3 Critical Steps for Buying Preconstruction Properties in Mexico
This article is not meant to be a complete how-to process, but it does build off of the previous 5 Essential steps to buying a lifestyle investment property in Mexico blog where I discussed the steps at a higher level. The blog is worth reviewing to get reacquainted with what has already been shared about this process.
Please Note: To gain all the specifics is a much more involved task and because we all have different sets of circumstances, you should always seek and obtain experienced professional legal and taxation advice.
Having said that, buying a preconstruction property entails some further steps and where it is appropriate, this blog will have some repetition from the 5 Essential steps to buying a lifestyle investment property in Mexico blog.
Step 1: Developer/Development Due Diligence
The ultimate goal when buying a preconstruction is to know how trustworthy the development and developer/seller is. So you need to learn all you can about the developer. The more you know about the developer the better. Understanding their track record is crucial to your perspective of risk. Is this the developer’s first or tenth or more development? It is very important to know and see the previous developments to understand how well they were finished and what the workmanship looks like. Are there complaints about the previous developments? If so what were the complaints, quality of finish, timeline, actual finished product matched what was presented, etc.
If the developer/seller is professional, the developer will have some sort of track record of completing a project and delivering on time. Usually the developer and development will have some sort of website showing current and past developments and a promotion centre or trailer and usually a sales team. Bear in mind, not all sales teams are licensed so you need to check. Also, websites are easy to make, so digging into the developer history and proposed development details in imperative.
Quality developers will be authenticated by AMPI ( Asociacion Mexicana de Profesionales Inmobiliarios / Mexican Association of Real Estate Professionals), which is a National professional real estate organization founded in 1956, and is the sister organization to and works with the professional organizations of NAR (National Association of Realtors) in the US and CREA (Canadian Real Estate Association )in Canada to which I am a member.
If the project is in or adjacent to the Federal Zone (this usually means oceanfront) be sure that the developer/seller has an appropriate Concession in place which permits the anticipated project. An environmental impact study is generally required as part of this.
Lastly, you want to ensure that the developer/seller is the legal owner of the property and that all permits have been paid for to ensure the project completion, which is another reason why you need to have a professional team that is hired by you and looking out for your best interests. I discuss this further in part 3!
Step 2: Build a Professional Acquisition Team
Professional & Spanish-speaking: Because you are purchasing in Mexico, a foreign country with Spanish as the national language, it is imperative that you work with a professional, experienced real estate agent that is fluent in both English and Spanish to assist you with navigating the entire purchase process. The developers’ contracts will not include the same elements that we use in resale contracts, and may not include all the same clauses we would see in a Canadian or US preconstruction contract. Your agent should assist you to get all the necessary purchase and related documents which involves the specifics of property legal and civic address, delivery date, payment terms and conditions, floor plans, and specifications list, which can include finishes, elements and equipment included, available upgrades or options for you to review with your attorney.
I became a member of NAR as well when I achieved my CIPS (Certified International Property Specialist) designation through the NAR. I bring all of this up because in many areas in Mexico, unlicensed people can and do sell real estate, so seeking to work with those individuals and or developers connected with professional organization the better your opportunity for success when purchasing.
Not all MLS
Please note not all regions in Mexico have a full MLS (Multiple Listing Service) System like we have in Canada or the US. You will find many areas will have licensed agents that will upload the developments to the FlexMLS which usually is accessed by contacting the agent or through the agent’s website.
Also note, not all developers have development website up or in a language other than Spanish, which is why connecting with a good, licensed agent in the area is paramount.
You will also need to work with a bilingual real estate attorney that will be able to review all the developer’s contract and all necessary related documents. The purchaser’s attorney should work on your behalf to ensure that your best interests are being maintained.
Typically when purchasing a preconstruction in Mexico, you wire funds directly to the developer. In general, this is done so that the developer can use your funds to continue building your unit. However some developers are actually well financed and have already began construction even without the funds from the preconstruction. These are usually long-time well-experienced developers.
Step 3: Taking Delivery
Notification & Payment
As per your preconstruction purchase contract, the developer will notify you when you will take delivery of the property. At that time you are required to pay all of the remaining outstanding balance of the purchase price, and you can actually take possession of your condo. Please bear in mind that even though the purchase contract is a formal agreement and you now have possession, you are not the registered owner until the escrituras” (formal title papers) are completed and the Attorney/Notario is ready to provide you a date to officially close in his/her office. As I have mentioned in the 5 Essential steps to buying a lifestyle investment property in Mexico blog, as a foreigner the property will be held in the fideicomiso (bank trust) that your Notario can assist in setting up.
Once you have taken delivery and everything is registered, the fun begins. There will be things to ensure that are set up for payments such as: electricity, gas, internet, property taxes, HOA fees, bank trust fees, and any fees related to owning and operating your new property.
If you are interested in real estate in the Greater Puerto Vallarta and Cabo San Lucas locations, I have great relationships with key contacts there for those interested in pursuing real estate there. In addition, I have made excellent connections with agents in other areas of Mexico and other international markets through my CIPS designation so please feel email me at [email protected], as I am happy to help you find the ideal Lifestyle Investment property for you.