Special Steps for Foreign Buyers

by San Miguel MLS on October 1, 2024

Real Estate Purchase Process in Mexico: Special Steps for Foreign Buyers

Once the “Oferta de Compra” (Offer to Purchase) has been accepted by both the buyer and the seller, the next step in the real estate purchase process in Mexico is to formalize the agreement and ensure all legalities are properly addressed. If you’re a foreigner buying real estate in Mexico, there are additional legal requirements that must be met, especially if the property is located within the restricted zone (within 100 kilometers of any border or 50 kilometers of any coastline).

Here’s an outline of the process, including the specific steps required for foreign buyers:

1. Hire a Notario Público (Public Notary)

In Mexico, a Notario Público plays a crucial role in real estate transactions. They are responsible for:

• Verifying the legality of the property title.
• Ensuring that there are no outstanding debts, liens, or other legal issues attached to the property.
• Drafting and formalizing the “Escritura Pública” (Public Deed), which is the official contract of sale.

Additional Step for Foreign Buyers:

• A Fideicomiso (bank trust) will be required if the property is within the restricted zone (coastal or border areas). A Mexican bank will hold the property title in trust for the foreign buyer, while granting the buyer full control and rights to use, rent, or sell the property. If the property is outside this zone, foreigners can own it outright under their name.

Step for the Buyer:
Hire a qualified Notario Público to handle the process and ensure that all foreign ownership laws are followed.

2. Due Diligence

The Notario will conduct the due diligence process, which includes:

• Title Search: Verifying the ownership of the property and ensuring there are no outstanding liens or legal disputes.
• Property Valuation: Ensuring the property is properly valued and checking that all taxes have been paid by the seller.
• Verification of the Seller’s Legal Standing: Confirming the seller has legal capacity to sell the property.

Step for the Buyer and Seller:
Both parties may need to provide documentation to the Notario, such as identification, proof of tax payments, and ownership documents.

Foreign Buyer Note:
Make sure to have a valid passport, visa (such as a tourist visa, temporary resident visa, or permanent resident visa), and other relevant immigration documents available for the Notario and bank trust process.

3. Obtain a Permit from the Ministry of Foreign Affairs (SRE)

If you’re a foreigner purchasing property in Mexico, the law requires that you obtain permission from the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores, SRE). This is a necessary step for both properties within and outside the restricted zone.

Step for Foreign Buyers:
The Notario will help you apply for this permit, which confirms your agreement to abide by Mexican laws and waives any claims to foreign government intervention regarding your property.

4. Drafting of the “Contrato de Compraventa” (Purchase Agreement)

Once due diligence is complete, the Notario will draft the “Contrato de Compraventa”, the official contract that outlines:

• The final purchase price.
• Payment terms and schedule.
• Any contingencies (e.g., repairs, inspections).
• The closing date.

Step for the Buyer and Seller:
Review the “Contrato de Compraventa” and make sure all terms are clearly outlined and agreed upon before signing.

5. Set Up the Fideicomiso (if applicable)

If you are purchasing property within the restricted zone, the Notario will work with a Mexican bank to set up the Fideicomiso (bank trust). This allows you, the foreign buyer, to legally hold and control the property for 50 years, with the option to renew the trust.

Step for the Foreign Buyer:
Provide necessary documents to the bank and ensure you understand the fees associated with maintaining the Fideicomiso, as the bank will charge an annual fee.

6. Payment and Escrow (if applicable)

Depending on the agreement, the buyer will:

• Pay the deposit (if not already done).
• Transfer the remaining funds (through a bank transfer or escrow service) in line with the payment terms.

Step for the Buyer:
Make sure funds are ready to transfer, and that you understand the payment schedule outlined in the contract.

Foreign Buyer Note:
Currency exchange rates and fees may apply, so it’s important to be aware of the total cost in both currencies and ensure smooth transfer of funds.

7. Closing and Signing of the “Escritura Pública” (Public Deed)

Once all payments have been made and the necessary documents have been gathered, both the buyer and seller will meet at the Notario’s office to sign the “Escritura Pública”. This makes the transaction official and legally binding.

Step for the Buyer and Seller:

• The buyer must pay the final purchase price (if not already paid).
• The seller must hand over the keys and vacant possession of the property.

Foreign Buyer Note:
If a Fideicomiso is involved, the property will be placed into the trust, with the buyer listed as the primary beneficiary.

8. Registration of the Property Title

After the deed is signed, the Notario will register the property with the Public Registry of Property to transfer the title to the buyer’s name (or the Fideicomiso, if applicable). This can take several weeks.

Step for the Buyer:
Wait for the official property title to be registered and delivered. Keep in contact with the Notario to ensure the process is completed.

9. Final Costs and Taxes

The buyer will need to pay various closing costs, including:

• Notary fees.
• Property acquisition tax.
• Registration fees.
• Fideicomiso setup and maintenance fees (if applicable).

Step for the Buyer:
Be prepared to pay closing costs, which are typically calculated as a percentage of the property’s sale price.

By following these steps, both foreign and domestic buyers can ensure that the real estate purchase process in Mexico proceeds smoothly and legally. Working with a qualified Notario and understanding the additional steps for foreigners, such as the Fideicomiso and obtaining the SRE permit, will protect you throughout the transaction and guarantee a successful property purchase in Mexico.