The “Gunslinger Days” of buying property in Mexico are over. Banking on the words “That’s the way we do business here!”, and trusting “Thy Seller”, have given way to U.S. Title Insurance and 3rd party, insured escrow accounts.

During the past ten years, property in Mexico has become a lucrative and viable investment strategy, bringing with it a new breed of sophisticated investor. U.S. title insurance, 3rd party escrow accounts and comprehensive title searches are “in”…promises and handshakes are “out”.

Owning property in Mexico is easier and safer than ever, because now there are well-established and defined rules regarding non-Mexicans owning land in Mexico. These rules are in place to protect your ownership rights and to promote the sale of real estate to foreign investors. The key is a safe, established and perpetually renewable Mexican Property Trust called a “Fideicomiso”.

WHAT IS A “FIDEICOMISO” OR A MEXICAN PROPERTY TRUST?

With the advent of North American Treaty Agreement, the Mexican Government recognized that it was critical to make foreign investment in Mexico safer and easier than ever. Because the Mexican Constitution prohibits foreigners from purchasing or owning real estate within 60 miles of an international border or within 30 miles of the Mexican Coast, a new, safe method of holding title was created. This new instrument, modeled after the one in Monaco, allows ownership through a Mexican Property Trust called a "Fideicomiso". This is a trust agreement, much like an estate trust, giving you all the rights of ownership.

The Department of Foreign Affairs in Mexico City issues a permit to a Mexican Bank of your choice, allowing the bank to act as purchaser for the property. The bank acts as the "Trustee" for the Trust, and you are the "Beneficiary" of the Trust. The Trust is not an asset of the bank; they simply act as the Trustee to hold and administer the Trust on your behalf.

Much like Living Wills or Estate Trusts in the U.S., the Mexican Bank, or Trustee, takes instructions only from the Beneficiary of the Trust (You). The Beneficiary has the right to use, occupy and possess the property, including the right to build on it or otherwise improve it. The Beneficiary may also sell the property by instructing the Trustee to transfer the rights to another qualified owner, or bequeath the property to an inheritor. The initial term of the trust is 50 years, and it can be renewed for additional periods of 50 years indefinitely, providing for long-term control of the asset.

You have all the rights of property ownership in the U.S. or Canada, including the right to enjoy the property, sell the property, rent the property, improve the property, etc. This is not to be confused with a “land lease”. The property you buy is placed in a Trust with you named as the Beneficiary of the Trust - you are not a lessee. If the property you purchase is already held in a Trust, you have the option of assuming that Trust, or having the property vested in a new Trust.

WHAT CAN I EXPECT IN CLOSING COSTS?

When you purchase property in Mexico, you will incur closing costs just like you would in the U.S. or Canada. How much depends on the purchase price, as well as how well you negotiate fees for appraisals, certificates of no liens, legal fees, etc… Typical closing costs will run 4% to 5% of the purchase price, depending on the value of the purchase, which includes your permit fees, Notary Fees, Acquisition Tax, certificates of no liens, appraisals, etc…

The primary fee, and the most important fee at closing, is the Acquisition Tax. This tax is paid by anyone purchasing or acquiring property in Mexico, whether a Mexican Citizen or a Foreign buyer. The tax is 2% of the purchase price and is paid when you get your Trust. Do not record a lower purchase price to save money on the 2% Acquisition Tax. Recording a lower value to save money on this 2% tax will drastically increase your Capital Gains Tax when you sell. (See the brochure on Capital Gains Tax in Mexico.)

At Snell Real Estate, due to our sales volume and the large number of closings we handle each year, we have negotiated the best rates for the professional services required to do your closing. These savings are passed directly on to you since we do not charge to oversee and coordinate your closing.

Fact: Entering into a Buy/Sell agreement in Mexico is not considered a Closing.

Fact: Closing Costs are due upon “Closing”, which is when you acquire the property with a Trust. (Do not release funds to the Seller until you have your Trust completed and the property is transferred to you.)

HOW LONG DOES IT TAKE TO GET A TRUST?

At Snell Real Estate, we work with Federal and State Notaries for all our closings, and to secure your new Trust. (In Mexico, a Notary, or “Notario Publico”, is much different than in the United States,

more like a Clerk of Courts.) On average, we can obtain your Trust within 60 days and in some cases, we have actually transferred title in as little as two to three weeks. We oversee the entire process and make certain you understand each and every step involved. We can even provide you with an English sample Trust for you to review.

You would be amazed how many people have only a simple buy/sell agreement between themselves and the seller as evidence of ownership. This is not a safe method of ownership and is not recommended by Snell Real Estate or Stewart Title Guaranty.

WHEN DO I PAY FOR MY PROPERTY?

When you have clear title, exactly like you would anywhere else. By using our U.S., third party Escrow service with Stewart Title Guaranty, Houston Texas, your money is held in an individually numbered and insured escrow account until your Trust is complete and the property rights have been transferred to you.

We do not recommend that you release funds to a seller unless you have received your Trust first. Purchasing property without receiving a Trust is simply buying without receiving the title in your name, which is risky and not recommended.

Fact:Until you have received your Trust, and rights to the property have been transferred to you, the legal owner of record in Mexico is still the previous owner.

Fact:You cannot bypass Mexican Taxes or fees by not getting your Trust, even if you sell the property to someone else before you have your Trust in place.

DO I NEED TITLE INSURANCE?

Whether you buy real estate in the U.S. or Mexico, Snell Real Estate recommends U.S. Title Insurance for every property you purchase. You have insurance for your car, your home and your health, why not purchase it for one of your largest investments, your property. Snell Real Estate will not represent or sell any property in Mexico that cannot be covered by a U.S. Title insurance policy with Stewart Title Guaranty, Houston Texas.

Fact:U.S. Title Insurance is available for properties in Mexico purchased by U.S. & Canadian citizens.

Fact:Just because you have a Trust does not ensure you have free and clear title.

(A Stewart Title porperty search reaches all the way back to the Mexican Revolution. Most title searches to secure a Trust only go back one or two owners of record.)

HOW CAN I OWN MY PROPERTY?

In the Trust document, you must name the Beneficiary or foreign owner for the property. This can be you personally, multiple partners, a foreign corporation, an estate trust, a living will, or other entity. The Trustee of the Trust (the Mexican Bank) will take direction from whomever you name as the Beneficiary.

Fact:You can name a U.S. Corporation as the Beneficiary of the Trust. This is perfectly legal.

Fact:If you sell more than 25% of the shares in the U.S. Corporation, you have created a real estate transaction in Mexico, and all Mexican Taxes apply.

(This is Article 151 of the Mexican Revenue Code and is also declared in the International Tax Treaty between the U.S. and Mexico. If this is done, and you do not pay the Mexican Taxes, you will have created a tax burden over the property for the new owner.)

Fact:You can own a property in a Mexican Corporation and take title fee simple only if the property is for development or investment purposes.

Fact:It is against the law for a foreigner to own property in a Mexican Corporation for residential purposes.

Snell Real Estate is the recognized real estate leader in Los Cabos. We pioneered the use of U.S. Title Policies and U.S. third party escrows in Mexico for all our transactions. We understand the local laws regarding ownership of real estate in Mexico by foreign investors, and we will put this knowledge to work for you to make certain your investment is protected.

If you are considering a real estate purchase in Baja, make sure everything is done right by allowing Snell Real Estate to work for you. We are an independent brokerage, assuring you that our only interest is representing you in a real estate transaction that is safe, solid and secure.

Our strength is in our commitment to safeguarding the interests of our clients. We will offer no properties that cannot secure a U.S. Title policy with Stewart Title Guaranty. No other real estate firm in Los Cabos is more dedicated to protecting your interests and ensuring a safe, clean transaction for both buyer and seller. We never forget it’s your money and your investment…it’s our job to protect it.

Snell Real Estate …The Most Trusted Name in Real Estate.