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”.
You will surely find your place here.
Because that is the same thing I did a few years ago. Now that I live here, let me share my experiences, about leaving the USA and making Mérida my new home.
- 1 How to Buy a House in Mérida Mexico
- 2 As a rule, a foreigner should assume nothing.
- 3 Actual Steps of buying property as a foreigner
- 3.1 Engage a real estate agent
- 3.2 Start the Fideicomiso process
- 3.3 Determine your price range
- 3.4 Find the right property for you
- 3.5 Make an offer
- 3.6 Have the house inspected including inspection by a general contractor
- 3.7 Renegotiate the offer price, if needed
- 3.8 Have the contract of sale written by a Mexican attorney
- 3.9 Finalize any further details
- 3.10 Sign the contract with the notary
- 3.11 Pay related to real estate and property taxes
- 4 Real estate transaction fees
- 5 Final conclusion on how to buy a house in Mérida Mexico
How to Buy a House in Mérida Mexico
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.
Foreigners own property through a trust
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.
The Fideicomiso truth ⤵️
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).
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. A contractual right to all benefits that may result from the use or sale of that property, even though he does not hold title to the property.
Under Mexican Law:
- 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.
The importance of a real estate agent
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.
Real estate agents and brokers are not legally licensed in Mexico. Foreign buyers cannot always depend on the constitutional protection guaranteed in real estate transactions like in the United States. 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.
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.
Other professionals involved in buying a house
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. A real estate company, the buyer’s lawyer, a bank, and a public notary are all helpful in their respective areas.
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. Importantly, 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.
The importance of a Mexican attorney
Keep in mind, the buyer should always have his or her Mexican attorney vs. using the attorney of the seller. 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.
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. Notably, very few Americans are licensed to practice law in Mexico.
In addition to formalizing your real estate transaction, an attorney can be very helpful in saving your money. Attorneys are involved in many different transactions and have contacts with banks, notaries, and the Mexican government regularly.
They will be aware of the most competitive cost and fees involved to ensure you, their client, are given the best possible prices. An attorney can inform the buyer regarding his or her legal options as well as tax planning considerations, closing costs which should be 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. 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.
Actual 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
Real estate transaction fees
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 here in Mérida.
One more thing . . . come on over to the Mérida Community and ask more questions.
Here’s a great video that outlines the financing process.