Residential development in Mexico is in full swing and U.S. buyers, tempted by attainable prices and spectacular ocean views, are acting quickly to fulfill their dreams of owning their dream home in Los Cabos.

While the process of owning your own home in Los Cabos is stratight forward and a relatively painless experience it is essential that you follow a few simple rules. Lands End realty of Los Cabos will help you through the process and ensure that your interests are fully represented - weather it be with a private Seller or a Developer.

Remember, you will likely be dealing with this process from the US, so the need for timely and accurate information from your Broker is of the utmost importance to you the Buyer. With our offices in Los Cabos easily reachable by phone and email and our experience of handling hundred's of transactions from selection to offer to purchase to contract to closing, you can rest assured that you are in safe, knowledgeable hands every step of the way.

These are a few tips that you should be aware of:

• First, be sure to work with a real estate professional with a solid reputation, experience and longevity in the area. Mexican real estate agents are not licensed like those in the U.S.; therefore, they have no legal obligation to disclose possible problems with the property.

• When purchasing property from a developer, research the developer’s history in Mexico.

• Ask if title insurance is available and, if so, make sure it is with a reputable title insurance company. Without title insurance, banks will not lend money to foreign investors.

• Verify that the developer places deposits in escrow or takes out a construction bond to protect purchasers, and always ask for banking references.

• Under the Mexican Constitution, foreigners are not permitted to directly own property in the Restricted Zone, 100 kilometers along all natural borders of Mexico and 50 kilometers (31 miles) along Mexico’s coastlines. As a result, oceanfront buyers must obtain a bank trust, or fideicomiso, for the property in order to hold title as the beneficiary of the trust and to be granted rights of ownership (e.g., possession, right to construct and to tear down, to rent or to sell) in a 50-year renewable trust. (See below)

• All home purchases in Mexico are to be finalized through notarios publicos (Mexican lawyers) who have the exclusive right to “sign off” on every real estate transaction. Beware that closing escrow in Mexico could take longer than buying property in the U.S.

• The boom in Mexican real estate has opened the doors for U.S. institutions willing to lend money to foreign investors for mortgages in Mexico, including GE Capital, GMAC and Laredo Bank/BBVA. Most of these lending institutions have local representatives in Los Cabos as well as offices in the US. Lands End Realty of Los Cabos has established relationships with all local and most US representatives and would be glad to introduces you to them.

Title Insurance

American title insurance companies Stewart Title Guaranty Corp. and First American Title are now offering title insurance policies to foreign buyers in Mexico. Title insurance offers an extra level of protection for buyers purchasing property in Mexico.

When a buyer elects to obtain a title insurance policy, title insurers undertake an exhaustive search of property records, sometimes going back decades to establish clear title. They will also examine records to determine that taxes have been paid and that there are no remaining liens on a property that could become the obligation of the new buyer.

In Mexico, the notario publico (notary public), who is an attorney and appointed by the governor, certifies all real estate transactions. This is done after reviewing various property and tax records from a title search. American title insurance protects buyers against errors made by the notario publico.

Title insurance policies typically cost $5 per $1,000 of the purchase price.

The "Fideicomiso"

In Mexico, there are ONLY two ways to own property as a foreigner: having a deed to the property and obtaining beneficial rights to the property through a Fideicomiso. There is no such thing as a 99 year lease!

Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real property within 50 kilometers of any coastline or 100 kilometers of either international border. This is referred to as the “restricted” zone. If the property you are buying is located outside of the restricted zone, you may own the property through a deed in your name.

However, in 1973, recognizing that many foreigners would enjoy owning property in Mexico, and would bring needed dollars to the country through such ownership, President Echeverria approved the Fideicomiso form of ownership, which is available to non-Mexicans. It is similar to a U. S. Bank Trust. This law governing ownership under a “Fideicomiso” was further expanded in the Foreign Investment Laws of 1989 and 1993.

Properties located within the restricted zone, which includes the entire BajaPeninsula, may be acquired by a foreigner through a “Fideicomiso”, which designates the buyer of the property as the beneficiary of the trust. Legal title is placed in the name of the bank selected by the buyer as his trustee. The bank administers the property in accordance with the instructions of the buyer/beneficiary. The buyer/beneficiary enjoys the same rights of ownership, as does a Mexican national. He may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to the general laws of the country established for all persons.

The term of the “Fideicomiso” is fifty years and it can be renewed for additional fifty-year periods. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law.

The procedure for establishing the “Fideicomiso” is as follows:

1.     Application is made to the Secretary of Foreign Relations for the permit to establish the “Fideicomiso”.

2.     Upon receipt of the permit, the bank acting as the trustee sends instructions to the "Notario Publico" for preparation of the deed to the beneficial rights.

3.     Applicable taxes are paid.

4.    The deed is recorded in the municipality where the property is located.

The cost for the permit to establish the “Fideicomiso” is approximately $2,400 USD. Annual bank administration fees generally range from $450 to $500 USD. Additional closing costs such as an official appraisal, notario fees, certificates, registration costs, must be paid in order to obtain the registered documents in the buyer’s name. During your purchase transaction you will be provided with a written estimate of all of the closing costs involved in your property purchase.

Real Estate Transfer Process

The real estate transfer process begins after a written purchase offer is accepted by the seller and when a purchase-sale agreement is completed by both parties. Typically a deposit is required by the broker in order to transmit the offer to the seller. Normally, when signing the escritura or official deed, which needs to be certified by a Notario Publico or notary public, the balance is paid and the property is delivered.

The Notario Publico is a government appointed lawyer who processes and certifies all real estate transactions, including the drawing and review of all real estate closing documents, thus insuring their proper transfer. Furthermore, all powers of attorney, the formation of corporations, wills, official witnessing, etc. are handled and duly registered through the office of the Notario Publico, who is also responsible to the government for the collection of all taxes involved. In connection to real estate transactions, the Notario Publico, upon request, receives the following official documents, which, by law, are required for any transfer: A non-lien certificate from the Public Property Registry based on a complete title search. A statement from the Treasury or Municipality regarding property assessments, water bills, and other pertinent taxes that might be due, and an appraisal of the property for tax purposes is also required.