The process of transferring the ownership of a property from seller to buyer with a notary according to a sales contract.

Baja California Sur is located within the restricted zone (31 miles from the coastline or 62 miles from a border) according to Mexican law, therefore certain requirements must be met:

For residential purposes: Title will be held by a Mexican Bank by means of a trust agreement (“Fideicomiso”) and buyer(s) will be appointed as beneficiary(ies) of the property.

For commercial purposes: Title can be held through a Fideicomiso or by creating a Mexican company to hold title directly.

Becoming a Mexican resident to buy a property in Mexico is not required.

No, you do not need to remain in Mexico. You may grant a power of attorney using a Mexican notary public or if you are abroad, you may grant such power of attorney before a notary public in your country and then get it appostilled by the Secretary of State near your location. Your closing attorney will prepare the power of attorney according to the specific terms of your transaction.

Regardless of the type of agreement used before closing, whether is an offer to purchase, a promise agreement and/or a purchase agreement, there are general terms that the contract should always contain, such as the purchase price, earnest money deposit, legal description of the property (including tax identification number), closing date, delivery date, closing costs, escrow agent, HOA fees and contingencies such as: home inspection, title report, tax related issues, amongst others.

Have all your contracts drawn up in English. Use a translator if required. Your closing attorney will take care of this for you. Always keep a hard copy of the signed contract in your records.

It is customary for buyers to pay for closing costs of real estate transactions, which can fluctuate between 4% to 8% of the purchase price of the property. The higher the purchase price, the lower the closing costs percentage. Common expenses will include acquisition tax, notary fees, trustee fees, governmental dues, escrow fees, legal fees, amongst others. Your closing attorney can provide you with an estimate closing cost list.

Capital Gains Taxes (ISR).

This is Federal tax paid by the seller which is based on the profit calculated between the amount paid for or registered value in the title deed and the amount the property sold for, minus certain costs and fees that may be deductible according to Mexican law.

The amount of the tax may vary from 25% to 35% depending on the tax situation of the seller (individual, companies, foreign residents, etc).

Property Acquisition Tax (ISABI).

This is a Municipal tax paid by buyer, which is equal to 2% 3% of the purchase price, the appraisal value or the registered value, whichever is higher.

Public Registry Fees.

This is a State fee that varies depending on the transaction that is being recorded (trust incorporation, assignment of beneficiary rights, mortgage and others).

It is strongly recommended that due diligence is done on the property to ensure a clear title. Based on such a report your attorney, will be able to make a recommendation on whether or not you should obtain a title insurance policy.

In most residential developments it is not necessary to purchase a title insurance, since usually developers make sure the property is a secure investment. However, when buying outside the urban area, such as common land (“Ejidos”) it is always advisable to acquire title insurance, due to the complex nature of the closing process of this type of property.

Yes, notwithstanding that this is not a legal requirement, its is strongly recommended to hire a third-party escrow company to hold the purchase funds while the closing process is completed.

Always enquire about the reputation of the escrow company. Try to avoid using individuals such as closing agents, realtors or brokers as they are not a neutral party in the closing process.

This is a person or entity that can be appointed as beneficiary of the Fideicomiso in the event of demise of the original beneficiary. The alternate beneficiary takes over the beneficiary rights of the trust through a simple process before the trustee bank, avoiding the complex probate procedure in Mexico.

Yes. It is strongly recommended that both purchaser and seller retain licensed attorneys during a real estate purchase. They will be involved in reviewing the terms and conditions of the sale and pointing out any problems the parties may encounter throughout the closing process and provide solutions.

It is advisable that the buyer retains his or her own attorney rather than using the seller’s or developer’s attorney, to make sure nothing is missed depending on the individual circumstances of the specific buyer, such as: legal options to take title to the property, future tax contingencies and in general, a time/cost effective closing process.

The buyer’s attorney will supervise the seller’s documentation and will be in charge of coordinating all the legal steps, follow ups with trustee bank, notary public, appraisers and authorities and will conduct due diligence on the property to ensure a clear title.

Attorneys in Mexico need to be licensed to practice law. If an attorney is licensed he or she should be able to provide a “Cedula Profesional”, which is an official document that includes a photograph and signature of the attorney. Always make sure to ask the legal counsel for a copy of this document before employing any services.