Differences in Mexican and American Real Estate Law

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Ah! The bliss of enjoying a beautiful sunset off the porch of your beach home, with a margarita or Tecate in your hand! First, however, you have to navigate the legal system.

Buying and selling real estate in Mexico can be fun and rewarding as long as you understand certain fundamental differences. Don't expect it to be like back home. I was always surprised by people who expected Mexico to have the same money and stamp system as the U.S.!

Below are some of the biggest real estate differences:

1. Houses are sold as is. In the U.S., you can have a house inspected and if something major (and sometimes minor) shows up, can demand that it is fixed, or call the deal off. In Mexico, there is no such guarantee and no legal mechanism to protect you, if your house ends up being a disaster. Do your own inspection and ask questions. When was the house built? Wiring and plumbing can be years behind the U.S. codes. What shape is the roof in? Replacing a roof on a colonial house can be extremely expensive. Look for signs of water damage on the walls. If possible look at the roof from outside. Where does the water supply for the house come from? If it is the city, how does the city's system do during dry seasons? Is there a backup water system (such as a cistern) in case of no city water? If there is wood in the house, such as doors, door frames or beams, are they termite free? In general, Mexican homes need ongoing, annual upkeep.


2. In general, there is no title insurance. There is a title search done, however, by the realtor and/or notary before drawing up a new title. There are companies that tell you they can sell you title insurance but it is not needed.


3. There are few mortgages to be had. Again, there are American companies offering mortgages for beach properties, but they are fairly expensive. Most deals are either cash or financed by the seller.


4. There are no escrow companies. Escrow companies hold your earnest money while papers are being finalized for closing. Without this service, handing over earnest money or commissions to realtors prior to closing is very risky. Many realty businesses have set up their own accounts to act as escrow accounts. Check with your realtor to see if he or she offers this service. An alternative to an escrow account, is to draw up a Buy/Sell Agreement in the U.S., clearly stating monies paid and what is going to happen. In the event of a disagreement, state what action will occur (negotiation? litigation?) and in what state.


5. There is a false market for buying and selling in Mexico, that everyone agrees to more or less. In general, actual value of Mexican property is less than the foreign dollar price. It works like this: An American buys in dollars. During the time that American owns the home, the peso might devalue, which effectively erodes the purchase price of his home. By selling in dollars to another foreigner, however, this protects the investment. Mostly this system works, but occasionally it can bite a seller in the "nalgas." If you are aware of this "false market," however, you can avoid potential pitfalls.


6. There is very little regulation of realtors or real estate agents in Mexico. Sonora is currently the only state to offer regulation, however, everyone who is selling real estate in Sonora is not currently licensed. Ask for referrals from happy buyers. Don't just assume that a charming realtor who speaks great English, is giving you a straight deal. By knowing the basic steps of acquiring a title, you can demonstrate to a realtor that you aren't to be fooled.