Buying & Selling Homes in Mexico: The Good, the Bad, and the Ugly

Three very important things to remember up front:

First, stop me if you’ve heard this before, but Mexican law–like the Pirate Code–is more what you’d call guidelines than actual rules. Most people know that criminal proceedings in Mexico are, shall we say, challenging; the civil code even moreso. Whereas North of the Border (NOB) the threat to sue someone can be serious, down here it’s an invitation to an endless parade of hearings and charges and counter-charges and oh, nevermind. The lack of a recourse to legal remedies is something you have to understand before owning property here.

Second, real estate is a growing business, but not a profession in Mexico. There is a realtor association (AMPI) pursuing professional standards of conduct. But there are no federal laws, and only some Mexican states have licensing requirements (ours, Jalisco, does not). So anybody can hang up a shingle and be your agent. Because it is not capital intensive and with little barrier to entry, we have met chefs and restaurateurs and waiters and retired expats and doctors and cabbies and others who are real estate agents.

Third, always remember that things in Mexico happen in three speeds: slow, slower, and slowest. Buying and selling property in Mexico means engaging notarios (who review and effectively “approve”the transaction), banks, real estate firms, home owners associations, utilities, maids, and gardeners, all for the purpose of establishing (1) you are who you say you are, (2) you own what you think you own, and (3) no one else has any claim on said property. All this in a land where cash is king, records are spotty, and the pirate code applies! Add in international money transfers and Mexican holidays and things will be all set mañana.

I just watched a Director’s cut of Sergio Leone’s “The Good, the Bad, and the Ugly” so that’s the theme from here on out:

In the end, we sold our house for a fair price and bought the house we wanted for another fair price. Given that we started out by falling in love with the new house (a REALLY, REALLY bad idea), this is what it is all about. Of course, that’s like saying eating at a restaurant is all about consuming edible food containing sufficient calories at a decent price. True, but there’s the menu variety, the service, the presentation and so forth. When we’re talking about the largest financial transaction most people ever make, you want to say more than “phew, glad we survived that!” The other good thing was that the buyers of our home and the seller of our new home were pleasant people; it is always a pleasure dealing with reasonable people! But that leads us to:

Many of the things under “The Bad” are structural. Without the possibility of a mortgage, we had to move money around in order to have it ready and waiting for the purchase. Getting no debt statements from the power (CFE), phone (TelMex), and water (Simapa) utilities was pretty easy. But some of these you pay in advance, and others in arrears, so that’s complicating. Then we needed to have our maid and gardener sign statements saying they had no claims on the property, and we needed a copy of their identification cards. As well as statements from the home owners association and the club and our receipt for annual property taxes paid.

At least we didn’t face two other potential “bad” aspects: currency conversion and title problems. The former happens if the other party in the transaction is a local national, since the actual transaction is completed in pesos at the moment of closing. If both parties agree to pricing in dollars, this peso conversion is irrelevant. If the deal is actually completed in pesos (per the Pirate Code), then one side has to convert them back to dollars, which could mean a substantial gain or loss depending on the currency markets (because you’re dealing with large sums, even a small change can mean big money).

The latter (titles) is a big potential problem here, as there are federal land use laws that could block one’s claim to ownership! As I understand it, the notario is responsible for authenticating the documents in the closing sale, but if the title is authentic but invalid, sorry, you lose. Buying property in an established development lessens the risk, as the title issues have probably been worked out, but it pays to do the research yourself. And finally:

These go back to my restaurant analogy: mostly things annoying or head-scratchingly dumb. The waiter spills water on you. Gets the drink order wrong. The appetizer comes with the main course. Your wine glass is dirty. You get the picture: not earth-shattering, but would you eat there again? Not if it’s a high end restaurant.

We had a long list here. An agent asked us to donate the beds in our new house to the cleaning team because “they fell in love with them.” Clauses we wanted in agreements failed to appear, not due to negotiation, they just weren’t there. Other terms–like a rent-back agreement–were similarly misplaced. Names misspelled, documents and data requested but already provided. A counter-offer that failed to mention the original terms, which thus became a “new” offer. An agent telling a client “if you decide not to go through with (buying and) moving here, I want you to promise me now that you will simply re-list the house for sale with me.” A threat to limit access to our new house before closing. A buyer’s agent who blithely commented “if anything minor comes up, I’m sure they (the sellers, us) will take care of it.” All of which just reinforces the point that real estate is a relatively unregulated market in Mexico, so you might encounter some pretty odd behaviors. We were pleased with our agent, but one must be diligent in selecting one.

All’s well that ends well, as Shakespeare penned! Here’s the money shot: