The Puerto Vallarta Real Estate market offers a myriad of investment opportunities whether you are a developer, retiree or luxury real estate investor.
The slowdown in the global and US financial markets in past years had a direct impact on coastal real estate in Mexico. The Puerto Vallarta real estate industry experienced a general slowdown in real estate sales and substantial price adjustments. Fortunately over the last year we have seen an increase in real estate sales and a return of the luxury real estate market.
There are still many real estate investments available at exceptional prices however this will not last forever. Many wise local and foreign retirees and investors are snapping up the available properties. Let’s face it; on the West coast, it is hard to find such incredibly well-priced properties in such a naturally beautiful location with friendly people and magnificent weather.
In order to assist you, we have designed a list of the most commonly asked questions by buyers when purchasing in Puerto Vallarta.
Frequently Asked Questions
The answer is a resounding, yes! The means, by which foreigners can acquire real estate, is through a Mexican bank trust, technically known in Spanish as a Fideicomiso.
Individuals or foreign companies, in their own right, as well as foreigners that own stock in a Mexican corporation, can all acquire properties through different methods depending on their location. In the interior of Mexico, through direct title and through a bank trust in the coastal areas, including beachfront properties.
A bank trust or what is locally referred to as a Fideicomiso, is the agreement or contract which is contained within the Title deed whereby the bank, known as the trustee (Fiduciario), holds the title for the buyer (Fideicomisario) who, in turn, has all the beneficial rights of use and enjoyment of the property.
A new bank trust is normally for a period of 50 years and can be renewed for a further period of 50 years.
Yes. If you decide to do so, you will be taking over the existing trust that is in place.
It would be wise to check how many years are remaining in the existing trust, since it may be better to establish a new 50-year Bank trust instead.
The initial fee varies from bank to bank; therefore it is a good idea to get a quote from different banks.
Typically, the initiation fee is approximately $500.00 to $650.00 USD, plus an additional, annual fee to be paid in advance. This is almost always the same amount as the initiation fee.
The bank fees are often based on the value of the property, however many banks will typically negotiate a fixed price for a specific time period or for the period of the trust.
Absolutely. On acquiring a property, it is placed in trust with the bank as Trustee (Fiduciario), who, for all technical purposes, is the legal titleholder.
The Trustee and purchasers’ responsibilities are clearly specified within the Bank Trust, which forms part of the title.
The Trustee is responsible for holding the property in trust for the purchaser who is then the beneficiary (Fideicomisario) of the Trust. In conjunction with the Trustee, the purchaser has the ability to rent, sell or transfer the rights to the property.
The Trustee`s (Fiduciario) function is purely an administrative one. The bank Trustee will only act upon written instructions from the Owner/ beneficiary (Fideicomisario) of the property.
Well, this really depends on who is selling the property.
If a Mexican national is selling a property to a foreigner, then normally there are approximately four people directly involved in the transaction. The parties would be the purchaser, the seller, the public notary and the bank.
If a purchaser is acquiring a property from another foreigner, in the coastal region of Mexico, then there would be approximately 5 people involved; the public notary, the seller, the buyer, the seller’s bank and the purchaser’s bank, if the purchaser is establishing a new bank trust with a different bank.
NOTE: It is important to note that the real estate brokerage, or agent, plays a very important role in the real estate purchasing process in Mexico.
A good agent, or broker, essentially orchestrates the whole process and is the main supplier and communicator of all the required information to all the parties involved in each transaction.
A Mexican Public Notary is a lawyer and is appointed to his or her position by the governor of the specific state, after completing rigorous exams.
This is normally a lifetime appointment.
The purchaser generally chooses the Public Notary since the purchaser pays the closing cost fees.
The Notary has an obligation to be neutral to both purchasers and sellers, even though the purchaser generally pays the Notary`s fees.
The Notaries function is to draw up the title. This involves checking the title chain (history) of the property that is being acquired.
The Notary also makes sure that there are no outstanding liens or encumbrances and that the property is current in the payment of the corresponding property taxes and maintenance fees, if they apply.
The Notary will also make sure that all the official requirements; evaluations, tax appraisals, non-lien certificate and other documents, are in place prior to the signing of the title.
On the designated closing date, buyer, seller and bank Trustee must appear before the Notary to sign the deed, which will then be officially certified by the Public Notary.
Once the deed has been signed and certified by the Notary, it will be sent to the Public Registry’s office for its inscription.
Once the deed is registered, it is returned to the Notary’s office and the purchaser will be able to pick up the registered title.
The process is very simple. On receiving an accepted offer for your property you will instruct your trust bank via a letter of instructions informing them that you are selling your property.
Once the title and all the paperwork has been completed by the Public Notary you will sign the deed in the presence of the Notary and the other parties involved.
On signing the deed, the net funds, after taxes and expenses, will then be wired to your specific account.
This is obviously a very simple explanation. There is a lot of work involved in completing a transaction but most of this is usually coordinated by your real estate professional.
Your real estate professional will guide you through each step of the process.
For more information, review our Free Sellers Guide, located on our website under the tab, “Sell”.
This free guide will give you a basic outline of the steps you will need to follow when selling your property.
In Puerto Vallarta, the purchaser pays the closing costs. The purchaser is responsible for paying the Notary`s fees and expenses as well as the transfer (purchase tax), escrow fee and all closing costs related to the sale.
The Seller is responsible for paying the Mexican Capital gains tax (Impuesto Sobre la Renta), if it applies, as well as the real estate fees. The seller also needs to be up to date with all his trust bank fees, property taxes and other payments related to the property, up to and including, the closing date.
Obviously it is difficult to give an exact amount, since closing costs are based on each individual property and have to be calculated specifically for the property being purchased.
Basically, you can expect to pay approximately 4% to 6% of the value of the property in closing cost fees. Remember, these closing cost fees are over and above the actual purchase price.
To avoid surprises, make sure that your real estate expert provides you with an estimate of the approximate closing costs for you prior to making an offer.
This really depends on the property being purchased.
Assuming that the property’s paperwork is in order, you could expect to close within a period of 30 to 90 days.