Every year hundreds of American and Canadian foreigners purchase property here in Puerto Peñasco as a part-time or full-time retirement home and purchasing a home in Rocky Point isn’t a complicated process but there are some key factors to consider before buying that second home you dreamed of.
Financing Real Estate in Mexico
In the U.S., homes are typically purchased using bank financing and most Americans assume that the same process applies here in Mexico. Unfortunately, there is no traditional U.S. mortgage bank financing for foreigners purchasing a property in Mexico. U.S. banks do not offer traditional mortgages for purchase in a foreign country. Nearly all purchases in Puerto Peñasco are done with cash but there is sometimes owner financing available on properties where the owner will give terms to the buyer over a short period of time. Owner financing terms are negotiable, and a typical scenario is 30 to 50% down payment, payments structured over 3 to 5 years, and with or without a balloon payment at the end of the term at 6% to 8% interest.
When searching for a property ask your real estate advisor about owner financing and they can pull properties that only offer owner financing through the MLS. Since the housing market has been nothing short of on fire this past year, most owners want a cash purchase, and options are limited but there are still some properties available with owner financing.
Mexican Notario Público
If you are buying property here in Rocky Point, then you will hear the term Notario, the Mexican lawyer responsible for closing your transaction. Notario’s are legally responsible to ensure the deed title is clear and recorded at the Public Registry. They are also responsible for calculating capital gains tax for the seller and can face civil and criminal liability for any mistakes.
In Mexico, the incorporation of every company, buying and selling of all real estate, and the establishment of deeds and wills must be protocolized by a Notaría Pública. A Notaría Pública is an experienced lawyer who is selected and appointed by the Governor of a Mexican state after practicing law, completing a rigorous application process, and passing a stringent exam while meeting all qualifications established by the government.
In a real estate transaction here in Mexico a Notarios’ services are paid for by the buyer and can range from $1,500 USD to $1,800 USD depending on the office handling the transaction. Even though a Notario Público is an attorney they are not there to give you advice or serve as your counsel they are there to solely process the transfer of title and record the real estate transaction.
The closing costs associated with your transaction are an important aspect of purchasing a property in Mexico. Closing costs tend to run higher than they do in the U.S. and typically average 6% to 8% of the purchase price. The largest portion of your settlement costs is the transfer of ownership tax of 2% that goes to the City of Puerto Peñasco. Other fees can include the establishment of your bank trust, the annual bank trust payment, Notario fee, closing coordinator fee, appraisal, and no lien certificate. The buyer is responsible for all the fees related to purchasing and the seller is responsible for payment of sales commissions to real estate agents and capital gains tax typically unless agreed to differently at contract.
About the author: Joseph Sanchez is president of Rocky Point Home Builders, a design/build contractor specializing in custom home design, construction and engineered renovations, and a real estate agent with RE/MAX Legacy specializing in the sale of new home developments. He resides here in Puerto Peñasco with his wife and three children and is originally from Chicago. For more information email him at email@example.com.