in various places, asking potential buyers to contact your agent if you don’t want to deal with buyers, or to contact you directly. In the case where a buyer contacts you directly, you might negotiate a lower commission with the realty agent to manage through the sale for you.

Some ways that sellers market their own home include:

• The hanging of of a large polythene printed banner (in Spanish called a ‘rótulo’ or ‘lona’) draped on a door or wall of your home to advertise it for sale to passers-by. (Some agents provide these with their own branding and contact details.)
• Free and paid inserts on Mexico’s principal property listing sites—see the next section for a directory of these.
• Using social media, some sellers pay to ‘boost’ posts about their property for sale; these can be targeted at people in or interested in, Mexico.
• Some sellers will pay to run ads in physical or digital magazines, newspapers, or newsletters that are distributed in the area or location where the property is based
• If sellers are looking for foreign=based buyers, they might also list or pay for advertising in popular overseas listing sites like Zillow and Truilla
• Local listservs and community groups may be another way to promote the house for sale, if the moderators allow this
• Some sellers set up their own website to sell their home, creating a form of ‘electronic brochure’ to present the property in detail, and support the sales effort, whether they are using the services of a realty agent or not.  While this is an excellent way to present your home in its best light, you will still need to actively market that site: using agents, seller-led (paid) advertising, word of mouth and social media, or a combination of these.

Property sales listing sites in Mexico

These are the principal sites to check when you’re scouting for a property to rent and to gauge sales prices for homes across Mexico.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• The value of Mexican real estate
• Tell-tale signs of a good realty agent
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

Fractional ownership can also be used when you want to fold a property into a business or community project with its ownership shared across two or more parties.

This article outlines the structure of fractional property ownership, and describes typical situations where this type of property arrangement is made.

The structure of fractional property ownership

Fractional ownership is distinct to other types of property transaction, thus:

It’s not Timeshare: Fractional ownership is very different to Timeshare because, unlike Timeshare contracts, the buyers each own a percentage share (a fraction) of the physical property through a special property trust.

The property is co-owned: For example, a property with a sales price of $5 million pesos might be purchased by 10 people at a cost of $500,000 pesos each.  The property’s title is held in a trust, that is legally divided into 10 shares, with each owner holding 1 share (a 10% fraction) of the trust—and by extension, the physical property.

The property is co-shared: The owners are jointly and severally responsible for the maintenance and management costs of the property as well as other costs associated with the property, e.g., Home Owner Association fees, property insurance.

The property share (fractions) can be transferred: Owners in a fractional ownership arrangement are usually free to sell or transfer their share as they would any other asset but you should check the associated clauses and covenants related to the property trust for rules about transfer and disposal of shares—and contact a local accountant to ask about the tax treatment of any share transfers or sales.

Who buys a property ‘fraction’ and how does it work?

Buying property on a shared ownership or ‘fractional’ basis can be helpful in certain circumstances.  The arrangements can be formed privately between individuals using a special property trust, known in Spanish as a fideicomiso, (and its related covenants) which are drawn-up by a Notary Public.  Some companies specialize in this field, although a Notary Public must always be involved to ensure the integrity of the legal structure.

Property trust and contract

Once purchased, the property deed is placed in a form of ‘property trust’ with each party holding a share of that trust.

Covenants exist in the contract between the parties which stipulate the rules for use of the property, and how the costs of maintenance and other charges are to be divided and paid between the shareholders—including the annual fees required to maintain the trust.

Shareholders are usually free to sell or transfer their shares to whoever they want; although some covenants may stipulate certain terms and conditions to ensure that the remaining shareholders are satisfied with the potential buyer, or other person that will inherit the shares.

In some cases, an existing share holder may purchase the share(s) held by others and thus increase their overall stake in the property. In some cases, one of the parties may purchase all the shares and effectively “buy out” the other owners, becoming the sole owner of the trust—and thus own the entire property.

Use and management of the property

Use of the property is usually divided on a time basis (weeks per year, per share holder) with high-demand periods like summer holidays, Christmas and New Year, and Easter raffled or placed on an annual rotation system.

Some share holders might trade their allotted weeks with other share holders, by mutual agreement.  Rules usually exist in the covenant about whether shareholders can sub-let or rent out their allotted weeks to third parties.

The parties themselves might agree to rent out the property on a commercial basis for some weeks of the year using online marketplaces, and agree between themselves how this will be managed.

Examples of fractional ownership situations

Fractional ownership is not suited to all circumstances, but it can be helpful in others.  Here are some examples of typical situations where fractional ownership is used:

Insufficient capital: Fractional ownership is popular when the parties involved have some savings and want to invest in physical property but don’t have enough savings individually to buy a home outright, or don’t want to take on the entire responsibility of owning a second home themselves—sharing the purchase and running costs with others.  It’s important to know and trust the other parties in the shared ownership arrangement.

Community effort to buy a larger home: Families living in a locality, or a group of friends or neighbors might band together to buy a larger home near a beach resort or other area of natural beauty they all know and enjoy so that they can use the home for vacations without having to pay hotel fees.

Dividing a property between family members: A family might place a property into a trust and give shares to family members.  This is a form of estate planning.

Buying a large property for a business venture: If you need a large property for some business venture (e.g. spa, hotel, or retreat center), a large residential property might be purchased between the partners in the business (or other backers) and the trust shares given to each of the investors who put up money to buy the property.

Buying a large parcel of land for building homes on: A fractional ownership contract can also be helpful when a group of friends and/or family members who each want to build their own homes, but live within a cluster of other homes (perhaps with some shared facilities on-site). This arrangement can offer some shared costs, community, and security, while still offering individual dwelling spaces for each owner.  It is, in effect, a form of private property development, and a fractional ownership trust can facilitate this type of arrangement between the interested parties.

The importance of the Notary Public

We recommend that all matters related to the buying, transfer, or sale of fractional property are undertaken through the professional support of a Notary Public to ensure that the trust, and its associated covenants and contracts, are legally sound and valid.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Finding a Notary Public in Mexico
• The costs and taxes of buying a home in Mexico
• Total costs of property ownership
• Insuring your Mexican home
• Offering shared space rentals in your Mexican home
• Enjoying your home and home life in Mexico

Three routes to housing in Mexico

When you decide to invest in property in Mexico you will have, broadly speaking, three main choices about how to achieve your goal.

You can buy:

• an existing home, brand-new or pre-owned; or
• land and build a house on it from scratch; or
• an older property for renovation (“fixer-upper”).

This article summarizes some essential matters to consider related to buying a built property, versus land for building and buying an old property to renovate.

Buying a prebuilt home

The quickest way to move into a new home is to buy one that’s built. This is, however, more expensive in cash terms than buying land and building a home on it—as built houses, new and second-hand, tend to trade at a premium.

All homes require care and maintenance; used homes are likely to call for some type of decoration or renovation work to bring them up to date or to match your personal tastes and preferences.

Brand-new homes are unlikely to need any renovation in the first years but will require regular maintenance to prevent them from deteriorating badly and requiring expensive renovations of their own. Eventually even brand-new homes will require significant maintenance or repair, e.g. a new roof, or roof sealant.

Buying land to build a home on

Buying land and commissioning the build of a house on it provides the best ‘value for money’ as the price of the land and the construction are usually less than an equivalent house bought prebuilt.

By designing and building your home from scratch, you also get to customize every element of the design, especially those that are difficult (or expensive, or impossible) to do when you or renovate an old house, or move into a prebuilt home.

The downside of this approach is that you have the additional time, effort, and expense of project managing a build.  It’s unrealistic to believe that you can take an entirely hands-off approach and get the results you hope for, even if you have a project manager overseeing the build.

When you’re building your home, it’s prudent to plan to be in Mexico for the duration of the project or otherwise at have someone you consider absolutely dependable and trustworthy situated locally overseeing the entire project and keeping in regular daily contact with you.

Architectural firms exist that offer to design, build, and finish your house for you—down to the last detail. They usually work on a multi-stage payment basis and guarantee that the price they have quoted you is the price you’ll pay, or within a percentage range of that, provided that you don’t change the design. By building in this way, any savings of building the home and doing some of the management yourself will be lost (perhaps entirely) in detailed project management fees charged by the architect firm.

Also keep in mind that most build projects call for a near-continuous series of decisions to be made, especially once the structure is built and you begin to work on the interior and décor. Unless you have paid an architect to design and deliver your home down to the last doorknob, you’ll need to make yourself available to take those decisions on a daily basis as delays in decision-making can hold-up progress and extend your build time and costs.

Things that tend to influence a decision to build

The choice of whether to buy or build is a personal one, and typically based on:

• What you envision and are seeking in terms of a dwelling space and lifestyle for yourself (and your partner/family).
• Whether what you envision is available already built and for sale in the market—and at what price. What you seek might already exist at a price you can afford, and the premium vis-à-vis building might thus be recouped in saved time and effort on your part.
• How much patient capital you have for investment in a property building project. Custom homes can take longer to build than you might expect; costs almost always overrun the original budget; and it might take longer to sell the property —part- or fully-built— if you need to withdraw from the investment at any time.
• How much time, capability, and inclination you have to oversee a house building project in Mexico. Building projects typically consume a lot of your personal time for at least several months, and you’ll also need to speak some Spanish or hire the services of an interpreter to help you interact with the architects, builders, suppliers, et al.
• Your character and temperament will be tested during a custom house build project in Mexico. If you know that you’re short on patience, or that you’re not great at dealing with stressful situations, paying a firm to manage all aspects of the build, or buying a prebuilt home, may be a better choice for you.

Buying an older property to renovate

There’s a certain romanticism associated with purchasing an old (or older) property and renovating it.

Most property renovation projects are, at least to some extent, a labor of love. Those who embark on these projects inevitably end up spending more money —some considerably more— than even their contingency budget plan called for.

Most renovation projects cost at least as much as buying prebuilt, and when you drill down into the details post-project, and especially if you take into consideration your own time, it usually costs more than buying a prebuilt home.

Some old colonial properties that lay in ruins can make interesting —and perhaps rewarding— custom home projects to take on, whereas other properties are old, but still quite well intact.  Every project offers its own set of challenges and opportunities.

Old colonial properties

Very old houses dating back to the colonial era are still standing in Mexico, and many of the ones you see today in good shape have undergone a restoration of some form in recent times.

These very old buildings, restored to their former glory, return a character and charm to the world that cannot be easily compared to any modern construction.

Colonial restoration projects are especially tricky because they are the ones that hold the most surprises when you start work on them: 300 years of history under the plaster and flooring tells a lot of stories, and not all of them are pretty.

Some of these buildings will be directly protected by INAH, the country’s cultural heritage institute, and that body will dictate the terms upon which any building or renovations are made, including what materials may be used.  They’ll also dictate the ongoing maintenance regime required for them.

Even if the property is not inside the protected catalog, local building regulations in the area might require you to adhere to certain norms or standards to make the renovation one that is “in keeping” with the building’s age, heritage, and its location.

Some architectural firms specialize in the renovations of very old properties and work closely with artisans and other specialist designers to maintain the original essence of the property’s character.  However, most architectural firms focus on selling contemporary construction, or introducing contemporary construction features and techniques into older properties where this is feasible and permitted by INAH and/or local regulations.

In summary: if you harbor romantic notions of buying and restoring an old colonial-era home in Mexico, come prepared with patience and flexibility, and with plenty of patient capital in excess of the purchase price.

Newer old homes for restoration

Houses that are more modern but nonetheless old, for example those built in the 50-year period between 1930 and 1980, can offer some good potential for restoration, but beware that, however well kept it might have been (and there are many more that are not well kept), renovation is a serious undertaking even in newer-old houses.

As we remarked in a sister article about older properties for sale in Mexico, some of these old dwelling spaces offer attractive plots of land with mature trees and gardens offering fine views that you may find hard to obtain elsewhere.

Newer-old houses are usually not protected by INAH, that will give you more flexibility regarding the design of the restoration including the look and feel of outer facades as well as the layout and remodeling of inside rooms.  You’ll have a wider choice of materials and design styles to choose from, some of which might be less expensive than those demanded for use on protected buildings.

Even if INAH is not involved, local regulations might exist that prevent you from implementing certain designs on the property that you might have envisioned for it, or demand certain styles to be applied (outside wall coloring is a common regulation in historic areas) so you ought to make inquiries about these before you begin any renovations.

Many of the newer old houses are usually structurally sound —their physical presence having survived many earthquakes or hurricanes over decades is testament to this— but you ought to always commission a structural survey before buying, nonetheless, as recent seismic or geological activity might have left the building intact, but no longer sound without intervention. (In a worse case scenario the surveyor might condemn the existing building.)

One of the great appeals of renovating an attractive newer old property is that, once complete, you enjoy all the benefits of an old land parcel (e.g. with mature gardens, attractive views, immediate access to an established community, etc.) with the benefits of an old house restored and renovated using modern features and amenities for your pleasure and comfort.

Some key points about property renovation

Here are some key points to keep in mind when you consider taking on a property renovation project in Mexico.

• It generally costs more to renovate, restore, and modernize an old property than it does to buy land and build a new house from the ground up.
• Renovations always throw-up surprises (damp, rot, termites, and foundation problems are common) and taking something down to replace it or redesign it is time consuming and expensive.
• Whatever you take down creates rubble; you might be able to reuse it somewhere, but otherwise it will need taken away, and that adds to your costs.
• Old swimming pools, out buildings, attics, and basements can be particularly tricky to deal with and can hide many problems that are expensive to resolve.
• Building from the ground up, using modern materials and the latest building methods (and standards) is less expensive…
• …however, some properties are deserving of restoration and if you have the time, capital, love, and inclination, there are plenty of old properties in Mexico waiting for you to buy and lovingly restore.

Water supply for the property

Regardless of whether you buy a built home, land for building on, or embark on a renovation property, check the source of the water supply at the property.

Properties in Mexico get their water in one or a combination of three ways:

• Mains or communal water feed to the property.
• Water deliveries by truck.
• Rainwater collected during the rainy season.

Ideally, the land you buy would have a mains feed from a municipal system; but this is not always available or practical, especially in rural and semi-rural areas across Mexico.

The land’s water supply might be fed by a local community water feed system. Check for conditions and costs to connect to this, as well as annual fees for water use via that system.

Some properties collect rainwater during the rainy season and store this in a large underground cistern situated on the property.

Building standards in Mexico

Building regulations are improving in Mexico, driven in part by recent earthquakes that sprung local authorities into acting on the issue of poorly built homes and commercial buildings.

There are, nonetheless, a lot of older properties in Mexico that were constructed long before modern materials and building regulations came into effect, and thus standards vary.

A positive aspect of the building work here is that the houses still standing have survived some significant earthquakes in recent times; however, it’s prudent to have a property you’re considering —especially older buildings— properly and independently inspected by hiring a qualified and experienced surveyor to review the property thoroughly before agreeing to buy or handing over any money as a deposit to the seller. (If the seller objects to this, it’s probably better to consider a different property for purchase.)

If you are having your house built, then you can benefit from the latest materials, methods, standards, and regulations that will mitigate any damage or worse from events like earthquakes, floods, and hurricanes.

Ask the architects to show you examples of their previous work and go to the places to see them—don’t just look at the photographs. Ask them about local building regulations and what you can expect from their team in terms of making your home as safe as can be reasonably expected.

A subsoil survey is essential if you intend to build.  It’s especially relevant in areas near to the coast, and in regions containing a substantial proportion of volcanic rock, and in areas that may have been host to factories and farms. Wherever the land is, a survey is a worthwhile investment that can prevent you from purchasing land that is difficult (expensive) to build on, or in a worse case scenario impossible to build anything substantial on due to subsoil issues, or contamination.  Your architect or building project manager can advise you about this.

Prices for older properties in Mexico

There was a time when old, dilapidated, buildings in town centers could be purchased at bargain-basement prices, but those days appear to have passed.

Prices for even old wrecks have risen substantially—especially in sought-after locations. If you cannot get a fair price for an old property, consider your choices carefully.

Negotiating the right price for the type of purchase —and being prepared to walk away from the seller— is key to making a worthwhile investment in this market niche.

Unless you have significant amounts of patient capital and time, and perceive the restoration as a labor of love and not an investment per se, then your price negotiation skills will determine how much you spend—from the initial property purchase, to every consignment of bricks and mortar arriving on site, to the tiles laid on the floor, the handles on the doors, down the to last plug socket!

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Finding a Notary Public in Mexico
• Tell-tale signs of a good realty agent
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

These vary depending on the type of property and what state it’s situated in, and the Notary Public processing the legal transfer will advise you on which costs and taxes are applicable as part of your transaction.

Closing costs you need to budget for when you buy a house in Mexico

Here is a list of the principal closing costs you’ll need to take into account.  There might be other fees, but these are the main ones most buyers face when they purchase a residential home in Mexico.

Property acquisition tax

This tax is paid on the sale value of the property and is typically equivalent to about 2-4% of the sales value, depending on the Mexican state in which you buy. (Some states are raising this rate that can be as much as 6.5%.) This tax is paid whether the property is sold, transferred, donated, placed into trust, split-off, or merged.

Sales tax (IVA) on residential property

Mexico’s sales tax us known as IVA that stands for Impuesto al Valor Añadido (Value Added Tax).  No IVA is payable on residential property.  Commercial property transactions are liable to IVA at the current rate in addition to the acquisitions tax.

Property appraisal tax

The tax authority might choose to perform a commercial appraisal (audit) of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts.

Federal Register registration fee

When purchasing a home, the buyer pays a fee (based on the value of the transaction) to have the public records updated and the legal Title Deed (re)issued. The rates vary depending on what Mexican state you buy in, and you should budget for about 2-4% of the sales value.

If you purchase property on agrarian terms you don’t need to pay this, but you might have to pay a similar fee to the local comuneros as part of the paperwork involved in that transaction.

Fees for Public Notary services

Buyers are required to pay fees to the Notary Public for services provided to transact the legal matters related to the sale. Notary fees are based on the transaction value and vary by state.

The buyer gets to choose which Notary Public to use, so it makes sense to check several Notaries locally for their current rates —and if you are working with a realty agent ask for their recommendation too. Typically, Notary Public fees work out to between 4%-7% of the sales value.

Fees for the property trust, fideicomiso, if relevant

If you purchase property within the 50km/100km ‘restricted’ zones (near coasts and land borders), you will need to pay a local bank to set up and manage a property trust for you, and there are government fees to pay as well.

• Banks charge around US$1,000 equivalent in Mexican pesos to set-up and manage the trust through the bank.
• In addition to the bank fee, there is a one-time government fee to pay to set-up the property trust permit in Mexico, amounting to about an additional US$1,000.
• The bank makes an annual service charge amounting to between US$1,000-$2,000 equivalent in Mexican pesos. The annual service fee covers trust administration and certain legal obligations (e.g., the filing of necessary documents annually) by the bank on your behalf.
• If you want to expand or alter the trust, e.g., add or remove beneficiaries, there are additional bank administration fees and government fees to do this.
• When you sell the property, you will need to cancel the trust, and the bank charges around US$1,000 fee to do this.

Some people choose to place their property into a trust even if it’s not situated in the restricted zone as part of their estate planning preparations. You should seek professional financial planning advice about whether this is appropriate in your circumstances.

Foreign national acquisition permit

If you are not a Mexican national (natural or naturalized) and depending on which Mexican state the property or land is situated in, the transaction may require a special permit that grants a foreign national the right to hold title deed of a property logged in their name on the Federal Register.

Check with your Notary Public, who advise you if this is necessary in your case and will usually manage the filing on your behalf if it is.

If you need this permit, its cost will add around US$300 government administration fee to your closing costs. If you hire a Notary Public or attorney to file this on your behalf, you will have those costs to pay in addition to the government fee.

Other attorney fees

If you hire a lawyer in addition to the Notary Public (the legal process must be filed through a Notary Public), you will also need to pay they lawyer additional fees for services they undertake on your behalf. These should be negotiated in advance.

Buyers may need to hire a lawyer in addition to the Notary Public if there are complications with the purchase and they need specialist advice on the matter.

Land and/or building surveys

Unlike some states in the US, sellers are not legally liable for any deficiencies that might be found on a property after its sale.  For this reason, it’s prudent to hire a professional land and building surveyor to assess the property before you sign a contract.

Pre-purchase surveys are optional and their cost falls entirely on the buyer. The fee for the survey/study will depend on type, extent, and complexity of surveys undertaken, and the size and type of property being surveyed.  Ask your realty agent, architect, or building project manager for advice and details about this. Some local architect firms might offer survey work as part of their services.

Gated community and condo service fees

If you are buying a house in a gated community, or a condominium, be sure to check on the annual service fees, and have these put in writing.

Service fees can range from a few hundred to a few thousand dollars a year, depending on location, number of houses or apartments in the enclosure, and the scope of the amenities present.

Keep in mind that service fees tend to rise year-on-year, especially as developments get older and more maintenance or structural repair is needed, e.g. to water cisterns and swimming pools.

Property title insurance

When you buy property in Mexico, you might consider purchasing title insurance. You must purchase this at the point of purchase, before you close on the property.  Rates are based on the sale value of the property. Learn more on this article.

Costs and taxes when selling a Mexican Property

When you eventually sell a residential property in Mexico you will need to budget for a range of additional fees and taxes as part of the sales transaction.  You can learn about these on this sister article: Costs and Taxes of Selling a Property in Mexico.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

What influences the listing price for a property

As we remarked in a related article about property values in Mexico, extensive price data related to property transactions is not readily available here.

Most sellers in Mexico list their property at the highest realistic potential price point based on several variables, including:

• what they paid for the house, plus improvements over the years; and
• technical calculations that can be used as a baseline for the property’s current value (see below);
• assessed present-day market valuations they might have had undertaken by professional valuation agents;
• advice and estimated market values given to them by local realty agents who would market the property for sale;
• current listings for similar properties in the area as advertised on Mexico’s main property listing portals;
• recent comparable sales they know about in the locality.

The price a property is listed for is often arrived at by a combination of some technical calculations used as a baseline for determining value, plus added value factors and local amenities that add appeal and value to a property.

Technical valuations

There are several methods by which a property’s value can be technically assessed. Three common technical valuations sellers may consider using are:

• Similar recent sales
• Present land & building value
• Annual rental yield value

Similar recent sales

All sellers (and their agents) will reference recent sales of similar properties in the same neighborhood as a benchmark to assess a property’s potential value.

Local realty agents may know the value of recent transactions in the area; listing sites given an indication of asking prices.  Assessors who write valuation reports will also reference these prices as part of their calculation.

Present land & building value

This calculation works best for single homes on their own plot of land and less well for condominiums. Take the number of square meters on the plot and multiply by the current market price for land per square meter in the area. One square meter is equivalent to 10.76 square feet.

To this, add the present market construction cost per square meter (this will vary depending on the quality and style of the building) and multiply by the total square meters constructed. This returns an estimate of what the property would cost to buy and build at today’s prices.

Annual rental yield valuation

A rental yield calculation shows a comparative return on the property vis-à-vis other investments, e.g., leaving your money in the bank, or investing in mutual funds.  It’s also helpful if the buyer intends to acquire the property to rent it out.

For example, if the property can rent for $15,000 pesos a month ($180,000 pesos a year) and the cash purchase price of the property (including closing costs) is $4 million pesos, the annual gross rental yield would be 4.5%.

Features and local amenities that add value

Technical valuation models are only part of the story when calculating the market value of a residential property. They can provide a baseline number to work from, but most properties tend to sell for more than their technical, investment, or ‘replacement value.’

Certain features on the property can add value, and often, services and amenities that are situated near the property are the things that can push up the desirability—and by extension the demand and the price for any given house.

Examples of features that add value

As we mentioned in a related article, it’s better to have less house in an optimum location than the other way around.

Things that can add value include:

Local infrastructure: The property is well served by local infrastructure that can include good access roads, a local interstate highway, or an airport nearby.

Water supply: The property is served by a reliable water source

Well developed local amenities: The property is surrounded by well-developed local amenities including stores, schools, medical facilities, community centers, sports and gym facilities, restaurants, and cafés, etc.

Bodies of water nearby: The property is near a clean body of water, for example, a river, a lake, or by the ocean; take note that some locations near water may be subject to local flooding and thus more difficult or more expensive to insure.

Attractive views: If the the property has good panoramic views of the area, whether or nor it’s situated close to a body of water, it will fetch a higher price than a similar property without attractive views.

Property condition and maintenance: Properties that have been kept in good condition and well maintained require little or no immediate remedial maintenance or restoration work for the buyer. (For buyers: it’s prudent to get a survey conducted as some homes that look well maintained on the surface might have issues to deal with that are not immediately apparent.)

Agreeable outdoor living and leisure spaces: Properties with mature gardens are attractive to buyers.  If the property also has a swimming pool, fountains, attractive driveways, terraces, patios, these are all value-add features that will increase the desirability and value of a home.

Helpful features: Homes with good water storage and pressure systems, solar panels for water heating (and pool if relevant), garages, car ports, bungalows (for guests or renting out), and homes with alarm systems all add something to the overall value proposition of the property.

Kitchens: A modern well-equipped and well maintained kitchen is an attractive selling point and can add some value to the house, not least as they are relatively expensive to install.

Furniture, fixtures and fittings: Some homes are sold with furniture included in the price or as an optional extra. Fixtures and fittings (built-in wardrobes, light units, bathroom units, etc.) are usually included in the price.

Local security: Local security services, for example, provided by guard houses in gated areas— where all residents in the community pay an annual fee to a security management company for continual vigilance may add value for some buyers.

How sellers typically decide their listing prices

The price a seller sets for their Mexican home for sale will typically be calculated using a combination of methods that include:

• Technical valuations to calculate a baseline figure (see above);
• Valuation assessments from realty agents and surveyors
• Seller’s own perceptions and circumstances

Technical valuations and formal assessments

An assessment as made by a professional valuation surveyor and/or a local realty agent’s assessment.  These valuations are based on a combination of local research, recent sales data, and their professional opinion about the property and the location it is situated in.

Seller’s perceptions and individual circumstances

The seller’s perceived value of the property, their motivations to sell and the personal circumstances surrounding the sale will also influence the listing price. Factors that can influence this include, and are often a combination of:

• The price the seller paid for the property (and how long ago).
• Investment the seller has made extending, renovating, and improving the property.
• How much neighbors are listing similar homes for, or have sold their comparable properties for recently.
• Preferred timescales in which the seller wants or needs to sell to liquidate the property for cash.
• Seller’s present cashflow situation in relation to maintenance to keep the property structurally attractive; as well other costs like homeowner association fees and taxes.
• Sudden change in circumstances and a need to move: examples include job changes, a death in the family, health issues.
• The current owner’s desire for a change of location, region, or country—and what timeline the seller has in relation to those plans.

Sellers’ typical approach

Sellers know that they might have to negotiate with potential buyers; most properties in Mexico sell for between 5 and 15 percent below their listing price.

If there is weak or no interest in the first few weeks or months following the initial listing for sale, or buyers make inquiries but ask for significant discounts, the sellers might adjust their price downward if they become impatient to sell.

Some properties remain on the market for years with sellers refusing to negotiate on the asking price, which might be unrealistic and, in any event, does not attract many inquiries.

If you’re a patient seller and don’t need to liquidate in a hurry, you could try the long-game approach; however, most sellers are (or become) realistic with their pricing if the house fails to sell in a reasonable timescale, as they prefer to not have the property actively offered for sale in the market for years.

Property sales listing sites in Mexico

These are the principal sites to check when you’re scouting for a property to rent and to gauge sales prices for homes across Mexico.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• The value of Mexican real estate
• Tell-tale signs of a good realty agent
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

Your key contacts in a property transaction

All property transactions in Mexico ought to be agreed in writing with a well-scripted contract drawn up by a Notary Public or attorney specializing in Mexican real estate law.

As you move through the process, you are likely to to engage with the services of several key contacts to help you complete the transaction, and these may include:

The seller

Some sellers take a ‘hands-on’ approach to selling their property and deal more directly with the buyer; but most sellers do the opposite and interact through the realty agent and/or Notary Public.  Every case is unique.

As described in this article, some ‘sellers’ are more than one person and this can cause delays as you work through the procedures.  Patience is required, especially if the property you are buying is an older family home that’s being sold.

The realty agent

If a realty agent is involved in the sale, that person ought to function as an intermediary between the seller and the buyer (and their legal representatives) and undertake the ‘project management’ of the transaction.

If you didn’t hire a realty agent, you will need to take on the role of ‘project manager’ for your property transaction—or hire someone to do that for you.

Realty agents often liaise between the seller, the buyer and other key contacts including the Notary Public.

This includes things like liaising about details of the contract as they are reviewed and (re)negotiated by the parties.

The realty agent will also help to overcome any obstacles that might emerge as part of the contract review process and/or administrative elements of the transaction—for example, reminding parties about documents they need to produce to progress the transaction.

The Notary Public

Even if you hire the services of a lawyer to support you with certain aspects of the transaction, you will still need to hire a Notary Public, as the transaction must be filed and recorded by the Notary as part of the legal process.

As the buyer, it’s important to choose your Notary Public independently: do not allow the seller to influence you or to pick one for you.

Realty agents usually have a list of Notary Public offices you can contact—but remember that in Mexico a realty agent often represents the seller and the buyer simultaneously.

The legal attorney

Although you can do everything through the Notary Public, some buyers like to hire a lawyer to provide legal counsel or additional legal support through the process—especially if there are complexities or unusual circumstances surrounding the transaction that require a ‘second legal opinion..

The property surveyor

When you buy property in Mexico, the seller does not provide any type of ‘sales pack’ that demonstrates the property is in good shape as sellers must, by law, do in other countries.  Furthermore, it’s difficult to seek legal redress after you have closed the deal and paid your money.

Therefore, it’s prudent to hire a property surveyor to check over the property, especially if the property is older or situated in a rural or remote setting.  Some architect firms provide this service; check locally.

You will need to pay for this separately, and ask the seller for access to the property before the contract is signed.  If a seller objects to a survey being undertaken, or agrees and makes the process awkward or difficult in some way, that ought to raise a flag.

The architect firm

If you are buying land to build on, you’ll likely use the services of an architect to help you with the building.

Architects usually undertake tests on the land (before you complete the purchase) to ensure that the land is suitable for building on, and to assess the costs of building there. You will need to pay for any land tests and studies separately, regardless of whether the transaction completes.

Outline procedure for buying a property in Mexico

The exact process to complete a property transaction will vary in each case, and to some degree vary depending on what State in Mexico the property is situated in.

However, every transaction follows broadly the course outlined in this description—the realty agent and Notary Public will provide essential support throughout this process and provide specific procedural details based on your situation.

Property valuation

An official appraisal of the property’s market value, known in Spanish as an Avalúo, might be undertaken.  Some buyers commission a valuation report, and some sellers pay for an appraisal and show this document to the seller as ‘proof’ of the property’s current market value—however it’s only a professional opinion.

In some cases, an official appraisal of the property might be required, and if this is the case the Notary Public will advise you about it, and the fees involved.

Verbal agreement

When you’ve found a property you like, you agree a price (and loose terms, e.g. ‘including all the furniture’) verbally with the seller.  This is not binding, but sets in train the process that will lead to the transfer of the property.

If you are buying a home from a real estate developer, especially if you are buying ‘off plan’, advise the Notary Public about this as they ought to ensure that the developer’s permits are in order as part of the legal diligence.

Written contract

The realty agent (and/or Notary Public) will draw up a written contract citing:

• the agreed sales price;
• a written schedule of inclusions and exclusions;
• detailed terms and conditions related to the transaction; and
• any contractual deadlines as may be agreed by the parties.

This document is known in Spanish as a “Convenio de compra-venta” —a sales contract— at which time a deposit, typically 5% to 10% of the agreed purchase price, is paid by the buyer with cancellation penalties set out in the contract if either party withdraws from the agreement.

It’s normal for the seller to provide the contract, although it’s important that the buyer reviews the contract with great care, ideally with legal assistance, and understands what is being agreed and what they are committing to through this document.

The written agreement ought to contain clauses that excuse the buyer from the contract without penalty on matters related to due diligence and force majeure.

Property trust, if relevant

If the property is inside the restricted 50km border and/or 100km coastal zone, the Notary Public will ask the buyer to set up a property trust (fideicomiso); this is done through a local bank.

If the property is not situated within the restricted zone, no trust is legally required but remains optional for buyers who wish to use a property trust as part of their estate planning arrangements.

Closing costs and taxes

The seller and the buyer will have costs to pay as part of the transaction. Capital Gains Tax is paid by the seller and the Notary Public will calculate the sum and arrange for the correct amount to be paid to the Treasury.  The buyer has other closing fees and taxes to pay, that might also include the need to apply for a permit to purchase land in Mexico.

Read more about the closing costs and taxes when you buy property in Mexico, as well as the costs and taxes of selling property here.

Payment for a land or property purchase in Mexico

Whether you are paying with cash or via some type of financing, you (or the person representing you) will need to have the agreed funds available for hand-over at the Notary Public’s office on the date that the deeds are scheduled to be signed across to you.  Payments are usually via a bank transfer, but other payment methods might be feasible—talk to the Notary Public about this.

Note that due to money laundering regulations, additional checks may be required to verify the source of the funds used to purchase a property in Mexico.

Legal due diligence

As part of due diligence in the purchase procedures, the Notary Public and/or the lawyer you hire undertake a series of checks on the property deeds and other records.

The Notary Public is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to.  The Notary is also charged with ensuring that property taxes, including property transfer taxes, are fully accounted for and paid.

There are many elements to check; this list is not exhaustive but outlines the key things the Notary Public will be looking for:

History and type of property

Checking that the property has a clean history, and that there are no liens on the land, for example an unpaid mortgage or other debt. Under Mexican law, liens are passed on with title of the land, so these checks are especially important. The Notary should also advise you whether the land has a title deed or whether it is untitled and being transferred on agrarian terms.

Verification of title or possession

The seller will need to furnish the original land/property deeds, unless the property is untitled, in which case you will need to ask about the Constancia de Posesión. The Notary Public will check these out and advise you whether the land is legally titled or whether you are obtaining possession instead of legal title.

Seller documentation

The seller will need to present to the Notary Public with other documents including (but not limited to): original property deed, up-to-date tax receipts for the property, public utilities bills (proof of payment), plus up to date details of any service fees, for example Homeowner Association fees, shown as paid.

Buyer documentation

The Notary Public will ask for key documentation from the the buyer, that may include but is not limited to: photo ID (e.g. passport), birth certificates, marriage certificates (if applicable), and proof that your stay in Mexico is legal: this can be a Visitor Permit, (you do not have to be resident in Mexico to purchase real estate here) and if you are resident here, then you will need to show your residency card.

Taxes and utilities current

Checking that all land taxes have been paid during the last five years (if applicable) and that utilities (especially electricity) have also been paid during the last two years. By law, you are not liable to any debts after these times.

Title structure, registers and permits

Other items to be checked can include verifying all buildings are on tax registers and have the required building permits (as may be applicable); utilities were legally installed, and payments are up to date; the property is not jointly owned, or if it is, that both (or all) owners agree to the sale; and that the named seller has the right to transfer ownership of the property.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Finding a Notary Public in Mexico
• Tell-tale signs of a good realty agent
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

It might take longer to sell than you anticipate

Mexico’s real estate markets are very regionalized and, in most cases, localized.

The location where the property is situated will influence how long it takes for a property to attract a buyer and transact through to closure between the parties.

Property transaction volumes are much higher in big cities, major resort areas, and popular colonial towns than in smaller towns, villages, and islands—and this transaction rate will determine, to a greater or lesser degree, how long it takes to match a buyer with a seller.

Typical time scales when buying a home in Mexico

When you are in the market to buy a home in Mexico, you may find the buying process frustrated by the seller—especially if it is a private sale instead of buying from a developer. This might sound strange, as you might think that the seller will be keen to close the transaction.

However, many factors come into play with Mexican property transactions; sellers may have to negotiate with family members, other ‘interested’ parties (e.g. distant relatives who may or may not be associated with the deeds), as well grapple with nuances of Mexican cultural behaviors in regards to ‘letting go’ of things—like long-held heirlooms.  This article about property cycles across the generations shares some helpful insights.

Some transactions may go through very quickly: for example, when the seller needs fast cash, or a developer is selling you a brand-new property.

Whatever the final time scales end up being, expect the buying process to be different to what you may be used to in the USA, Canada, and Europe—and realize that you may have to be patient if you found your ‘dream home’ and think you can move-in quickly; in some cases, you can; in other cases, you won’t be able to.

Typical time scales when selling your home in Mexico

When you come to sell your Mexican home, you will realize that the location of your property will not only affect its sale price, but also the time it takes to sell the property.  Some properties can remain on the market for years before they sell; this is particularly true of homes situated in remote or rural areas.

Conversely, some homes can sell soon after they are listed—these tend to be properties in Mexico’s popular places including larger cities (especially trendy neighborhoods of Mexico City) as well as popular beach resorts and trendy or sought-after colonial mountain towns.

Most of Mexico’s realty markets are not as “mature” as property markets in the USA or UK, for example, and transaction volumes are lower.

As a rule of thumb: land and property in rural and remote places, as well as those in areas with less well-developed amenities and local services will take considerably longer to sell —perhaps a year or more— than properties situated in larger towns and cities, and the most popular towns and resorts.  These also tend to be places which offer nearby local services and amenities—shops, schools, community centers, clinics, hospitals, etc.

Typical time scales when closing on a property transfer

Once a buyer and a seller have agreed to proceed in earnest, the paperwork can take anything from a few weeks to several months to reach a close.

If you are buying, you should not rush your Notary Public or lawyer as they conduct the necessary checks as part of their due diligence.  If any untoward matters arise, these may add delays, but addressing them helps to protect the buyer and the seller.

Most real estate transactions in Mexico go through without major delays, and with all the necessary paperwork and title deeds completed to legal norms.

The solidity of the legal procedures involved in Mexican real estate transactions has enabled US insurance companies to provide secure title insurance. It’s important, however, that both buyers and sellers exercise patience and understanding. Mexico’s legal system is bureaucratic; managing your own expectations (and your practical plans) to suit will save a lot of unnecessary stress as you purchase or sell your Mexican home.

Tip: a good local realty agent might help

Finding and working with a well-established realty agent in the locality you intend to move to in Mexico can bridge important gaps in most people’s capabilities, in terms of providing local knowledge and planning, as well as helping to save valuable time as the good agents will know the transactional procedures and might be able to provide facilitation that can accelerate the sales process.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• The costs and taxes of buying a home in Mexico
• The costs and taxes of selling a home in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The three main costs when you’re selling a property in Mexico are:

• Selling fees;
• Professional service fees; and
• Taxes.

Selling fees

It’s possible to market and sell your property without the services of a local realty agent; however, as we explain in our Guide to Realty Agents in Mexico, a good realty agent provides a marketing service, a conduit between the negotiating parties, and someone who will help to work through the paperwork to bring a property sale to successful completion.

Realty agents in Mexico typically charge between 5% and 8% of the sale price in commission—and you need to add Mexican sales tax (IVA) to this (16%), so if the agent’s commission is 5%, the tax-inclusive payment will be 5.80% of the final sales price; and if the agent’s commission is 8%, the tax-inclusive payment will be 9.28% of the final sales price.

Professional fees

In Mexico, the role of the Notary Public is paramount in property transactions.  As we explain in our Mexico Real Estate Guide, a Mexican Notary Public is a legal professional with very important statutory roles.  The fees for the Notary Public are paid for by the buyer.  Some buyers also choose to hire a lawyer, which can add several thousand US dollars to their total fees, but this is not necessary for most transactions. If the property you are selling is held in a Bank Trust (fideicomiso), then you will also need to budget for a ‘trust cancellation fee’ that is levied by the bank; the amount varies, but you should budget for around US$1,000 to cover this.

Taxes on the sale of residential property in Mexico

Taxation on residential property sales is a complex area of Mexican tax law and every case will be slightly different depending on the circumstances.  Also, keep in mind that tax laws are subject to reform and because house purchases tend to be long-term investments, the tax laws which apply today might apply entirely, in-part, or not at all when you come to sell your property years from now.

These are the key principles of residential property taxation as of the date of this article, and guidelines here are intended to help you compose an estimate of the taxes you will be expected to account for when you sell a residential property in Mexico. (Different tax rules and rates apply when you sell commercial property.)

We recommend that you seek professional advice from a Notary Public, tax accountant, or other professional/legal service firm in Mexico to get a detailed appraisal of your situation.

Note also that if you are not a Mexican national then you might also be liable to taxes in your home country and you should seek advice from a specialist tax accountant in that respect, too.

Capital Gains Tax

Mexico applies a capital gains tax on residential property of 25% on the gross sales value of the transaction without any deductions OR between 1.92% and 35% on the value of the gain (purchase costs less allowable exemptions and deductions): the percentage is calculated on a sliding scale in relation to the gain and we recommend you assume 35% as residential property sales with a gain above $250,000 pesos (c.$13,000 US dollars) will be subject to this rate.

One-time tax allowance exemption

A one-time tax allowance exemption is available under Article 92, Fraction XIX a) of Mexican income tax law that reduces the tax liability for many family homes, although you and the property must meet certain criteria to qualify for the exemption:

• you must be resident in Mexico* with a Mexican tax ID (known as a RFC, or Registro Federal de Contribuyentes); and
• the property you’re selling must be your primary residence in Mexico; and
• the land subject to the sale must not exceed three times the size of the construction on that land (measured in square meters); and
• you can only claim this exemption once every three years.

The flat-rate exemption is the peso equivalent of 700,000 UDIs; the value of UDIs fluctuates and you can get current UDI exchanges rates on the Bank of Mexico website. At the time of writing, 700,000 UDIs equates to approximately $5.06 million Mexican pesos, and you can deduct this amount from the sale price if you qualify.

Co-titled property

If the same home is properly co-titled with your spouse or other family member and they are resident in Mexico* with a Mexican tax ID, and the house is their primary residence too, you can deduct an additional 700,000 UDIs in their name.

The tax-deductible allowance is not automatic: you must qualify, and you must prove the qualification.  Talk to your Notary Public about how to arrange this and what you need to do to present the necessary records for proof.

Talk with a licensed accountant or other professional firm who is experienced in property matters about getting a RFC if you hold legal residency in Mexico but don’t currently have a RFC number and want to use this as a means to claim the tax deductible allowance when you sell your residential home.

* Mexican income tax law does not expressly state whether the foreign person selling a property must have temporary or permanent residency status to avail themselves of capital gain tax exemptions; it does, however, expressly state that the seller must be selling his/her primary residence in order to qualify for tax exemptions on capital gains. The Notary Public dealing with the matter will interpret the law; some will apply the capital gains exemptions only if the seller has residente permanente status; some Notary Public offices may apply the exemptions to foreign residents with residente temporal status.  You can read about the differences in these two residency statuses on our Mexican visas and immigration page.

Deductions allowed for capital improvements

You can deduct the costs of any capital improvements (e.g. building extensions, new flooring, swimming pools, new rooms) while you owned the property, as well as some closing costs commonly incurred when purchasing a home.  You need official receipts —in Mexico, these are known as ‘facturas’— for all services and building work to claim these allowances when you sell, so be sure to take advice from your Notary Public and/or accountant on how to account for these—and follow it.

Any capital improvements made using a firm or builders who didn’t issue you with facturas for the work cannot be deducted.  General maintenance and home improvements, like remodeled kitchens or new bathrooms, do not count as capital improvements.

The currency exchange rate effect

In most towns and cities across Mexico, home prices are quoted in Mexican pesos when they are offered for sale. However, a few places and most notably in Los Cabos, Puerto Vallarta, San Miguel de Allende, Ajijic/Chapala, and Cancun/Riviera Maya, home prices are often seen quoted in US dollars.

Even though the home may be marketed in dollars and the transaction amounts may be quoted in dollars, the deed will show the amount in Mexican pesos at the exchange rate prevalent on the date of the closing. Any capital gains are calculated only in Mexican pesos and therefore, shifts in the exchange rate can affect the capital gain calculation as expressed in a foreign currency.

Learn more: Read Exchange Rates and Capital Gains on Your Mexican Home to understand how foreign exchange rates can influence capital gains calculations on property in Mexico, because your tax liabilities when you come to sell are calculated in pesos, not dollars.

Selling your Mexican home as a non-resident

If you are not a resident in Mexico and/or you don’t have a Mexican tax ID, you cannot claim the one-off allowance exemption explained above, although you can claim qualifying deductions, so long as you have the official receipts (facturas) to prove the expenditures which can be deducted.

Your Notary Public is a key contact

The Notary Public (in Spanish, Notario Público) is the most important professional person you will deal with when you buy and sell property in Mexico.  Don’t rely on hear-say and instead get the Notary Public to assess your individual situation and the taxes that will likely apply to it.

When you’re buying property, talk with the Notary about what you need to do to plan your estate efficiently, how to structure your arrangements, and how to keep the proper records you need to ensure that when you come to sell your property you (or your heirs) are prepared.

Every property transaction has its own quirks and unique characteristics; cultivating a good relationship with your Notary Public is a crucial aspect of successful property investment in Mexico.

Learn more about property in Mexico

We publish a wide range of guides and articles about property and real estate in Mexico:

• Learn about the costs and taxes of buying property in Mexico
• How do property owners value their Mexican house?
• What drives house prices in Mexico
• Putting your house on the market for sale
• Comprehensive guide to buying and selling real estate and renting property in Mexico
• View the latest articles about real estate in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.