The Closing Process
The Mexican Real Estate Closing Process typically involves several steps. First, is the Purchase Offer. The Purchase Offer is written and the terms, price, and any other conditions are normally outlined in this document. The Purchase Offer is not legally binding. Many of the conditions shall be then included in the Purchase Contract. The drafted Purchase Offer is then signed by both parties, which outlines the terms and conditions of the Purchase Contract. The Purchase Contract is normally prepared by a professional Transaction Coordinator. Next, a Title Search is conducted to ensure that the property is free of any liens or encumbrances. Once the title is clear, a Notary is enlisted to oversee the closing process and prepare the necessary documents. Finally, the buyer and seller meet at the notary’s office to sign the deed and transfer ownership.
During The Mexican Real Estate Closing Process, it is customary for the buyer to pay a deposit, usually between 5% to 15% of the purchase price, which is held in an escrow account until closing. The Escrow Company Additionally, the buyer is typically responsible for paying closing costs, which can include notary fees, transfer taxes, and any outstanding property expenses. It is important for both parties to have legal representation to ensure a smooth and transparent transaction.
After the closing, the buyer is required to register the property with the Public Registry of Property to establish legal ownership. This step is crucial to protect the buyer’s rights and prevent any future disputes. Overall, the Mexican real estate closing process can be complex, but with the right guidance and knowledge, it can be successfully navigated.
Bank Trust Fees:
These are charged on a yearly basis and are paid upfront. They may vary according to the transaction, the property and the trustee bank; nonetheless most of them charge around $700 for properties priced under $800,000. For properties priced over that the fees will increase accordingly. In Addition to this, all the trustee banks collect the following:
Trust Acceptance Fee – This is a one-time initial fee to set up your Trust. This is a one-time charge and the fee varies by banks. For example, a bank could charge $700 USD + IVA (16% tax) so the fee would be $812.
Trust First Year Fee – There is an annual fee charged by the bank to maintain the Fideicomiso. This is paid in advance, so you have to pay for your first year at closing.
Foreign Affairs Permit:
SRE – Secretaría de Relaciones Exteriores
The Trustee Bank has the obligation to register the Deed within a 30 day period after the granting. The costs will vary depending on the Bank and the fee will range from $350 up to $800 Dollars.
National Foreign Inversion Registration:
RNIE – Registro Nacional de Inversiones Extranjeras
The Trustee Bank has the obligation to register the Deed within a 30 day period after the granting. The costs will vary depending on the Bank and the fee will range from $350 up to $800 Dollars.
Notario Fees:
These are regulated by a fee list authorized by the Notary Law valid in every State. Sample fee list is as follows:
- From $1,600 up to $6,492 = 2.75%
- From $6,493 up to $16,230 = 2.00%
- From $16,231 up to $32,462 = 1.50%
- From $32,463 up to $162,311= 0.95%
- from $162,312 up to $324,622 = 0.55%
- From $324,623 and over = 0.35%
*The fees can be for a lesser amount but never for an amount over this fee list.
Property Acquisition Tax:
ISAI – Impuesto Sobre Adquisición de Inmuebles
This is a State Tax. The Notario is responsible to charge and declare it without surcharges. It is around 2%based on the highest value of the previously authorized construction appraisal. It is important to mention that in order to calculate this tax you must apply a special procedure and the real closing costs cannot be determined on your own, a Notario must determine these costs.
Public Registry Rights:
RPPC – Registro Público de la Propiedad y Comercio
This permit can be processed through the Notario and is based on the sales price of your property. Once the corresponding rights are paid, the Notario will be able to process the registration in the Local Public Registration Office where the property is located. The costs vary as stated by the law in every State.
No Liens Certificate:
Certificados de Libertad de Gravámenes
NO LIENS ON PROPERTY TAX; NO LIENS ON WATER OR MAINTENANCE FEES:
The Notario has the obligation to check that the subject property has no liens. The Notario will gather the certificates from the corresponding Government offices and from the Condominium administration. This charge is normally not more than $100.
Other Charges:
Appraisal for tax assessment (Avalúo): This is used exclusively for tax purposes. Learn more about Appraisals for Baja Properties.
Property Survey (Deslinde): This is a sketch showing the property boundaries and physical features, like federal zone, roadways, easements, etc. The survey may also note topographical information, like elevation.
Other fees depend on the Notario and the costs they incur.
Title Insurance:
This varies according to the value of the transaction and the Insurance company but it should not exceed 0.5% – 0.7% of the price of the property. Learn more about Title Insurance for Baja Properties.
Escrow Account:
In order to manage the funds for the purchase of a property it is recommended to open an ESCROW ACCOUNT. The fees are different at each company and should be asked for in advance. This account is normally set up by a closing agent when you deposit your Earnest Money. The escrow account is usually held in a US bank. Funds for the real estate purchase, including remaining downpayment, loan proceeds and closing costs are deposited into the escrow account prior to closing. The escrow money is then disbursed at time of closing based on specific disbursement instructions which are prepared prior to closing.
There are certain fees that are paid prior to closing for services provided by 3rd parties (such as the appraisal, Notario deposit, trust permit, trust set up fee). The escrow account fee is $550-$750 depending on the sales price and title company that is used.
It is important to mention that some of the aforementioned expenses are mandatory and they must be made.
All of this information about closing costs is necessary to have an idea of what your
closing costs may be. It is important that you get a GOOD FAITH ESTIMATE up front from your Closing Company and review it with your Real Estate Agent.
Title Insurance:
This varies according to the value of the transaction and the Insurance company but it should not exceed 0.5% – 0.7% of the price of the property. Learn more about Title Insurance for Baja Properties.
Escrow Account:
In order to manage the funds for the purchase of a property it is recommended to open an ESCROW ACCOUNT. The fees are different at each company and should be asked for in advance. This account is normally set up by a closing agent when you deposit your earnest money. The escrow account is usually held in a US bank. Funds for the real estate purchase, including remaining downpayment, loan proceeds and closing costs are deposited into the escrow account prior to closing. The escrow money is then disbursed at time of closing based on specific disbursement instructions which are prepared prior to closing.
There are certain fees that are paid prior to closing for services provided by 3rd parties (such as the appraisal, Notario deposit, trust permit, trust set up fee). The escrow account fee is $550-$750 depending on the sales price and title company that is used.
It is important to mention that some of the aforementioned expenses are mandatory and they must be made.
All of this information about closing costs is necessary to have an idea of what your closing costs may be. It is important that you get a GOOD FAITH ESTIMATE up front from your closing company and review it with your real estate agent.
The Mexican Real Estate Closing Process is and to understand, that the only thing standard about buying property in Mexico, is that nothing is Standard.