You’ve fallen in love with Mérida. In fact, you love it so much that you are ready to move here. You might be packing up your belongings in Michigan or Maine or Texas (like me!). You’ve started donating those sweaters and coats to Goodwill. You feel ready to commit to real estate in Mérida and you begin googling “how to buy a house in Mérida Mexico”. There are more than a few things you need to know as it is quite different buying a house in Mexico vs. other countries. Recently, the Mexican government made changes in its policies making it easier for foreigners to purchase property in Mexico. The liberalization of “Property Ownership Laws” helps Americans and other foreigners acquire and possess property in Mérida, Mexico.
This article was updated in February of 2023.
What is a Fideicomiso?
Under Mexican law, foreigners cannot own the property outright within the restricted zone. The restricted zone is defined as 50 km from the coastline and 100 km from the border. In order for a foreigner to legally own property within the restricted zone, the Mexican government created a trust called a fideicomiso.
Created for the benefit of a foreign buyer, the fideicomiso trust agreement is executed between a Mexican bank and the seller of property in the restricted zone. This type of trust is similar to trusts set up in the United States. However, in this type of trust, a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of a record.
Created to reconcile the problems involved in developing the restricted zone and to attract foreign capital, this trust enables foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law.
The bank, as trustee, buys the property for the foreigner with the fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the bank holds the title to the property. The trust entitles the foreigner to use, enjoy, and even sell or will the property that is held in trust.
Learn as much as you can about the Fideicomiso to completely understand the details.
What is a Fideicomiso beneficiary?
This is a real estate trust and not a lease like so many people believe.
The beneficiary can:
- instruct the bank to sell or lease the property at any time
- develop and use the property to his liking
- benefit from any sales or transfers within the provisions of the law.
Generally, the law allows most activities engaged in by foreigners (legal activities, that is).
Notably, there is a common misconception among foreigners investing in Mexico that once the trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case.
On the contrary –
The beneficiary has a contractual right under the trust agreement with the Mexican bank. Subsequently, contractual rights to all benefits may result from the use or sale of that property, even though he does not hold title to the property.
How d0es a Fideicomiso work?
- The bank as a trustee has a fiduciary obligation to respect the rights of the beneficiary.
- The trust is granted for 50 years and is renewable in perpetuity.
- The trust is renewable at any time (for another 50 years) by applying to the bank.
- The owner has another 10 years in which he may apply to renew the trust, if the 50-year period expires without renewal,
- The existing trust may be transferred to the new owner and will be good for the remainder of its 50-year period, or the trust may be renewed at that time, if a property is purchased that already has a fideicomiso in place.
If the property is already in a fideicomiso, probate and transfer tax is avoided when the property is transferred.
Do I need a real estate agent in Mérida?
Mexican real estate transactions are not carried out in the same manner as the United States. The buyer must retain professionals to assist in the transaction. This is because Mexico does not have any real estate transaction regulations.
Did you know, real estate agents and brokers are not legally licensed in Mexico? Therefore, foreign buyers cannot always depend on the constitutional protection guaranteed in real estate transactions like in the United States. Be aware, use caution when hiring an agent. Perform due diligence. Ask for references. Speak to the clients who have used the broker and use your common sense.
Some real estate companies prefer that buyers know as little as possible about real estate transactions. This can be a very bad situation with devastating consequences. It’s hard to know the questions when you don’t know the laws.
Many houses show a for sale sign outside with phone numbers. I highly recommend engaging the services of a professional realtor.
There is no oversight or regulatory committees such as the Real Estate Commission or a Department of Real Estate in Mexico. The American Embassy and the American consulates in Mexico are good places to ask the reputation of the company. Namely, real estate companies establish a good reputation in some of the consulates.
What other professionals are involved when buying a house in Mérida?
It should be noted, it is easy to assume that there are basic terms and principles in real estate in Mexico that are similar in the US. The paperwork, too, is similar, if not the same. Some of their transactions may be the same as in the US. However, many aspects are completely different.
As a rule, a foreigner should assume nothing.
With that being said, there are typically at least three to four professionals involved in a real estate transaction in the restricted zone:
- agent and their real estate company
- buyer’s lawyer (abogado)
- notary public (notario)
Please note –
Transactions outside of the restricted zone do not involve a bank since it is not necessary to establish a real estate trust in those areas. Otherwise, the transactions are much the same. For the most part, a Mexican attorney is responsible for drawing up contracts, reviewing the conditions and terms of sale, performing a title search, and pointing out any problems or issues to the buyer.
Do I need to hire an attorney when buying a house in Mérida Mexico?
Keep in mind, the buyer should always have his or her Mexican attorney vs. using the attorney of the seller. Importantly, if an attorney is licensed in Mexico he should be able to produce a “cedula profesional.” This document is a registered license to practice law in Mexico and includes a photo of the attorney and his signature.
You can pay to have the contract translated to English which I highly recommend.
Not surprisingly, a foreign buyer should ALWAYS ask to see the attorney’s license. Have the attorney’s license number included in a retainer agreement before employing any services. American attorneys are not licensed to practice law in Mexico and should not advise on Mexican Law.
In addition to formalizing your real estate transaction, an attorney is very helpful in saving your money. Involved in many different transactions, attorneys have contacts with banks, notaries, and the Mexican government regularly.
They are aware of the most competitive cost and fees involved to ensure you, their client, are given the best possible prices. To clarify, an attorney informs the buyer regarding his or her legal options as well as tax planning considerations, closing costs paid by the seller, and ways of taking title to the trust rights which make sense for the particular circumstances of a specific buyer.
For what it’s worth . . .
Of course, one piece of good advice can save the buyer thousands of dollars in tax payments or other savings when the buyer eventually sells the property.
Usually, any Mexican attorney can handle a real estate transaction. Thus, the buyer is not limited to only the local attorneys where the property is located and all real estate transactions involving a trust are governed by federal law. This means that all such transactions are carried out the same way regardless if the property is in Mérida, Cancun or Los Cabos.
Steps of buying property as a foreigner
Now that you have the foundation, let’s talk about the actual steps of buying a property as a foreigner.
Keep in mind, this can vary from transaction to transaction (no two transactions are ever the same).
Engage a real estate agent
Start the Fideicomiso process
Determine your price range
Find the right property for you
Make an offer
Have the house inspected including inspection by a general contractor
Renegotiate the offer price, if needed
Have the contract of sale written by a Mexican attorney
Finalize any further details
Sign the contract with the notary
Pay related to real estate and property taxes
Real estate transaction fees in Mérida Mexico
Finally, here are some fees you can expect to pay as a buyer with a projected range based on the sales price of the property:
- Acquisition tax 0.18% – 4.565%
- Notary Fee 0.075% – 1.125%
- Registration Fee 0.02% – 1.82%
- Miscellaneous Fees 0.50% – 1.00%
- Title Insurance 0.50% – 0.70%
Final conclusion on how to buy a house in Mérida Mexico
I covered a lot of topics in this article and I hope that you now have just a bit more insight into the process of how to buy a house in Mérida. You will surely find your place here. Why? Because that is the same thing I did in 2019. Now that I live here, I love to share my experiences, about leaving the USA and making Mérida my new home.
One more thing . . . come on over to the Mérida Community and ask more questions.