As a real estate agent I find I get asked the same questions time and time again. So here is a blog which answers the most frequently asked questions and walks you through the buying process for purchasing residential property in the Lake Chapala area. If you haven't already read Part 1 of this blog. Make sure you do!
Q) How much are closing costs and who pays them?
A) Closing costs are between 3-5% of the purchase price and are paid by the buyer. As many costs are fixed, the percentage amount varies depending on the price of the property. These fees cover the government transfer taxes and Notary fees.
Q) How does the closing take place and what do I need to bring?
A) The closing takes place in the office of a Notario Publico, or the public notary. The Notario is a high standing lawyer with additional training who works on behalf of the Mexican Government. The Notario authenticates the seller’s right to sell the property, scrutinizes the history of the property for any irregularities, and investigates the deed through appropriate government offices to ensure it is clear and free of liens. Both parties need to present themselves at the Notario’s office for the closing. The buyers also need to sign paperwork prior to the closing to allow the Notario to verify their identity, collect the tax on their behalf, and send it to the Government. A lot of paperwork is necessary for a successful closing! The most service oriented Real Estate Agencies process it all on your behalf and present it to the Notario.
Q) Who selects the notary (Notario)?
A) Since the buyer pays the property transfer tax and other closing costs, plus the Notario’s fee, it is the buyer’s privilege to select the notary. Your Real Estate agent can help choose the right one for you.
Q) Which is best for me? A Deed or Trust?
A) Based on personal circumstances and chosen Beneficiary, the Notario – along with your knowledgeable Real Estate Agent - will advise the buyer whether a Deed or Trust is the best option for them. The Trust is always an option, even in areas of Mexico where it is possible to purchase with a Deed.
Q) What happens on closing day?
A) The Notario will file with the Mexican government the application for the transfer of ownership from the seller to the buyer. His official signature on all documents finalizes the purchase and makes it a legal transaction under Mexican law. Once everything is recorded on paper the signing happens right in front of the Notario. The buyer receives a draft Deed at the time of closing and the official, original Deed is made available 2-3 months later. The seller receives payment immediately after the closing.
Q) How long does it take to close from the time when the offer is accepted?
A) From purchasing to closing the norm is 30 to 60 days. This allows time for an inspection to be performed, and the inspection report to be reviewed and accepted. Shorter closing times are possible without an inspection, and on occasion, longer closings can be negotiated for specific reasons.
Q) I hear that capital gains tax can be steep for sellers. How much is it, and can I avoid it?
A) Upon selling, to avoid paying the 35% capital gains tax as a tourist, a seller must have a Permanent or Temporary Visa, have their RFC number (Tax Identification Number) and must not have sold another property (in which they exempted) in the past 3 years.
The exemption has a ceiling of 700,000 UDI's (Investment Units, updated daily). UDI's are a unit of value protected against inflation. For example, using an exchange rate of 18 pesos/dollar – 700,000 units of UDI's times 8.12 (the value of the UDI) = 5,409,000 pesos divided by the current exchange rate (18) = $307,000 USD exemption (per person named on the deed).
It is of utmost importance for the seller to inform themselves of how much capital gains tax he/she would pay prior to selling, by contacting a Notario to request the calculation. Good real estate agents will help you with this process and the information will help in determining the right selling price of the home to maximize the amount of money landing in your pocket.
In summary, the current buying process at Lakeside involves …
find the property you like and negotiate a purchase price
set a closing date - minimum 4 weeks after the Contract To Purchase is signed
get a home inspection - it takes approximately 2-5 working days to schedule an inspection and get the report
after the buyer signs off the report (releasing the contingency on the contract), he/she has 3-5 days to wire the 10% initial payment to place the property “under contract”
your Real Estate office staff and the Notario’s get all the documents in order for the sale
2-3 working days before the closing, the buyer signs off tax documents (SRE's) at the Notario's office
on closing date, the buyer and seller MUST present themselves at the Notario’s office to sign the purchase documents and finalize the transaction (unless POA was given to someone else in which case the person with Power Of Attorney must be present)
approximately 2-3 months later, the buyer gets the original copy of the Deed
So there you have it. If you have any further questions, please Contact Me through this site or Facebook and I will be happy to answer all your questions. Thank you for reading and look forward to hearing from you.
Get all the information you need on moving to Lake Chapala! Whether you are a first time visitor or seriously considering relocating to Lake Chapala, this book is for you!
Buy Now on Amazon Kindle!
Don't have Kindle? Contact us for a PDF version and receive $2 off your purchase!
Email: heckertricardo@gmail.com
Michaela & Ricardo are your FULL SERVICE Real Estate Agents. With over 25 years of combined experience Lakeside, and our network of area Professionals, we help guide you to from beginning to forever in your Retirement Journey to Lake Chapala, Mexico.
