It is well known that starting a business or purchasing a property can take a long time, anywhere.  This can be especially true if you are a foreigner and you want to purchase property in the “restricted zone” (the coastal areas) of Mexico. I’ve spoken to many foreigners who were told “by somebody” that they could have their deal closed in a couple of weeks.  When that doesn’t happen, I have heard many bitter complaints about delays, and about receiving all kinds of excuses from the people who are managing their closing. I have even heard from others that after many delays their transactions were never actually closed, but they didn’t know it.  Although every transaction is different and timing varies greatly, I have summarized here a list of the major steps toward closing a real estate transaction in Mexico, to help you understand the process and better understand the potential delays.

Although the non–Mexican citizen is not technically a “buyer” (the property will be owned by a Trustee and they will be beneficiaries of the trust), but for ease of understanding, from here on we will refer to the foreign party as the “buyer.”

For example, we will deal with the most basic and common scenario: a non-Mexican Citizen wants to purchase a property from a Mexican Citizen, this property is for residential purposes (with or without construction) on the coast, in the restricted zone.  He or she will understand that it is not possible for foreigners to make a direct purchase, so he or she will have to set up a trust in which the Trustee (an authorized Mexican Bank) will hold the ownership, while he or she will hold the rights or benefits of the trust.  Having understood this, he or she will have to go through these three major stages:

1. Private Negotiations

The first stage depends only on the time it takes for the seller, the buyer, their attorneys (if they have hired any) and their real estate agent (if any), to establish the terms and conditions under they will carry out their transaction (price, time to close, payment method, documents, delivery, down-payment, currency, money transfers, etc.). All of this can take from one day to the time the parties need to have all of this ready. Some times, a big developer’s policy is not to negotiate at all, here are the terms, take it or leave it; other times when a buyer and a seller have an agreement on the price, there is still a lot to negotiate. It is advisable to sign a private contract stating all of the agreements you had come to during this stage, this is the only way you can enforce the compliance of the agreements later and the best way to document any payment made before the closing. Hiring an attorney before paying any money or signing any documents is the best way to make sure that your transaction is legally possible and that that you didn’t miss anything important.

2. Formalization

The second stage can be easily explained and illustrated in 3 parts:

A. Notary’s quote. During this stage a Notary will be involved (all property transaction must go through a Notary) so it is important to get a quote from the Notary before hiring him/her and pay in advance a part or the total of the Notary’s quote (this quote comprehends taxes, expenses, Notary’s fees, survey, Registration, Trustee payments, Permits etc.).

B. Documents Delivery. All the parties will provide the Notary with their general information, a copy of a valid ID and any other document proving their legal interest in the transaction (if necessary), the seller will have to provide a copy of the property title, last receipt of property tax payment and any other document required by the Notary depending on the type of property (if necessary), the buyer also needs to deliver a copy of a document proving his/her domicile (cable, power, water, etc), naming a person(s) as a substitute beneficiary for the trust and to provide a copy of an ID of this person(s). The bank will deliver to the Notary all the necessary documents concerning the Bank and its representative’s authorizations (if the Notary has worked with the same bank before, it is very possible that he or she has these documents already).

C. Notary’s process. Once part A and B had been completed, the time will depend mainly on the Notary’s staff’s ability to have everything ready, having the help of an attorney during this part can help you on one side, to make sure that everything is being done as agreed and to help close your transaction in a shortest time possible. Note, that during this part the Notary or the Attorney will have to apply, through the Bank, for a permit which will be issued by the Foreign Affairs Ministry, this permit is usually issued in no longer than 3 weeks from the moment the application was presented (if it was properly applied for). The Notary also has to get some documents, such as a certificate of non-encumbrances, documents proving that the property is current on its taxes, an official survey, etc. Once all of this is done, a project of the title containing the setting up of the trust and the terms and conditions of the transaction, this project must be available for the revision of the parties and to set up a signing date (closing date).

When all the 3 steps are ready (A, B & C), the parties and the Notary can sign the deed and unless otherwise agreed the payment must be completed, the property can be delivered and all pending payments such as realtor commissions, notary’s quotes, attorney’s pending fees must be made. 2 months is a reasonable amount of time to finalize this stage.

3. After-signing procedures

Once the second stage is finalized, the third stage depends mostly on the Notary and although the property is been transferred, there are some things that the buyer should follow-up on. When everybody has signed the deed, the buyer can request the Notary for a notarized copy of his/her deed, note that the original deed will be kept in the Notary’s office, however, any notarized copy can serve as a property title. After the signing, the Notary will have to pay the registration fees and the transfer taxes, and then communicate with the City Hall & Public Registry of the closed transaction.

Once the above is done, the Notary will be able to issue a Testimonio to the buyer, which is also a copy of his/her deed, but this document will have attached all the necessary documents and seals proving that the transfer was legally made, that the Notary authorized the transaction, that the taxes where paid and that the transfer was registered before the Public Registry of the Property. All of the tasks listed in this stage could be completed in one month, however, due to the amount of time and the follow-up involved in the process, most of Notary’s will take more than three months. After this is done the buyer must make sure that all new tax and services receipts such as property tax, water, power, telephone, etc are changed into his/her name (and/or the name of the bank); this small detail could save thousands to the buyer when selling the property.

There is not an easy formula established for all purchase transactions, and although some people will tell you that a closing takes around one month or that it takes around six months, it is not really possible to know unless you have a clear idea of all the details of the transaction you are involved in. Before making any decisions or agreeing to any deal, make sure you receive the right advice on the transaction you are about to enter into.

-Originally published in February 2007.