A Step by Step Guide to the Purchase Process

This article ran in the February, 2013 PV Property Journal.

A STEP BY STEP GUIDE TO THE PURCHASE AND CLOSING PROCESS  FOR FOREIGNERS IN COASTAL MEXICO.

by

Robert Foster

You've been thinking for years about buying something here for investment and retirement. Dreaming about the good life is fun...and it's how all of us expatriates started our journeys that eventually brought us here.

But all such dreams eventually reach a tipping point; a point where they either become reality or not; where you either summon your courage and leap off the high board into the pool and actually, (oh my God!) make a purchase, or walk back to the ladder, climb down from the high-board, and stay away from the water.

The reason some people never take the plunge usually comes down to simple fear and anxiety. More specifically, fear of making a huge mistake, a financial and lifestyle belly-flop, and being laughed at by friends and family back home.

I made my first home purchase here almost 17 years ago, and I went through that insecurity phase. And sure enough, once I was under contract, well-meaning friends and family hit me with things like, "You did what? For heaven's sake Robert, why would you do that?"  Then they'd give me that sad, skeptical look and they'd say, "Well...I sure hope it works out. But I don't know...purchasing property in Mexico? That's downright morbid..."

Later on, visiting me in my Mexican home, sitting on my rooftop terrace, gazing at the mountains and the ocean, cold margarita in hand, they all had, shall we say...a slow but inevitable enlightenment. "You know, this really is nice. I have to admit it. I haven't felt this good in years! And how much did you say your property taxes are? What? That's all? You can't be serious!"

The best way to get control of your anxiety in any situation is through knowledge. If you're at that tipping point, and wanting to make an offer on a property, but just can't quite summon the courage, it might be helpful to know how the process will unfold. (All the following steps assume you're working with a professional, knowledgeable AMPI agency. AMPI stands for, in English, the Association of Mexican Real Estate Professionals. AMPI has stringent ethical and professional requirements, including ongoing annual education.)

Step 1. Negotiating the Purchase offer Agreement.

Your agent will submit your offer to the seller's agent, and there will usually be the standard negotiating phase, with offers and counter offers. In my office we prefer to use formal contracts for all phases, but some agencies just use informal "letters of intent." (We prefer to avoid that informal approach, as it allows either side to temporarily "fish for agreement" without being legally committed.)

In any case, once you reach agreement on price and details, you will then have a detailed, signed-around (fully executed) purchase offer contract, normally in both English and Spanish, stating precisely what is and is not included in the sale; precisely what the terms, if any, are; what international escrow company will be used; how much the deposit will be and when it must be in escrow; what the penalties to both sides are for non-compliance; what Notary will be used; and what the scheduled closing date is. FYI: The Spanish side of the contract takes legal precedence over the English side. The English side is there as a courtesy translation.

Step 2: Opening Escrow/Earnest Money Deposit

The contract will typically stipulate that you have, for example, 5 business days from date of seller's acceptance of your offer to open an international escrow account, and fund it by wire  transfer with a 10% earnest money deposit. (The 5 business days and the 10% are negotiable, but are used in most cases.)

Your agent should immediately fill out the Escrow Agreement forms  (we use Fidelity), and send them to you to review and sign. The agent will send those forms along with a copy of the purchase offer contract and the IDs of buyer and seller to the escrow company. The escrow account number will then be issued and you will wire the deposit plus the escrow fee into the account. (Fidelity's escrow fee is $650 USD). So, if you purchased a $400,000 property, you would be wiring for example $40,000 USD deposit plus the escrow fee, or $40,650 USD. 

Step 3. Closing Costs Deposit

Concurrent with opening and funding escrow, or immediately after, your agent should obtain an itemized closing costs estimate from the Notario that will be handling your closing, and explain it to you point by point. Depending on the value of the transaction (the price you have agreed to pay for the property), your total closing costs including Notary's legal fees, trust permit, appraisals, 2% property transfer tax, and public registry fee, etc., should average around 5% of the purchase price. (You can save a bit if you elect to assume an existing trust rather than start with a new trust. A qualified agent should be able to explain the pros and cons of this option.)

For a million dollar plus home, the total closing costs will fall, as a percentage, and may be closer to 4%. On the other hand, for a very inexpensive property, such as a studio or a small lot, the closing costs can be, as a percentage of the price, more in the 6% or even 7% range.

Regardless, you will be instructed by your agent to make an immediate deposit of usually half the the closing costs to the Notario or attorney handling your closing. (Sometimes the closing costs deposit requested is less than half, but should never be more than half.) This deposit will typically be done by another wire transfer, into the specified closing costs account. Your agent will provide you with wire transfer instructions in all cases. Common sense dictates that you should always obtain a wire transfer receipt from your bank for any wire you send.

Step 4. Providing Documents to the Notary and the Bank.

On behalf of the Notary and the fiduciary trustee (the Mexican bank that will hold your trust),  your agent will begin asking you to provide scans of various documents needed for closing. You will need to provide a scan of a recent utility bill with your current name and address in Canada or the USA. You will also fill out substitute beneficiary forms indicating who will inherit the property in the event of your demise. Your agent will explain to you the various options for structuring this, but usually, your children will receive equal undivided interests in  the property only upon the demise of all primary beneficiaries (you and your spouse in most cases).

There are some exceptions to this structure. If a husband and wife are making the purchase as co-primary beneficiaries but each have children by previous marriages, it can be set up to accommodate that situation. You will discuss this with your agent and the Notary and decide on the structure most suited to your situation. Regardless, the beauty is that having sub beneficiaries already written into your trust deed negates the need to draw up a Mexican will. It negates the need for Mexican probate.

You will also be providing Know Your Client forms, among others, to the fiduciary bank. Your agent will explain how these are to be filled out and signed. In some cases these can be signed at closing.

Step 5. Preliminary Disbursement Form/Closing.

Most closings occur about 6 weeks after the purchase offer contract has been signed-around. About a week before closing date, your agent should create an itemized, detailed preliminary version of the Escrow Disbursement Form. This will show every disbursement of funds related to the closing, and the net proceeds to the seller. This is circulated among all parties a week or so ahead of closing so that everyone can check it.

In almost all closings here, the seller pays the commissions. Those commissions will usually appear on the Disbursement Form, but are simply taken from the net proceeds to the seller. So they are as a practical matter paid by the seller, not by you, the buyer.

At the actual closing, a final version of the Disbursement Form is circulated for all to recheck and sign. Immediately after closing has taken place, meaning after the title has been properly transferred to you (as beneficiary) with no liens or encumbrances, this signed final Disbursement Form, plus a no lien certificate and a preliminary version of your new deed, are sent to the Escrow company for review, and only then are your funds disbursed to the seller and all involved.

The balance due on your closing costs (remember that you paid a deposit on the closing costs to get started) is collected at closing. You can pay it with cash, a personal check in CAD or USD, or from extra funds you previously had wired to the escrow account. If the latter option, it will of course appear as one of the items on the Disbursement Form.

Step 6. You Are Handed the Keys at Closing, and a Preliminary Copy of your Trust Deed. Go to Your New Place, Have a Margarita!

It would be nice to end this article on that upbeat note, but, unfortunately, there's a bit more work to be done.

Step 7.  Changing Utilities Into Your Name

Over the next few days, your agent will accompany you to the various utility companies (water, electric, phone, internet, cable or satellite TV, etc.) to assist you in getting the needed changes made.

FYI. It often happens that buyers cannot attend the closing, or cannot stay for a few days after closing to change utilties. If planned in advance, there are ways to deal with these situations.

If you are getting a new trust, the fiduciary bank signs for you. You don't have to attend. But it is still best if you can, to do a final walk through of the property, etc.

If you are saving a bit in closing costs by assuming the seller's existing trust, you either must attend the closing, or grant a Mexican limited power of attorney to your agent (or whomever you wish) to sign in your behalf. That power of attorney can in most cases also be used by your agent to change utilities into your name.

With several weeks advance notice, a Mexican limited power of attorney can be granted by you while you are in the USA or Canada. Your agent should be able to explain the different procedures for this, which vary depending upon whether you are Canadian or American.

Step 8. Your Final, Registered Trust Deed

At closing you will receive a preliminary copy of your trust deed. But the sale still has to be registered in the property tax office (catastro) and the public registry (Registro Publico). Due to the backlog of documents, this process takes on average from four to six months. When done, the Notary will notify you (or your agent in some cases if you so request) that your final, bound deed is ready. You can pick it up from the Notary the next time you visit this area, or (recommended) ask them to send it directly to you by FedEx, UPS or DHL.

No two deals are exactly alike, but the above steps are typical of the vast majority of transactions here on the coast, in which the purchaser is not a Mexican.


Robert Foster
Robert Foster y Asociados
163 Lazaro Cardenas, Bucerias, Nayarit
329 298 3314
Toll free from Canada or USA 01 866 210 1324
website: rfasoc.com
office blog: http://robertfosterasociados.blogspot.mx/

Green Bay II, Was $339K, Now $295K!! Now That's A Serious Seller!

Robert:


This exquisitely decorated and furnished condo in Green Bay II, on El Tigre golf course in Paradise Village, is now very seriously for sale. The owners have taken a decisive and bold step, and dropped the price from $339,000 USD to $295,000 USD!

View from the living area, master and terrace.

Another view from the master and terrace.

From large kitchen to dining area, living area and the terrace beyond.

                                 

Here's a hi def video tour of the unit:

For more photos & specs, here's a link to the complete web page for this condo: CLICK HERE

New Listing, Condo Mantarraya, Bucerias

Robert:

Condo Mantarraya was just activated in both MLS systems this morning. It has 3 bedrooms (or 2 bedrooms plus office), 2 baths, and it is newly and exquisitely remodeled, with a stunning kitchen and new tile floors.

Living area to dining area.

New kitchen is spectacular.

This is in the Perla del Mar complex, on the beach side of the highway, and only about 5 short blocks to the beach. The owners tell me it takes them 7 minutes from their door to the beach and in their words, "We walk slowly." :)

Pool and swim up bar.

The condo is tastefully furnished. I especially admire the dining room set. Condo Mantarraya is being offered with everything included; all furnishings, appliances (washer dryer included), electronics (except the owners' personal computer), decorations, pots, pans, dishes, utensils etc. Truly, this condo is turn-key.



There is a small back patio with a gas grill (included), and the front terrace looks out on the beautiful pool area. The living and dining area have large sliding glas doors to make the entire area bright, and "bring the pool inside."

Even from the kitchen you see the pool.

The condo complex has a common rooftop terrace, with palapa shade, with views of the bay and Bucerias village. Great for sittin', sippin', and watchin' the sunset. Make mine iced tea. :)


See the complete web page of this condo with more fotos and all data HERE:

VIdeo tour below. Be sure to set your You Tube settings to hi resolution for best clarity.

Another One Goes Under Contract!

Robert:

There is a lot more activity in this market so far this high season. Velmar Penthouse is now under contract, making it the third of our listings to go under contract in the last two weeks. Maybe this market is turning the corner at last.

Congratulations to all!

Bucerias Wednesday Market Video

Robert,

Every Wednesday in high season, just one block south of the office, there is a food and crafts market.

Around noon I decided to walk the one block to the market to see what there might be to buy for lunch.

I  almost went for the lasagna, but opted finally for the smoked chicken breast. 50 pesos. Mmmm. There is always food everywhere in Bucerias.

Condo Krutulis Is Under Contract and In Escrow

Robert:

Condo Krutulis, overlooking the Paradise Village Marina, is under contract and in escrow. There is a lot more activity in the market than last year. At least, at this moment that is the case.

                                                               UNDER CONTRACT

Casa Mariposa Under Contract

Robert:

Casa Mariposa, in La Cruz,  is UNDER CONTRACT and in escrow.

                                                               UNDER CONTRACT

New Listing, Casa Yvonne, Zona Dorada Bucerias

Robert:

This house is extremely well located, on Francisco I. Madero street, 1 1/2 blocks off the beach, in the best part of the Zona Dorada (golden zone).

It's an older home, but is nonetheless cute and livable as is. And, with some TLC, it could be adorable.

Large, bright great room...sala and kitchen flow together, and out to the garden and pool. $270,000 USD. Call Patty 322 278 6961

For more photos and data, go to the web page for this property: CLICK HERE

Classical Paintings Come To Life

Robert: Classical paintings come to life. This is so beautiful, so mesmerizing, but the end is disturbing:
B E A U T Y - dir. Rino Stefano Tagliafierro from Rino Stefano Tagliafierro on Vimeo.

What the Best Among Us Know

Robert:

A lovely quote from Martin Luther King. And regardless of your religion, or lack thereof, you'll appreciate the inherent wisdom:

“Now there is a final reason I think that Jesus says, ‘Love your enemies.’ It is this: that love has within it a redemptive power. And there is a power there that eventually transforms individuals. That’s why Jesus says, ‘Love your enemies.’ Because if you hate your enemies, you have no way to redeem and to transform your enemies. But if you love your enemies, you will discover that at the very root of love is the power of redemption. You just keep loving people and keep loving them, even though they’re mistreating you.

Here’s the person who is a neighbor, and this person is doing something wrong to you and all of that. Just keep being friendly to that person. Keep loving them. Don’t do anything to embarrass them. Just keep loving them, and they can’t stand it too long. Oh, they react in many ways in the beginning. They react with bitterness because they’re mad because you love them like that. They react with guilt feelings, and sometimes they’ll hate you a little more at that transition period, but just keep loving them. And by the power of your love they will break down under the load.

That’s love, you see. It is redemptive, and this is why Jesus says love. There’s something about love that builds up and is creative. There is something about hate that tears down and is destructive. So love your enemies,” – Martin Luther King, Jr., “Loving Your Enemies.”

Velmar Penthouse REDUCED to $269,500

Robert:


This affordable penthouse with spectacular views of Bucerias and the bay has been reduced to just $269,500 furnished and equipped. It's very livable or rentable.

 

This is a great unit in a 6 unit building that is especially well maintained (both the unit and the building overall). Very reasonable maintenance fees of just $230 USD per month.

Indios En La Calle.

Robert:

You never know what you'll see walking down a Mexican street. There are always surprises, there is always color.

Today these two Indios passed by in front of the office. They were walking fast. Truckin', as we used to say way back in the day.

They might have been real Indios, from a regional indigenous group, in town to sell crafts or put on a show. But I don't think so, judging by their costumes. They were dressed nothing like the Indians from Chiapas that frequent this area in high season; nor like the Huichols in the Sierra Madre mountains, to the north and east.

I'm no expert on this sort of thing, but these two looked to me more like Aztec impersonators. 


More likely, these guys are just regular Mexicans with a job dancing in a show..a ballet folklorico. They have shows like this often in the Decameron hotel, about 3 blocks away.

Kurt Vonnegut's Advice To A High School Class, and His Daughter Nanette

Robert,

Late in his long life, Kurt Vonnegut wrote this letter of advice to a high school class:

“...Practice any art, music, singing, dancing, acting, drawing, painting, sculpting, poetry, fiction, essays, reportage, no matter how well or badly, not to get money and fame, but to experience BECOMING, to find out what’s inside you, to MAKE YOUR SOUL GROW.”

And he wrote this advice to his daughter Nanette:

 "...Most letters from a parent contain a parent’s own lost dreams disguised as good advice. My good advice to you Nan is to pay somebody to teach you to speak some foreign language, to meet with you two or three times a week and talk. Also: get somebody to teach you to play a musical instrument. What makes this advice especially hollow and pious is that I am not dead yet. If it were any good, I could easily take it myself."

 And this:

"Dear Old Nanno –

You’re learning now that you do not inhabit a solid, reliable, social structure — that the older you get people around you are worried, moody, goofy human beings who themselves were little kids only a few days ago.

So home can fall apart and schools can fall apart, usually for childish reasons, and what have you got? A space wandered named Nan.And that’s O.K. I’m a space wandered named Kurt, and Jane’s a space wandered named Jane, and so on.

When things go well for days on end, it is an hilarious accident.You’re dismayed at having lost a year, maybe, because the school fell apart. Well — I feel as though I’ve lost the years since Slaughterhouse Five was published, but that’s malarky. Those years weren’t lost. They simply weren’t the way I’d planned them. Neither was the year in which Jim had to stay motionless in bed while he got over TB. Neither was the year in which Mark went crazy, then put himself together again. Those years were adventures. Planned years are not. I look back on my own life and I wouldn’t change anything. . . .

Later in the same letter, he adds another piece of advice:

"..I think it’s important to live in a nice country rather than a powerful one. Power makes everybody crazy."


Via Maria Popova.

Money and Things...

“If you worship money and things … then you will never have enough. Never feel you have enough. It’s the truth.”

David Foster Wallace 

By Norah Borges, sister of Jose Luis Borges

Rosca de Reyes; A Special Cake For Day of the Magi (Three Kings)

Robert:

Today, January 6th, is celebrated and venerated in Latin America as the day the three kings (the magi) arrived to pay homage to the Christ child.

This day is marked by the eating of a cicular or oval cake called Rosca de Reyes. These are covered in candied fruit strips, representing the jewels on the king's crown, and are really tasty.

Inside, baked into the cake, is a figurine. Usually it is of a baby, representing the Christ child, but sometimes it is one of the three kings. Or sometimes a shepherd.

These cakes come in very large ovals for big families or gatherings; or, medium, small, or even individual sizes.

We had the medium size cake in the office this year, and yours truly got a figure of the shepherd. He's in green robes, holding his staff.

The usual tradition is that whomever gets the slice of cake containing the figurine must provide for everyone present tamales and atole on February 2. (Atole is a warm Mexican drink, with a finely ground hominy cornmeal base, flavored with cinnamon, fruit or chocolate. It's one of those things that doesn't sound very good. You're making a face about now, right? But it is absolutely delicious and soul satisfying. I mean, atole is sooo goooood.

Here is all that's left of our Rosca de Reyes this evening, our sad leftover, bagged up to stay fresh for tomorrow.

I imagine it will be all gone by noon tomorrow. It's quite good with your morning coffee.

"The Aggregate of Our Joy and Suffering..." Revisited.

Robert,

10 or 12 months ago I posted another version, a different video, set to these lovely and affecting words by Carl Sagan.

My friend and client Daniel Swisher just sent me this even-more-beautiful version, which I had not seen before.

Sagan was a uniquely gifted scientist, writer, poet, and communicator. No actor in the world could have delivered these lines (which he also wrote, of course) with more heartfelt reverence, awe and humility.

Take it away, Carl, as only you can:

"So smooth and seemingly effortless..."

As Norah Jones said, the harmonies are so smooth and seemingly effortless...it just washes over you....

Street Juggler

This guy was juggling this afternoon at the stop light in front of Mega. He has a couple of drops.

But, undaunted, he picks right back up and keeps going.

Big Remodel of Bucerias' Plaza Underway

About 2 weeks ago workmen began excavating the street alongside the main plaza, and also the sunken concrete area frequented by skateboarders and soccer players.

It's a surprising time of year for this project to begin, because the area is now a real mess right here at the start of high season, and also the Fiestas Patronales will be starting in a few days.

The Fiestas Patronales are a carnival and street fair that is always held in January in Bucerias, and it is a really big deal. The plaza and most of the side streets for several blocks around the plaza are normally filled with rides, game booths, and street food...also lots of merchandise stands...clothing, jewelry, shoes, belts, watches, candy, nuts, electronics, housewares and so on.

It's the biggest fiesta of the year here, by far, and how they are going to do it this time with the plaza torn up is a mystery to me. But I'm sure they have a plan. Maybe.

Tranquility Break. Plus, In 17 Years Here I've Never Seen Anything Like This

First, a comment about the simply bizarre weather we have been having here for over a week.

As many of you know, it very rarely rains at all here from early November to June. The dry season is usually just that. Months and months without a drop of rain.

Every now and then, there will be a freak rainstorm that lasts a couple of hours, or a day at most, in the middle of winter. But, it's not common. This year, everything is turned upside down. We seem to have fallen into a meteorological rabbit hole.

A cool rainy pattern set in in earnest about 10 days ago and is still prevailing. Every day, I think, this cannot continue. No way. And yet, as I look out my office door, it is raining steadily once again. Temps are hovering around 70 degrees, but to us full-time tropical birds, that is cold. So, we are squawkin.'  My heart goes out to all the folks here for a week or two of vacation, expecting the usually extremely reliable warmth and sunshine. They are being cruelly denied by the newly deranged weather gods, and aren't too happy about it.

Meanwhile, to start the year on a more tranquil note, here is an exceptionally wonderful video. Even a non-boomer should be able to appreciate the exquisite talent shown once again in this beautiful live performance.