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The Real Estate Industry
Status
The real estate industry in Mexico is similar in many ways to that of the United States, which is probably the most advanced in the world. It is developing quickly, taking advantage of today’s technology: however, it seems to be paralleling the system as it exists in the USA.
The only national profession real estate organization in Mexico is the “Associacion Mexicana de Profesionales Inmobiliarios” (Mexican Association of Real Estate Professionals) or “A.M.P.I.” with 24 chapters in 38 cities. This organization is somewhat similar to the National Association of Realtors (NAR) in the United States.
Licensing
At this time, there are no government license laws regulating real estate brokerages and sales agents in Mexico. Anyone can, in effect, offer properties for
sale; therefore, caution should be taken to select an established and reputable real estate company.
Financing
Historically, due to lack of capital markets and high Mexican interest rates, most transactions were made in cash. In 1993 and 1994, the Mexican economy picked up to such an extent that annual inflation went down to one digit and interest rates were more or less accessible.
Banks introduced attractive mortgage programs and, consequently, sales proliferated throughout Mexico. Due to the devaluation in December 1994, the situation has reverted and the few banks that offer mortgages do so at such high variable interest rates that very few buyers are in a position to take advantage of them. However, this is changing. Recently Scotiabank Inverlat introduced long-term mortgages at rates between 15-17%. These mortgages, however, are only available to foreigners with FM-2 immigration status.
Two US lenders currently lend money to foreigners, GMAC and GE. Additionally, several US mortgage brokers operate in Mexico to assist foreigners in finding the appropriate lender and securing the loans.
Closing Costs
It is common practice that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary’s fees and expenses, while the seller pays his capital gains tax and the broker’s commission. Since January 1, 1996, the federal law regarding the real estate acquisition tax, which was 2% for all the Republic of Mexico, was modified to allow each of the Mexican states to determine its own tax. The range now may be from 1-4% of the tax appraisal value, the rest of the closing costs, which exclude the transfer cost mentioned above, vary from 3-5% or more of the appraised tax value, depending on the particular state. These percentages are applied to the highest value of the following:
• The amount for which the property is sold
• The value of the official appraisal
• The value designated by the property assessment authorities
Cost of the Fideicomiso
The bank charges the person desiring the Fideicomiso an initial fee for drawing up the agreement and establishing the trust, plus a percentage based on the value of the property. In addition, the bank charges an annual fee to cover its services as a trustee. The fees associated with the Fideicomiso vary from bank to bank and exact fees should be verified with the specific bank used.
Real Estate Broker’s Commission
Most Real Estate companies in Mexico charge a 6-8% commission based on the actual sale price of the property. In resort areas, broker rates are usually higher because of increased broker expenses.
Capital Gains Tax
The notary will retain the calculated gain after deductions, forwarding it to the Mexican tax authorities. The seller will then deduct this amount against his annual tax return which becomes an adjustable tax credit in the USA.
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... published 2007-08-18 |
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