The Purchase and Sale Process

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The purchase and sale process in Mexico is very similar to Canada in many ways.  Once the Buyer has decided on a property to purchase he or she will make an Offer to Buy.  The typical deposit with the offer is 5-10%.  In some instances, the Offer to Buy contract may require the Buyer to deposit half the closing costs.  Average closing costs are 5-8% of the purchase price depending if there is mortgage financing involved.  All deposit moneys are held in an escrow account by the Notary Public (Notaria Publica), who is a government-certified Lawyer.  The whole process should take no more than 45 days.  Although closing costs are considerably higher than we are used to in Canada, the property taxes are much lower, so it helps make up for it.

It is common practice that the buyer pays the transfer of acquisition tax of 2% of the declared value of the transaction and all other closing costs, including a registration fee of .05% of the assessed value of the property, the Notary’s fees which are on a sliding scale and expenses, while the seller pays his capital gains tax and the broker’s commission.  Notary Public fees are regulated by a fee list authorized by the Notary Law valid in every State.

Ongoing Costs

Property Tax

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The property tax known as “impuesto predial” is established separately for each State and based on assessed value. The assessed value is determined at the time of the sale. To give you an idea how low the property taxes are, at the time of writing this article, the rate in the State of Jalisco where Puerto Vallarta is located comes out to about .08% (.0008). For example, on a $500,000 purchase, the property tax is approximately $400 per year. The formula for calculating property taxes may vary from time to time, but it is not considered as a significant revenue source for the State.

Homeowners’Association (HOA)
The HOA is responsible for maintaining and administering the common areas of any project or development. They collect maintenance fees from the owners, provide reserve funds, pay the bills and work with a board made up of homeowners. A well-run association can keep your costs down, but it’s a good idea to find out how it’s functioning in any property you are considering purchasing.

Annual Bank Trust Fees

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If you are purchasing your property through mortgage financing with the bank, the bank will maintain the Trust or ‘Fideicomiso’ as part of your mortgage terms. The initial fee the bank charges for the Fideicomiso is approximately $500 USD plus a percentage based on the value of the property and about the same amount annually to cover its services as a trustee. Fideicomisos are not held by the trustee as an asset of the bank.

Property Management and Administrator Fees

All above responsibilities can be taken care of for you by a local Administrator or Property Manager for reasonable monthly fees. If you would like to rent out the property you purchase, you can hire a Rental Agent and Property Manager to rent your vacation home to short-term guests at premium nightly and weekly rates, so you can earn revenue and have everything taken care of for you. We can recommend reliable local professionals to help you with this process.