Use A Buyer’s Agent When Purchasing Real Estate In Mexico

So, you’ve reached a point in your life where you think that you’ve learned a little about business, finance, contract negotiating, real estate, etc. and have at least a layman’s knowledge of law pertaining to each. Being that savvy, you might also be aware of the incredible retirement locations and values south of the border; furthermore, you might even be considering Mexico as your retirement destination. If so, you might as well forget everything you’ve learned and leave your law degree at home!

Mexico, as beautiful as it is, has a somewhat different way of doing business and a completely different set of laws. Additionally, all legal transactions, including real estate transactions, are done in Spanish. Therefore, for those of you that may be considering locations in Mexico as possible retirement destinations, the following information should give you some insight as to how the Mexican real estate industry works, list some of the possible pitfalls, and most importantly, give you the guidance required to assure a pleasant and safe experience.

In 1984, we made our first real estate purchase in Puerto Vallarta; a condominium in Mismaloya, about seven miles south of town. Our second purchase, two years later, was the adjacent condo. A year later, we removed the wall between the two condos and remodeled them into one very spacious three bedroom condo. For thirteen years, while still working in Houston, we thoroughly enjoyed visiting Vallarta two or three times a year.

At some time after the purchases of the two condos, we noticed that our original escrituras (legal property documentation similar to a title or deed that is held in a fidecomiso or bank trust) showed the property values to be about one third of what we actually paid for them. When we inquired about the discrepancy, we were told that the lower values were used in order to reduce our annual property taxes.

It wasn’t until many years later, when we decided to sell the condo, that we learned that capital gains taxes were due on the huge difference between the selling price and the documented purchase price. Ouch, we owed substantial taxes on a paper gain; when in fact, there was very little real gain! We then learned that the condo developer entered the extremely low sales prices on all the escrituras in the condo complex in order to evade paying substantial capital gains taxes. As we later learned, the developer could have entered the selling price, the appraised value, his cost of construction, or just about anything imaginable into the escritura, and we, being the naïve Americans that we were, were at his mercy!

Upon the sale of the condo, we bought a beautiful new mountainside villa with a panoramic view of Banderas Bay, El Centro, and the Sierra Madres. We saw the new villa advertised in one of the local magazines and asked our realtor friend to show us the property. He showed us what seemed to be every property in town, before reluctantly taking us to see the villa in the magazine. Some time after buying the villa, we learned that our realtor friend received only 10% of the commission on the sale because that was all the listing agent was willing to pay. The listing agent ran the ad in the magazine and didn’t feel that an agent representing a buyer was necessary in order to sell this beautiful new villa. Therefore, our agent spent a couple days showing us nothing but properties listed by his agency before caving in to our demands and taking us to the villa of our dreams; one that we have thoroughly enjoyed for more than a decade.

These experiences revealed the tip of the real estate iceberg and after living in Vallarta for ten years, we’ve finally been able to expose the entire iceberg and share some of the details below.

To begin with, there are no licensed real estate brokers or agents in Puerto Vallarta! In fact, there is no mandatory licensing for real estate agents in all of Mexico because the Federal legislation process has yet to accomplish it and therefore such legislation remains in limbo. In Puerto Vallarta, where there are in excess of 80 real estate agencies, there are probably more than 500 real estate agents with minimal qualifications. With the booming real estate market and economy that exists today, it’s quite obvious why we have such a diverse group of agents and brokers in Vallarta.

In order to have some degree of continuity from agent to agent, a voluntary association for real estate personnel exists in various areas of Mexico. The Asociacion Mexicana de Profesionales Inmobiliarios A.C., known as AMPI, is quite active in Vallarta with the membership of approximately 50 of the 80 real estate agencies in Vallarta. Although membership in AMPI is not compulsory and has no bearing on the capabilities of the agents representing the buyers or sellers, it is considered to be the standard bearer for listing agents in the area.

A second real estate association, mainly consisting of Mexican agencies based in the Vallarta area, is Asociacion de Profesionales Inmobiliarios de Vallarta A.C., known as APIVAC.

These associations schedule periodic conferences, conduct educational programs, and hold various meetings where they attempt to keep their members and the public current on activities in the area as well as changes in the Mexican law as it pertains to real estate. They have codes of ethics and they do attempt to establish uniform sets of operating policies and procedures, some of which are in writing, others understood but not documented. They bring real estate personnel together where their members voluntarily agree to abide by their organizations´ statutes and codes of ethics while attempting to operate with some degree of continuity and professionalism. For sure, these associations are better than nothing but still not to be confused with associations such as the National Association of Realtors or NAR in the US. Dual agency disclosure, designated agency, full disclosure, confidentiality, imputed knowledge and notice, implied knowledge, fiduciary duty, loyalty, and vicarious liability are foreign concepts to the majority of real estate agents in Mexico. Consequently, misleading or inaccurate statements often made by many of the agents can put both the buyer and seller in intolerable predicaments in Mexico.

Although AMPI and NAR do have a working relationship, one example of the differences between AMPI and NAR is that NAR provides its member agencies with standard statewide listing forms, pre-qualification forms, escrow account and earnest money forms, standard purchase agreement forms, letters of intent, etc. In Vallarta, there are no such forms provided by AMPI or APIVAC. Each real estate agency has its own listing form or uses a form provided by an outside privately owned publisher, which clearly depicts the listing agent as receiving 100% of the commission upon sale of the property. Also, NAR has written and enforceable guidelines regarding the handling of commissions and the sharing of commissions between the selling and buying agents. Although there are guidelines in Mexico for real estate commissions, they are still flexible, and to some degree negotiable with the seller. The listing agent can then negotiate commission sharing with the buyer’s agent.

All other forms vary from agent to agent and are not necessarily written in the best interest of the buyer. Also, most forms and contracts for North Americans are in English; however the Spanish version is the only document that has any legal standing in Mexico. Therefore, regardless of what you read in English, a Spanish speaking attorney should always represent you along with your agent.

Another major difference between the Mexican based associations and NAR has to do with the Multiple Listing Service or MLS. In the States, the MLS is controlled and monitored by NAR and is available to all NAR agents. In certain Mexican cities, including Vallarta, there is an MLS; however it is not controlled by AMPI or APIVAC. Instead, it is privately owned and operated by a local publisher and is available for property searching to the public at no charge. AMPI members are able to list their properties on the Vallarta MLS, with the general public as well as the other AMPI and APIVAC members having access to the listings.

Once you understand the inner workings of the real estate industry in PV, you need to learn a little about Mexican real estate law. It can be quite complex regarding trusts, escrows, mortgages, treatment of taxes, etc. and is often open to interpretation by a state appointed attorney, known as a notario. A small percentage of the realtors in Vallarta have a fair understanding of Mexican law as it pertains to real estate transactions; however the vast majority of them are sorely lacking in this field. Even with little or no knowledge of the law, they will be anxious to advise you, right or wrong; therefore, the best law to follow is caveat emptor, or buyer beware!

Because of the many pitfalls that a buyer can encounter while purchasing real estate in PV, we learned over twenty years ago that it is wise to interview realtors with scrutiny, keeping in mind that most all will be promoting their own listings first and meeting your needs second. It’s just human nature and with virtually no control in Mexico, it’s pretty much assured. Also, because almost 100% of them have listing agreements with the sellers, they are legally bound to act in the best interest of the sellers, and not necessarily in the buyer’s best interest. Because the buyer usually has no contractual agreement with the realtor, he will in all probability get the “short end of the stick” in this conflict of interest.

Of all places, in Mexico you should select an agent that is 100% dedicated to helping you find the property that meets your needs and satisfies your requirements; preferably, a contractual agreement with an agent with no listings, no axe to grind, no ulterior motive, and is exclusively representing buyers and their best interests.

A true buyer´s agent in PV should have no property listings, should have complete access to the Vallarta MLS, should know the areas and growth trends in and around Vallarta, should be able to professionally negotiate on the buyer’s behalf, should have a decent understanding of Mexican real estate law, should have a working relationship with the local notarios, real estate attorneys, escrow and title agents, mortgage bankers, insurance agents, inspectors, appraisers, and lastly, your representative must have a thorough working knowledge of the local real estate industry and understand the idiosyncrasies associated with it.

Buying your dream home or condo in Vallarta should be one of your best experiences, however without due diligence, it can be a nightmare. Obtaining an exclusive buyer´s agent with 100% dedication to you is a prerequisite for assuring a pleasant beginning of your retirement in Paradise.

Real Estate Investing in Rehabs

Real estate investing in rehabs is a field of investment that is excellent for skilled and experienced investors and is not a good option for beginners. Real estate investors looking to rehab a house need to evaluate the site as well as the structural pattern of the house.

For the smart and proficient real estate investors, rehab real estate investing is one of the finest techniques that can bestow in profits beyond their imagination. Several real estate investors utilize real estate investing rehabs to figure their fortunes.

Such investors are constantly hunting for run down, overlooked, and unattractive estates for very minor margins. Further, they fix the estate, preserving the costs of repair as low as possible, repaint the estate, provide a renovation, and execute to sell the estate at an awesome price for huge marginal profits.

The evaluation of the site to rehab is done with thorough consideration to the type of vicinity in which the estate is located, shopping amenities as well as with the accessibility of transportation facilities in the vicinity.

Real estate investors need to possess an excellent concept of the local realty hoard, the present land value, with full experience in rehabbing, to review the requirement for fixing the estate. Further, investors are also required to have the capability to calculate the cost of rehabbing the estate, with the decision for rehabbing the estate by their own, or lending the job to someone else. Investors are advised to deem over every feature, for attempting to acquire the house at a greater profit, and work things out with very less cost price while trying to sell it for its present market value, or higher than that.

Further, the investors are also required to possess a fine concept about the latest patterns in colors and interior furnishings expenses as per the planned finances. This will aid in making the rehabbed house attractive to the promising buyers. But, the investors are advised to carry out the rehab procedure on their own, as this reduces the expense to almost 50% than what a contractor will charge for the same. It is an excellent situation, if the investor is trained proficiently to rehab the houses, as that investor is bound to have an apparent idea of the chores that are required to be conducted, along with the method to cover up the process at the lowest expense possible.

There are certain real estate investors who make prime money by investing in rehabbing commercial real estates, while others are professionals in rehabbing outdated houses, making big profits, opting for the estates located close to a lake or pond. There are certain other investors who focus on rehabbing condos in places where there is a comprehensive demand for condos.

Certain real estate investors rehab and sell off their estates at an excellent profit, and yet others rehab, refinance and lease the estate to acquire fine returns on those investments. For instance, there are certain investors who buy the homes for say $100,000, and rehab it for say $30,000 and sell it for around $200,000. Hence, the sky is the limit for skilled real estate investors investing in rehabs.

Real Estate Property Buying Tips

Buying real state properties could be the one amongst your most important investments. Purchasing real state properties in San Mateo (California) is very exciting but for making quick and better decisions you should be well prepared of all the real estate buying aspects. It pays to get your-self acquainted with the major steps involved in purchase of any San Mateo real state properties in (California). Purchasing or buying real estate properties in San Mateo can be a complex procedure where several important, legal, financial details are required. A close study and a deep understanding can help in having better real estate buying experiences in California CA.
Here are some of the important guidelines to know before you purchase any residential or commercial properties in California.

Step 1: The prime and first stride is to figure out your purchasing power and decide how much you can afford to pay. This saves your time by allowing you to focus on only specific price-range real estate properties. Verify your credit report to examine your credit worthiness and clear up problems if any before going to a lender. A good credit rating will result in receiving lower interest rates. The mortgage you get is largely dependent on your credit history, as all prospective lenders will have a look at your credit report before offering you any loans or mortgages.

Step 2: After that it is very essential to get pre-approved for a mortgage from a mortgage broker or lender, with an assurance to fund your mortgage in writing. Many people frequently avoid this step and choose to look out for real estate before getting a mortgage pre-approved. Moreover, you should examine potential lenders after you have your credit check. The lender like brokers, banks can check out your credit history, and give you an official letter stating how much of a mortgage you qualify for. In addition to this look out for several payment options and pre-payment options.

Step 3: Now it is very important to identify what you are looking for. It is very vital step to list down on paper what you actually want in your real state property. Prepare a list of all the specifications you want in your residential or commercial properties and prioritize them based on your requirements. Performing this exercise will really narrow down your search and will simplify your process when the time comes to truly go out for searching real estate properties.

Step 4: Now after you have recognized what you want in your real estate property, the next logical step is to get good real estate agent who can assist you in locating a property in a wanted location. Finding the right real estate agent or Realtor can make easy for you to buy any real estate properties. A reputable real estate agent can assist you in having right residential or commercial properties, while focusing your likings and price range in mind.

Step 5: After viewing many San Mateo real estate properties, hopefully you may find some properties that you would like to consider more seriously. Now after your agent provides you with a list of properties that are reasonable and match your criteria, there are certain critical aspects of property that you have to be very sure like its structure, features or how much renovations may be needed and many more. Consider factors like safety, school districts, freeway access, recreational options, work commute time etc.

Step 6: When you and your real estate agent finally derive to the conclusion to have a specific real estate property then you can make an offer. But before making an offer compare its price with other properties in the area. Get your real estate agent to evaluate the value of the property.
Your real estate agent should be actively involved in brokering the offer, as they can give advice you on a realistic offer that further optimize your chances of buying that property. Don’t get into any negotiations with that agent without the presence of your own agent and if all looks good, then write an offer.

Step 7: Once you have made the offer or the offer has been accepted, now you must confer with your San Mateo ca real estate agent to find out when real estate inspections should be handled. But this step is valid only when you make an offer on houses, townhouses, condominiums, and cottages.

Consult your real estate agent to obtain only professional inspections necessary to answer any questions you may have about the property. Some concerns may include: the condition of the roof, foundation, walls, ventilation, insulation etc. You should not close the deal until all home inspection has been completed.

Step 8: After you and seller have agreed to the deal, then plenty of administrative tasks need to be done in order to finalize the deal. You must try to reduce everything to Black and White so that there are least problems later on. However, in this step you should be focused and try o avoid any changes that can affect your mortgage payments. Also be sure to have a proper sale-deed if possible through a qualified or experienced document writer in the industry. The final sale-deed should be registered at the suitable local area office.