With Los Cabos’ warm climate, rich history and culture, and stunning setting by the sea and the desert, it comes as no surprise that many people would love to settle down or at least keep a holiday residence here. Click here to learn more about buying a home in Los Cabos, from restricted zones and buying property through land trusts to a brief background on the history of foreigners buying real estate in Mexico. This buyer’s guide will help you ensure a smooth and pleasant home buying experience, with your dream home in Los Cabos successfully delivered by the end of the process.
Sun-drenched Los Cabos— nestled between the mountains, the desert, and the sea— is the dreamiest and most perfect setting for a vacation home or an investment property. You’ll have a piece of Land’s End’s magic right in the palm of your hand.
If you are interested in purchasing real estate in Los Cabos, here are the most important things you should know.
A short background on foreigners buying real estate in Mexico
Once upon a time, foreigners were prohibited from buying real estate in Mexico. It was solely for Mexican nationals as stated by the Constitution of 1917.
That all changed in 1973 when the constitution was amended, and the Foreign Investment Law was introduced. This allowed foreigners to buy real estate almost anywhere in the country except in the restricted zones. These are areas near the border or by the coast.
In 1993, the constitution was once again amended, this time allowing foreigners to purchase real estate even in the restricted zones. The way you can is by buying through a fideicomiso.
What is a fideicomiso?
A fideicomiso is essentially a bank trust where you are the beneficiary and the bank serves as the trustee. In this role, the bank:
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Is the legal owner of the real estate; and
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Holds the trust deed for you.
As the beneficiary, you hold all the ownership rights. That means you can sell the property, as well as lease it or bequeath it to your heirs. You can also use a single trust to own multiple properties.
The fideicomiso is valid for 50 years and can be renewed any time for an additional 50 years, even after expiration. You’ll be given a grace period of 10 years to renew the trust. All you need to do is go to the bank and submit an application.
Note: If you are not purchasing real estate in a restricted zone, a fideicomiso is unnecessary.
What if the real estate property I buy is already under a trust?
Then you don’t have to undergo the process of applying for one. In this situation, the existing trust may be transferred to you.
An overview of the buying process
Before you buy Mexican real estate, it’s highly recommended to work with a real estate specialist who’s well-versed in the local processes and customs. Now, on to the buying process.
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Step 1: Make an offer
Once you’ve found the perfect property with your realtor, it is time to initiate the buying process. Your realtor will help you make an official written Offer to Purchase. This will detail everything, from the terms of the sale to the deadline for acceptance.
As soon as your offer is accepted, and in agreement with the terms outlined in the Accepted Offer, the Engel & Voelkers Snell Real Estate Closing Officer, in association with your realtor will help you open Escrow by writing an Escrow Agreement.
Afterwards, you will open an Escrow with a refundable earnest money deposit. Now, the due diligence period begins, where all conditions of your offer are satisfied.
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Step 2: Work with your realtor toward satisfying the contingencies of your accepted offer
You may have a home inspection done by a local third party professional with a Repair Agreement put in place for any issues discovered. You may review Homeowner Association bylaws, Design Guidelines, and budgets.
Many homes in Los Cabos are sold furnished and, if this is the case, you may want to request a photo inventory of included furnishings and household accessories.
You will also want to review associated costs of ownership including estimated operating costs and good faith closing cost estimate from a local Closing Attorney.
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Step 3: Complete the Due Diligence period and initiate the transfer of rights process
Once the conditions of the offer have been satisfied, the closing process and the transfer of trust rights will be initiated.
At this point, and in agreement with the accepted offer, an earnest money deposit is added to Escrow. All escrowed funds become non-refundable unless the seller defaults in his contractual obligations.
A deposit on closing costs will be made to the Closing Attorney of your choice. You will provide instructions for how you would like to hold the title and who will inherit your property.
The draft for the closing deed will be drawn up, then reviewed by your bank trust officer, your lawyer, and the notary.
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Step 4: Close the deal
With the paperwork ready, you’ll be notified of the closing date and will receive a Settlement Statement and Disbursement Instructions for your review and signature. Your closing costs will be itemized along with the final payment due for the property purchase.
You will have the opportunity to discuss these documents with your Realtor, Closing Officer, and attorney. Typically, a final walkthrough of the property is done a few days prior to closing.
At closing, all parties will sign (or have their legal power of attorney sign before the notary). Once all parties have signed and the notary has issued disbursement instructions to Escrow, possession of the property is transferred and you will receive the keys.
Within a few days, you will be given an unregistered, notarized copy of the trust deed. In approximately three months, the registered deed will be issued by the Public Registry and will be delivered to your closing attorney. He will then notify you when it is ready to be picked up.
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Step 5: Receive your property
On another date, perform a final walkthrough of the property you’ve purchased. If everything is in good order, sign the delivery agreement, which finalizes the buying process. The property is now officially yours and duly received.
Learn more about buying Mexican real estate with Catherine
Get in touch with Catherine Buchanan today at 503.545.1767. You can also send her an email at catherine(at)livebaja(dotted)com.