This trust is administered by a Mexican bank and has its own cost. A buyer may consider a new trust for 50 years, renewable, or assume an existing trust.
The notary gives the estimate of closing costs for the trust and associated fees. It is customary for the buyer to select the notary. The costs are given in pesos at a conversion rate selected by the notary or requested by the buyer. The rate is adjusted closer to closing, when the final payment is made. Customarily, the buyer pays a deposit of 50% of the estimated costs, so that the notary can start the application for ownership and order the appraisal. The appraisal is not a market appraisal, but one from which the city computes the property taxes.
The seller should know before closing if he has capital gains costs. However, many times this information is learned upon the written agreement of a sale, when the seller’s documentation is taken to the notary.
If the seller has an existing trust, the bank charges a fee to cancel it, if the new buyer is not assuming it. The seller can also be responsible for the payment of the real estate commission, including I.V.A. or sales tax.
The seller should pay also, the proper portion of property taxes, his current trust fees, utilities until date of closing, condo fees and assessments, contributions to city services being charged to his neighborhood, and what other costs are negotiated between buyer and seller.
The buyer will work off the estimated statement from the notary, and when the final 50% is paid, should receive a formal paid receipt.
The Closing Cost Estimate from the notaries all follows a common format:
The Property Value of Sales price is given in Dollars and the selected exchange rate. The Property Value is then given in Mexican Pesos.
The notary’s fee is a percentage of the sales price in pesos and averages from .007-.01 percent. This includes the professional fee, a charge for office supplies, and I.V.A. The notary’s fee is sometimes negotiated.
The transfer or acquisition tax is approximately 2% of the appraisal value. The notary will order the appraisal to be done by an authorized appraiser. This value will also establish the basis for the yearly property tax. The law changed in 2002, whereby the transfer tax is charged on the appraised value instead of the sales price.
Additionally, there is the cost to apply or register the trust in Mexico City. Foreigner ownership of real estate is recorded at the Foreign Affairs Registry in Mexico City. The buyer pays for the cost of certificates to show that there are no liens of record prior to sale and that the property tax has been paid. An additional certificate will show that the water bill (Seapal) has been paid, if the property has this city service.
The bank will also charge a set-up fee or assumption of the trust, plus the first year administration fee in advance. There is a yearly fee for administration of the trust, due on the anniversary date of the formation of the trust. These fees currently run from $350 USD to $700 USD a year, depending on the bank.
The costs for closing for the buyer who has a trust, average 4-7% of the sales price. The sellers in this area consider the transfer tax and trust cost to be the responsibility of the buyer. A Mexican citizen does not have the cost of a bank trust, but pays the other normal fees charged by the notary.
For many first-time buyers, it is a shock to realize that closing costs are more than is typically paid in the US and Canada. It is important to budget for this expense when you are determining the overall cost of the purchase.
If a bank or title company escrow account is used to hold the purchase funds, there is an additional one-time charge averaging $500US. Currently, no Mexican companies offer title insurance.
If you are building in an area that is overseen by an environmental impact agency, there is a cost for an ecological study before a permit to build will be issued.
Additionally, if you have an attorney working for you, you will have the cost of his fees as well.
Although closing costs for the buyer can be substantial, I recommend that you not try to take a short cut. To protect your purchase, you need to have the trust and public deed. To do this, you must go through the proper channels with a notary.
The majority of pre-existing homes for sale, whether they are villas or condominiums, are offered furnished. There is no large discount in price to exclude the furniture.
If your purchase is adjacent to a federal zone, such as the ocean, a river or a federal highway, you should have the concession researched. If you want the private use of the federal zone, you enter into a lease agreement and pay an annual fee. By paying for the concession, you have the use of the federal zone under certain guidelines. Many homes have terraces, beach palapas, pools or landscaping on the federal zone. Construction of part of a permanent structure, such as a room of the house, is not permitted in the federal zone.