top of page
Propiedades | Properties

Understanding The Closing Process in Mexico



If you are a first-time home buyer in Mexico, the closing process may seem overwhelming. If you know what to expect, you can close the purchase of your dream home in a timely manner, planning costs appropriately with as few surprises as possible. Here’s what you need to know about the home closing process, from start to finish.


The Mexican closing process is a set of steps performed for a real estate purchase transaction where both the buyer and the seller submit documents and pay taxes, fees and duties to close a real estate transaction according to Mexican laws.


There are many variables that can occur because we are dealing with buyers and sellers who are typically not in Mexico and we have many third parties who are involved in the process such as Public Notary, Home Owners Associations, Closing Agents, Foreign Affairs Permit, Trust Bank Fees (Fideicomisos), Property Taxes, etc.



Closing Process Time Frame


Regarding the time consider that a the Closing Process in Mexico is "estimated" and it takes between 2 or 3 months and this frame may change according to Mexican National Holidays.


The real closing date will be determined by the Notary once all of the closing documentation has been completed and is ready for the final signature transferring the property to the buyer. It is typically in the last two weeks of the close that the final date can be determined.


Closing Costs


These are fees that are paid at the closing of a real estate transaction. Closing costs may be paid by either the buyer or the seller (or a combination of both). The buyer's closing costs are notary fees, bank trust fees, taxes & duties, administrative, and application fees. Typical closing costs for an average-priced home range from 7% to 10% of the home’s price in the Riviera Maya.

The following is a brief explanation of the buyer's costs in a standard transaction:


Notary Fees

In Mexico, any legal acquisition of property must be administered through a Notary. A Notary (Notario Publico) in Mexico is an experienced lawyer, selected and appointed by the Mexican Government. All real estate purchases must be registered with a Notary, and they are legally responsible to ensure the property’s title is clear and properly recorded with the public registry. The fees paid to the Notary are based on the purchase price of the property. These are regulated by a fee list authorized by the Notary Law valid in every State.


Bank Trust Fees (Fideicomiso)

Bank trust fees can vary by financial institution and depend on whether you are doing a transfer of trust or opening a new trust. These are charged on a yearly basis and others are paid upfront. They may vary according to the transaction, the property and the trustee bank; nonetheless most of them charge around $600 for properties priced under $700,000. For properties priced over that the fees will increase accordingly.


In Addition to this, all the trustee banks collect the following:


Trust Acceptance Fee – This is a one-time initial fee to set up your Trust. This is a one-time charge and the fee varies by banks. For example, a bank could charge $500 USD + IVA (16% VAT) so the fee would be $580.


Trust First Year Fee – There is an annual fee charged by the bank to maintain the Fideicomiso. This is paid in advance, so you have to pay for your first year at closing.


Foreign Affairs Permit

Secretary of Foreign Affairs of Mexico (SRE - Secretaría de Relaciones Exteriores):

This is a permit that the Notary or the Trustee Bank process through the closing agent and it may cost around $1,100 USD.


Legal Fees

Legal fees paid to attorneys and/or closing agents will include the closing services such as due diligence of the property, accompaniment at the Notary’s offices, agreements revision, etc.


Taxes & Duties

Property Acquisition Tax (ISAI - Impuesto Sobre Adquisición de Inmuebles): This is a State Tax. The Notary is responsible to charge and declare it without surcharges. It is around 2 or 3% based (depending on the state) on the highest value of the previously authorized construction appraisal. It is important to mention that in order to calculate this tax you must apply a special procedure and the real closing costs cannot be determined on your own, a Notary must determine these costs.



Other duties and fees paid at the time of closing include:

  • Escrow account & appraisal (only if a mortgage loan is required)

  • Insurance

  • Registration of the title deed at public registry (processed through the Notary)

  • Transfer tax & property tax

  • No liens certificate (no liens on property tax; no liens on water or maintenance fees)


Conclusions


Many buyers are surprised to see that the taxes they pay at the time of closing are much higher than they are used to paying in the United States, Canada, or some countries in Europe. The reason is the Mexican Government collects a large percentage taxes at the time of closing.


However, you will be pleasantly surprised when it is time to pay your annual property tax, known as the predial. Annual property taxes are very low in Mexico as the tax is calculated at a fraction of what your property is actually worth. Additionally, many municipalities offer significant discounts (up to 25%) if you pay early.


In order to save time, buyers and sellers outside of Mexico for the closing date, use a limited power of attorney for the purpose of signing the deed transfer only. All other documents will have been executed by all parties during the closing process. In this way buyers and sellers can be on their own countries with a team able to carry out the process in Mexico.


In Espacio Desarrollos we are expert real estate advisors thanks to our extensive experience we can suggest various options from all participating parties for you to make the best decision for your investment.


Contact us and receive free comprehensive real estate advisory.

 

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.



Comments


Image-empty-state.png

Starting at $69,000 USD

Image-empty-state.png

Starting at $96,000 USD

bottom of page