A Concise Guide to Buying Real Estate in Mexico
A Step by Step Guide
Congratulations on pursuing your desire to own a piece of paradise! Since you’re reading this you at least have a curiosity if not a consideration or indeed a determination to own property somewhere in the Puerto Vallarta region of Mexico. But you want to know how to go about it safely and wisely. And for that, we offer this buyer's guide.
While this website is designed to provide an easy and fun means for finding one's ideal property, this guide is meant to provide interested foreign buyers a basis of how to go about purchasing here.
The information presented herein is concise and by no means complete or definitive in scope and this guide shall be amended through time as sales practices evolve.
Skim through the parts that are of your interest and check out the questions and answers below for a briefer overview.
The reasons for desiring property in the Vallarta area of Mexico are many. While on about the same latitude as Hawaii, Cancun and much of the Caribbean, it is its inhabitants who are rightfully credited for Puerto Vallarta being continuously voted the World’s Friendliest City. Upon your first arrival to this tropical paradise, you feel its welcoming nature and charming character. Who wouldn't want to live here?
Situated deep inside the spectacular Bay of Banderas, midway up Mexico’s Pacific coast, Puerto Vallarta is an easy 2 1/2 hour flight from the United States and under 5 hours to most cities in Canada.
The mountains behind Puerto Vallarta are part of the Sierra Madre range and flowing from them into Banderas Bay are several rivers including the Ameca which is centrally located to the bay and serves as the border between the two Mexican states of Jalisco and Nayarit.
Puerto Vallarta's Licenciado Gustavo Diaz International Airport is located midway in the bay and is easily accessible to towns and cities in both states where our MLS market has active properties for sale. The vast majority of all listings are less than an hour's drive of the PVR airport.
Puerto Vallarta is a city of about a quarter million inhabitants and over the past 25 years that I’ve lived here it has doubled in size. It has evolved into a relatively sophisticated city with good infrastructure and an ever improving road system. It has good bus, taxi and Uber services, modern conveniences, quality health care and good hospitals. As more and more younger families are also moving here, its worthy to note it has good schools of which many are bilingual.
All that along with tourism related offerings such as top notch restaurants, nightclubs, entertainment venues and countless funtime activities. Many reasons moving to Vallarta is appealing to so many.
Like any city its size it has its issues and areas best not ventured or considered for a purchase to live in but truly, for it needs to be said, Puerto Vallarta and this region of Mexico remain as safe a place to live as anywhere in the United States or Canada.
As it's not a shipping port, neither is it a drug cartel shipping route and therefore little drug-related crime occurs in this region that has unfortunately plagued other parts of this beautiful country.
The time to buy in Puerto Vallarta
What you'll discover is how charming and friendly the area is and why others are flocking here. That there is no better time to buy real estate here than now with prices and market demand ever increasing, fueled by retiring baby boomers and an ever-increasing number of millenials.
And the price for what you can buy here coupled with lowered living expenses, Puerto Vallarta and region is an excellent consideration.
Hopefully this guide will accomplish a couple of things.
First, provide a clear understanding of the purchasing process while clearing up any misconceptions some have about buying in Mexico.
Secondly, positively assure you an investment in the Puerto Vallarta region is of minimal risk. With professional guidance, that is.
At some point you’ll wish to secure a professional realtor knowledgeable in the local market. One with whom you'll feel comfortable discussing your desires and requirements. Someone you can discuss these issues yet sense he'll keep them private.
You'll want a professional realtor to guide you through your property search and eventually take you on showings. A realtor who'll lead you through the negotiating phase to seek a good deal and who’ll then ensure a smooth closing process and transaction. And an agent who will still be there beyond the sale.
Choice Realty Services
My name is Jamie Coates, owner of Choice Realty Services, and I strive to be your agent. I am a buyer’s agent and guarantee my professional services to ensure your best interests are met.
What’s important is you find and buy the home you want for all the right reasons, not buy the one someone wants to sell you for all the wrong reasons.
Like most everywhere, Puerto Vallarta real estate is a commission-based industry and the compensation for those involved in a sale is paid by the seller. And while the seller is responsible to pay the full commission to all involved selling her property, it can be noted the money originates from the buyer.
That is, the buyer puts the money on the table from which the seller then deducts the owed commission. The seller never pays the commission with her own banked money first nor pays an initial retainer fee but rather, at the time of closing, the seller pays the commission using the money the buyer made available for the purchase.
Since the buyer is putting up the money, shouldn't the buyer have someone looking after their best interests? I think so. Since I'm a buyers agent, I look after the best interests of my buyers, just as there are many really good listing agents in Puerto Vallarta who serve their sellers well.
I assure each buyer that I will listen to them and put their interest ahead of any seller. With that, I encourage my buyers to explore when visiting the region, to walk the streets and visit developments that catch their eye as part of their property search. As you visit each, simply let them know Jamie Coates of Choice Realty represents you but that you're interested in information.
Real estate commissions in Puerto Vallarta
Like everywhere, commission practices in Puerto Vallarta are driven by tradition and company policies and not by any law or government regulation. The standard commission rate in Puerto Vallarta for resale properties is 8% when listed through local MLS services. If the property sells for a million dollars or more the commission often drops to 7%. For a building lot or a business the rate can jump up to 10%.
These are the standard rates and they’re negotiable; however, as the number of overall resales in the region each year is much less than other North American markets, the 8% rate often gets justified.
There are exceptions. Developers of large housing or condominium projects often negotiate a 6% fee to the agency representing them due to the sales volume involved, for example.
Real estate practices in Puerto Vallarta
Each property listed for sale on the local MLS is the exclusive listing of one of its participating local member agencies. The exclusive listing agreement is a legal contract between a seller and an agency concerning the marketing and sale of a specific property within a predetermined period of time at a pre-agreed compensation typically in the form of a commission payable when the property sells at closing.
Part of marketing any property is utilizing the services of other MLS member agencies for the potential buyers they collectively represent. The chances of selling a property increases significantly over the resources of a single agent or agency. In turn, commissions are shared between the two agencies involved in every sale: the listing agency (representing the seller) and the selling agency (representing the buyer).
On a typical MLS resale, that 8% commission is evenly split between those two agencies. On a $200,000 home sale, for example, 8% equals $16,000 in total commission, which is split 50/50 ($8,000 & $8,000) between the two agencies involved. Each half is further split between the individual agents working the sale and their respective companies, often again 50/50 but that split can and does vary from company to company and from agent to agent within each company.
So generally speaking, the agent who brought in the buyer on a $200,000 sale makes more or less $4,000, a quarter of the total commission paid out by the seller.
If the same agency represents both buyer and seller, referred to in Canada and the US as “dual agency”, then that company makes substantially more money. Just add the quarters together. It’s most advantageous if you own the company, it’s your own listing and you represent the buyer, too. It’s not difficult to understand why agencies would be tempted to push their own listings over what may otherwise be a buyer’s better choice.
Listing agencies are obviously motivated to sell their own listings, as they should be. An agent pushing his own listings is actually doing his job, living up to his responsibilities in the exclusive listing contract regardless if those listings are of the buyer’s best interest or not.
Real estate licensing
While there is no licensing of real estate agents in Mexico, Jamie Coates of Choice Realty is a member of AMPI, a national organization that promotes fair business practices and ethical behavior in the real estate industry throughout Mexico.
The properties displayed on this site are represented by fellow AMPI members who are generally a joy to work with. While Mexico and Puerto Vallarta specifically is known for tardiness and late appointments, the industry takes punctuality seriously.
Unlike the US and Canada where lockboxes are frequently used, here they're much less common. Rarely in fact. As a result, all property viewings are by appointment with the seller's agent and so to create a tour of 3, 4 or 5 homes takes some planning. Fortunately, as we're all in the same boat, we all attempt to adhere to a tour's schedule.
So my hat is off to our listing agents and agencies.
What you have to be concerned about in Mexico is dealing with an unqualified "agent" peddling real estate online without any qualification nor necessarily adhering to any ethical standards.
Should you discover a property online that grabs your interest and that's privately for sale, be it Craigslist or another site, or walk the street and see a "Se Vende" sign, forward the information to Jamie and he'll investigate it.
Once you’ve whittled your search down to types, prices and locations of properties interested, it’s time to go see them! As your realtor, I've already assisted in your research and have offered advice on your selection as well as arranged viewings.
Probably the most cumbersome part of buying here is when viewing properties. Unlike the US or Canada, lockboxes are rarely used so virtually all showings must be prearranged with the listing agent which takes coordination and punctuality on everyones part. Fortunately, all realtors here are in the same boat and therefore we all appreciate the punctuality part!
I like to keep the number of viewings on any one day short so not to overwhelm but also to keep them finely within the range of your stated preferences. It may take a few excursions to whittle them down and even a return visit but when you find the right property, that is the one that matches your desires, needs and wallet, the next step then is to present an offer.Preparing the Offer
To buy property in Mexico you must be an adult, legally in the country and financially capable of making an offer. The details of any offer will be specific to each property, of course, but for resales realtors here use a standard boiler plate "AMPI contract" modified with each sale’s particulars. These contracts are in both languages, Spanish in one column and English in the other. Spanish is the legal language of the contract while English is considered a “courtesy translation.”
Properties displayed on this site are those offered in US dollars. Some local Mexican real estate sites offer properties in Mexican pesos. Both are common and accepted; however, it is important to point out that all properties have their values deeded in pesos, the country's official currency.
Presenting the Offer
In the United States and Canada, an offer is commonly accompanied with a check representing a good faith deposit, demonstrating the buyer’s seriousness and ability to buy. Here, there is a difference.
In Puerto Vallarta, it has become regular practice that once an offer is accepted, both parties work to clear the contingencies, if there are any. Once cleared, usually within 15 days of the offer's acceptance, an escrow account is specifically established for the sale and 10% of the purchase price is wired into it.
Things are handled a little differently if you're purchasing in a new development. If you've settled on a development your first step is to reserve a specific unit. A reservation deposit is typically $10,000. This gives you a window of opportunity to view the sales contracts and other documents provided by the developer. If you don't wish to continue with the sale you get your $10,000 back.
Oftentimes there will be counteroffers and counter-counteroffers before the two parties agree (or the buyer chooses to let the offer expire and begins looking elsewhere). Once an offer is accepted and a good faith deposit made, it’s time to work our way toward the closing. For a resale, that's nominally 45 days away but can be completed sooner if one’s in a rush. Sometimes, for reasons beyond anyone's control, the banks can hold up the process.
The immediate concern after reaching an accepted offer is removing any contingencies affecting the sale. The most typical contingency being a property inspection. As your agent, I will arrange a property inspector to do an ocular inspection of the property for its overall condition. They're usually completed within the first or second week of an accepted offer and the cost varies but expect to pay somewhere around $250 to $300 depending on size of the property. It's payable at the time of the inspection or upon delivery of its report.
Should the report recommend a further inspection by a building engineer or there be other aspects in the report not to your liking, then these issues can be discussed between parties via their representative agencies and hopefully resolved.
Ultimately, the buyer must be satisfied with the inspection. If it doesn't go well or the seller fails to rectify any issues to your satisfaction then you have the right to cancel the sale and have your escrow deposit returned if paid. Many sellers sell "as is" and will not rectify anything but at least you'll know if the hot water tank will need replacing anytime soon.
Other contingencies to be overcome could include financing or selling one's house elsewhere, etc. Once all contingencies have been met and satisfied then it is time for the lawyers to get to work prepping the transfer of ownership and creating the new deed.Public Notary
The closing will take place in front of a public notary. Unlike their Canadian and American counterparts, Mexican notarios are of an elevated legal status over common lawyers. In reference to a property transfer they work on behalf of both the buyer and the seller “to bring faith to the operation” as well as to record the land transaction for the government and collect taxes and possibly any capital gains taxes owed by the seller.
Collectively, this service is part of the closing costs and the buyer is responsible for its payment. Near the time of an offer we can arrange a quote from the notario what the fee most likely will be but at this point you could guess it to be around 5% of the purchase price, around $10,000 on a $200,000 purchase.
The notary process commences after the contingencies are cleared. The buyer sends the notary $3,000 or so, an amount sufficient to commence the process. The balance owed to the notary is paid in full at the closing usually using wired funds.
Depending on the complexities of your purchase you may want to consult your own lawyer but be sure to choose one who practices Mexican real estate law. I work with local lawyers who are available to assist in drawing up the contracts as well as for fielding any legal questions you may have. As they assist the notaries to complete the new deeds and other legal work, they are compensated by the notaries through your closing costs.The Bank Trust
Probably the most misunderstood aspect to foreigners buying property in Mexico is the bank trust requirement. Many confuse it as being a lease which it is not. All properties within 50 km of the country’s coastline or 100 km of their land borders are in the constitutionally-protected “restricted zone.” Such restrictions do not exist further inland.
This restriction of land was put into the Mexican constitution after the loss of half their country, i.e. Texas, California, Nevada, Arizona, etc., in the middle of the 1800s. It was meant as a means to protect what was left of Mexico when invaders then would come by land or by sea. Today, the only foreign invaders are tourists flocking by the millions to soak up the beaches and margaritas. And some, liking what they see, want to retire here and in the process purchase a home.
The Mexican constitution dictates that only a Mexican entity can purchase in the restricted zone. In a clever get-around, the property you purchase is purchased via a bank trust, a fideicomiso as they are known, where the bank, a Mexican entity, is the owner by record, with the purchaser, you, listed as the bank trust’s first beneficiary. Your heirs are listed as the trust's 2nd beneficiaries.
The fideicomiso happens to be a very flexible and safe purchasing instrument that does not circumvent the country’s constitution. It enables North American baby boomers to stake out their piece of this paradise. And it smartly permits an inflow of capital into the country that in turn generates thousands of jobs for the local economy.
What’s important to understand about the bank trust is you’re making a real land purchase and not a lease. The reality is these trusts are exceptionally flexible and safe instruments for purchasing property. They operate not unlike a living will as the bank trust substitutes the need of probate since it has hereditary clauses.
You are the first beneficiary of the trust; your children (for example) are listed as the trust’s second beneficiaries to whom the land transfers when you pass on. Where it can get messy is if something happens to you when no second beneficiaries have been listed. It would then be resolved in a Mexican court. (Your children can check back in a few years.)
The closing will occur at the notario’s office and when you leave from there, it’s your home. Time to pop the champagne!
You'll leave the notary's office with keys in hand to your new property and a simple copy of your new deed. Your new permanent deed will not be available for about six months as the beauracracy regarding the sale continues for awhile.
As necessary, you'll leave with pre-signed letters instructing the utilty companies to switch the names of the accounts from the sellers' names to your own. As your agent, I'll be there to assist you in those endeavours.
If it’s a resale chances are the property came furnished. New developments are typically delivered unfurnished apart from some appliances. However you receive your dream home you’ll likely want to spruce it up, maybe a little or perhaps a lot. There are a number of architects and interior designers I can put you in contact with as well as make mention of the many excellent stores and other services available should you want to explore more on your own.Property management?
If it’s your intention to bring in some rental income when not here then property management services may be required. There are numerous companies offering such services and their costs vary with the complexity of the services contracted. It can be arranged to include anything from simply paying bills to making repairs on short notice to providing maids, cooks and/or gardeners, all tailored to your needs, circumstances and pocketbook.
To enjoy your property you could continue visiting Mexico as a tourist as you’re allowed to enter the country for up to six months at a time before leaving and reentering again. Instead, you ought seriously consider elevating your Mexican immigration status above a tourist level by acquiring legal residency. I can put you in touch with those who can help in this regard, too.
Having legal residency will offer increased opportunities. For example, you can apply for a tax ID number that can help you later should you choose to sell.Everyone and every purchase is unique
That’s the purchasing process as it relates to most people. Each purchase is unique and your own requirements will vary.
If you were purchasing beachfront property, for example, then consideration to maritime laws and concessionary rights would be required.
If you come across some really cheap land of the too good to be true variety then it likely is too good to be true and it’s likely ejido land. Proceed with extreme caution; foreigners cannot legally buy ejido property despite what “great deal” may get presented your way. Be wary.
As your representative, we’ll discuss all these issues and more in greater depth and tailor my assistance to your desired purchase and needs. Welcome to paradise!
Purchasing real estate in Puerto Vallarta is really not too different than purchasing anywhere apart from some local and logistical issues such as arranging bank trusts and the use of public notaries. Below are answers to questions frequently asked.
Yes. Foreign ownership of property is encouraged by the federal government for its postive impact on local communities and ties to the tourism industry.
The Mexican constitution restricts foreigners from directly owning property within what is called the restricted zone, that is anywhere within 50 km (30 miles) inland from the ocean or 100 km from its national borders. Puerto Vallarta, being a coastal community, rests within this zone. As such, this restriction means a purchase here must be done via a Mexican entity.
There are a couple of legal ways one can make a purchase. The most common and preferred method is through a Mexican bank trust, known as a fideicomiso, that provides the buyer with the same rights, privileges and responsibilities that come with direct ownership. As the bank is a Mexican entity, it circumvents the constitutionally-placed restriction.
The federal government must approve all foreign purchasers, a formality, and the bank trust enables a purchaser to potentially claim the property as a primary residence and therefore qualifiy to not pay capital gains taxes whenever the property is later sold.
The fees vary by bank and the trusts can be transferred from one bank to another as they are not an asset of the bank but in effect are of yours. They run for 50 year increments and are fully renewable and go on for perpetuity.
A second option for purchasing is to form a Mexican corporation and to have the corporation purchase the property. While this option also circumvents the constitutional restriction and will eliminate ongoing bank trust fees it won’t help in eliminating capital gains taxes later for a corporation is not a person and therefore the property could not qualify as a primary residence.
The bank trust is a legal substitute for fee simple ownership with the Trustee as the legal holder of the property. As beneficiary, you have the right to sell your property at anytime without restriction. You may dissolve the trust upon sale or transfer your rights to a third party or pass it on to named heirs.
The bank trust is available through various banks and they are initially set up in 50 year increments and can be renewed for successive 50 year periods, running in perpetuity. As they are not an asset of the bank, the Beneficiary can at anytime transfer the trust from one bank to another or even transfer the remaining balance of years to a new buyer, reducing their closing costs.
Setting up the bank trust is part of the closing costs and their ongoing annual charges vary from bank to bank with the typical charge being about $500 a year. I encourage foreigners to look at the annual charge as part of their overall property taxes, which are really cheap to begin with. For most people, the trust fee and their actual property tax would add up to less than a $1,000 a year.
Closing costs will vary from property to property and from notary to notary, among other considerations. Some costs are fixed regardless of property price while most costs are a reflection of property value.
It is fair to estimate them at 5% of the purchase price in general terms; however, the greater the purchase price the less of a percentage are those costs. Oftentimes, it will be only 3 or 4 percent. A very inexpensive property would have a greater percentage of closing costs, sometimes considerably more than 5%. If you obtain a Mexican mortgage, that too will drive up the closing costs.
Before making an offer to purchase, it’s best to obtain an estimate to see what the actual closing costs will likely be on a particular property, something I would arrange as your representative.
Not much. Property taxes are less than onetenth of a percent of the property's value. On a $100,000 property, the tax would be about $100 a year. $300 on a $300,000 house.
The fideicomiso trust fee varies by bank but averages around $500 a year. One can look at the trust fee and the actual property tax, called a predial, as the effective property tax which for most people is less than a thousand dollars a year. Still cheap.
There is no formal licensing of real estate agents in Mexico; however, I was fully trained and licensed in Canada prior to moving here in 1993.
Furthermore, I am a member of AMPI (the Associación Mexicana de Profesionales Inmobiliarios — the Mexican Association of Real Estate Professionals) which promotes for such licensing. Ongoing education and strong ethical behavior between its members and with the public are AMPI themes.
While there is a correlation between Puerto Vallarta tourism and local real estate sales, the two feed each other, and while economic forces drop hotel rooms in half during the summer season in reflection of the lesser number of tourists, property prices are not affected from high season to low season. They trend up or they trend down from year to year. I find summers a good selling time, though. Often enough, buyers are more on a mission to purchase then compared to those in the winter months when priorities are more attuned to the beach.
You might, but don’t count on it. The agent representing the seller is contractually bound to get that seller the highest price possible. It’s not to say the selling agent cannot work with you in a fair and professional manner, as long as you realize where his loyalties lie.
Think about it. Being a listing agent is not an easy job and the more listings one has to deal with the greater its collective burden. How much time do you think listing agents have for buyers when they have so many listings? Do you think they’ll be more motivated to show their own listings or those of others with perhaps more suitable properties?
The commission is paid by the seller at an amount previously agreed to and detailed in the exclusive listing agreement signed between the seller and their agent. In the course of a negotiation, you might get a percent off the commission on a specific property in the process of making a deal, which actually benefits the seller more than the buyer, but no one can or will offer a blanket reduction across the board.
Properties listed for sale on this site are through our local Multiple Listing Services. All agents have access to the same inventory; therefore, you don’t need go door to door. Because the time to research and show properties is time-consuming, you’re best to find an agent you like and stick with that agent to get your best deal. Give them your loyalty and they’ll give you the same in return knowing you’re not going down the street shop to shop in some false hope of cutting a deal.