The home selling process in Mexico is more or less similar to that in the United States. You prepare the property for sale, make repairs, find a licensed listing agent, and price it competitively to attract buyers. There are, however, a couple of things to note before you proceed with selling your home. This Seller’s Guide aims to help you with the preparations needed before listing your home for sale, from building your files folder, manifesting improvements done on the property, and determining whether you are qualified for the capital gains tax deductions or one-off exemption. Know the essentials of selling a home in Mexico here.
Have you decided that it’s time to move on from your property in Los Cabos? Read this guide to know what to expect as you sell your Mexican property.
To sell with or without a real estate agent?
It is wholly possible to sell your Mexican property on your own. But if you want additional services, market insight, and overall expertise on Los Cabos real estate, finding a local seller’s agent is highly recommended.
If you can’t make it to Los Cabos to oversee the sale of your property, having a local realty agent as your conduit would be extremely helpful. The challenge lies in finding the right agent to work with.
Choose a real estate agent who openly communicates in a consistent basis, especially if you are selling from abroad. Of course, local expertise and recent experience selling homes in Los Cabos are also great attributes.
Documents you need to prepare
As the seller, you have quite a long list of paperwork to organize. Make sure to share the following documents to your realtor:
A copy of the title (escritura) or fideicomiso
Utility bill that states your primary residence
Last Property Taxes Paid
Last Bank Trust Fees
Current HOA, Maintenance, and/or Property Management Fees (if applicable) and proof of payment
If you purchased your property as an individual: Present two valid IDs, usually your passport and driver’s license.
If you purchased the property as a legal entity: Present two valid IDs for each of the members or partners and a copy of the Legal Entity documentation.
If you originally purchased a homesite: Include the Manifestation of Construction and Construction Completion Certificate (Terminacion de Obra) in the files folder.
Getting a Capital Gains study
Before you list your home in the market, you have the option to conduct a Capital Gains study on your property. This will allow you to get an estimate of how much you need to pay for the Capital Gains tax once you sell the property.
The Capital Gains tax can either be:
25 percent of the gross sales value without any deductions
Between 1.92 and 35 percent, depending on the value of the gain
There are also options for you to reduce or even completely avoid paying capital gains tax.
Lowering your Capital Gains tax
One way to lower what you need to pay is by manifesting all the work you have done on the property, such as repairs, upgrades, and renovations. Add these to the cost basis and make sure to provide proper documentation (such as receipts (fraturas), the Manifestation of Construction, and the Construction Completion Certificate).
If you weren’t able to manifest the construction work done on your property, Mexican tax law will not count the costs as deductive expenses.
Avoiding the tax
The best way to avoid paying the Capital Gains tax is to establish that the property you’re selling was your principal residence. In order to do this, however, you must meet the other requirements:
You must be a registered resident (temporary or permanent) with a Mexican tax ID
The land the property sits on must not be three times larger than the building
You can only use privilege once every three years.
If the property you’re selling is co-titled with your spouse or another family member who meets the requirements above, you can apply additional deductions in their name.
You might also discover that your property is exempt from the capital gains tax. It could be that you’re selling an inherited or donated property. The latter, however, is not final. Talk to a tax attorney to make sure it is indeed included in the exemptions.
Things to know
When dealing with Capital Gains tax, take note of the following useful information:
While the Notary Public is the one to finalize the deed and tax declarations, they’re not experts on Mexican tax law. Furthermore, Mexican real estate laws change once in a while.
Raw land as well as corporations are under a different tax system.
You can include maintenance costs in your manifest as they are considered deductions.
If you paid a 2 percent Acquisition Tax, this can also be used to lower your Capital Gains tax.
About property disclosures
One way to help the sale of your property is to provide a disclosure document detailing any issues that can potentially harm or even terminate a sale. These include hidden liens, structural issues, fumes seeping into the property, and encroaching buildings, among other things.
Learn more about selling Mexican real estate with Catherine
Once you get the hang of the preparations, the selling process is often straightforward and stress-free. Talk to Catherine Buchanan today at 503.545.1767 or email her at catherine(at)livebaja(dotted)com or firstname.lastname@example.org for more information.