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Mexico Real Estate Buyer’s Guide
How to Buy Property in Costa Alegre
Why Costa Alegre?
Thinking about buying a home in Costa Alegre, Mexico? You’re not alone. Every year, thousands of people fall in love with this coastal paradise and decide to invest in a second home, retirement property, or vacation rental.
This simplified guide walks you through the entire process of buying real estate in Mexico—from choosing an agent to closing the deal—so you can feel confident and informed every step of the way. A guide to purchasing real estate at Costa Alegre, Mexico from beginning to end. Find out all you need to know about buying and selling property in Mexico with this free comprehensive guide that answers all those burning questions about buying real estate in Mexico.
Let’s just imagine the scene: you came here on vacation and fell in love with Barra, Mexico and decided that you never want to leave. Sound familiar? Well, you are not alone. With hundreds of expats already having successfully made Costa Alegre, Mexico their home, you can be sure your instincts are spot on when it comes to choosing a prime location. Next, you most probably began looking on-line religiously and now believe you have asked all the right questions, have spent some time looking over the geography and have narrowed down your options and know the difference between Barra and San Patricio. Are we good so far? Finally, you have checked your budget and think you are ready to go… yet you still have a lot of questions. Right? That’s precisely where this guide is here to help. Read on and hopefully by the end of this article most of your questions will be answered.
Costa Alegre is one of Mexico’s best-kept secrets. With secluded beaches, luxury resorts, and a growing number of eco-conscious developments, it’s ideal for buyers seeking natural beauty, privacy, and long-term value. Areas like Careyes, Barra de Navidad, and La Manzanilla offer a unique blend of local charm and modern comfort.
Step 1: Choose a Qualified Real Estate Agent
The first piece of advice is to make sure that the real estate agent you choose to work with is fully competent to offer you the best service. At the very least, your agent should be an AMPI Member. The chapters of AMPI (The Mexican Association of Professional Realtors) are some of the most pro-active in Mexico in terms of membership and on- going training requirements. That said, there is no governmental regulatory body that oversees the legal and ethical operation of real estate agents in Mexico. So make sure you are comfortable with the agent you are working with because you are going to be depending upon that agent to cover a lot of ground on your behalf through to the closing.
Not to put too fine a point on this, our agents at Biencom Real Estate undergo thorough training on an ongoing basis and must all pass a rigorous 3-hour exam with a minimum passing grade of 75% before they speak to any of our customers. On-going training and coaching is something that every broker and agent receives at Biencom on a continual basis.
Step 2: Select a Trusted Real Estate Agency
The next thing you should be looking for is an agency that has been able to successfully sustain itself through thick and thin over the years and has a strong name in the community. Biencom Real Estate was originally founded in Ajijic in 2012 and has since expanded to Puerto Vallarta and Barra Navidad, becoming the first real estate agency to be active in all there major tourism markets of Jalisco
Step 3: Understand the Purchase Agreement
Although the Purchase Agreements used by most Real Estate agencies at Costa Alegre have become fairly standardized over the years, they are still custom documents prepared in double column format – English and Spanish. The purchase agreement covers everything that you would normally expect to be in a well written real estate agreement: the parties, the price, deposit and payment terms, due diligence, boilerplate clauses, default provisions, closing date and signature block.
The question is often asked: What price should be offered relative to the asking price? The answer is that it varies – depending upon the current state of the market and the current price of the property. Your agent should be able to guide you with current market data for real estate trends in Mexico so that your offer is treated seriously while not over-bidding.
Step 4: Make a Deposit (Down Payment)
Once the offer has been accepted, it becomes a ‘bilateral binding agreement’ and there is usually a period of 1 to 10 days within which time the buyer has to make the escrow deposit. The deposit amount generally recommended for the Mexican property market has traditionally been 10% of the final agreed purchase price. Usually, the deposit will be refundable until such time as all due diligence items have been satisfied – usually 10 to 20 days, or longer – after which time the deposit becomes non-refundable
Step 5: Use a Secure Escrow Service
At Costa Alegre, the escrow deposit is managed by the real estate companies who legally function as Depositors. The escrow protects all parties in the transaction. This is critical to any properly written real estate agreement in Mexico or anywhere else in the world. These deposits do not accrue interest. In the event of default or disagreement, the wording in the contract will take precedent; failing that or failing the ability of the parties to negotiate the disposition of the deposit between them, the matter will become the subject of a lawsuit – something that happens only in the most remote cases. In the event of a dispute between the parties, the lawsuit will be heard in the municipality where it was signed, usually the Municipal Court of Cihuatlán or La Huerta.
Step 6: Complete Due Diligence
The real estate purchase agreement may often call for some points of due diligence – everything from boilerplate items such as copy of the deed and no-liens certificate, to copies of the tax and HOA receipts, an inspection of HOA rules and building regulations, as well as a full engineering inspection if so desired. Built into the agreement, all due diligence items must be given a clear time frame and either stipulate methods to repair or provisions for cancellation in the case of catastrophic discoveries. Once the real estate due diligence items have been signed off, the agreement then becomes unconditionally binding for both parties and the closing process can begin.
Step 7: Calculate Closing Costs
At this point, the agent will provide the buyers, who will be responsible for 100% of the closing costs, with a closing cost estimate. It is an estimate because closing costs are calculated in Mexican Pesos, and are vulnerable to exchange rate fluctuations.
The buyer will be asked to advance about half of the estimated costs to the notary to cover his out-of- pocket expenses, and the balance is usually paid by personal check to the notary at the closing, or can be deposited into an escrow and disbursed directly to the notary’s account at closing.
The Closing Costs can vary from on location to another in Mexico. They consist of various fees and expenses and at Costa Alegre they generally total between 3–4% of the actual purchase price, although this may be higher if there is a mortgage involved or the property is being bought below market value. These costs are always the responsibility of the buyer. (The seller will bear the cost of the real estate fees and their capital gains taxes, if applicable). A very approximate break down fo what these Closing Costs consist are as follows: (these fees – in USD – are to be used as a guideline only and are approximate. They will vary according to the size of the transaction and the exchange rate at the time).
Transfer tax – 2% State Tax
Trust Permit –$200 per person Department of Foreign Affairs Mexico City
Appraisal for Future Tax Assessment – $200–$500 USD or more. The appraisal for Future Tax Assessment in Mexico varies with property size with locally certified appraiser.
Non-Encumbrance Certificate – The Non-Encumbrance Certificate from the Land Registry Office (LRO) in Jalisco is about $100.
Preventative Notice Advice – The Preventative Notice Advice from the LRO are about $50 (for 2).
Registration Fees in the LRO – Registration Fees in the Land Registry Office varies from .5%.
Notary’s Fee – The Notary’s Fee in Mexico varies from .5% to 1% depending upon transaction size.
Step 8: Closing the Deal
Notaries in Mexico are like Super-lawyers, one step below a Federal Judge. Notaries must pass the Mexican equivalent of the bar exam, they are then required to take two years of extensive study while practicing in a notary’s office following which they are subjected to a 3 day examination program and finally must be appointed by the state to a specific office in a city of which there are only a predetermined number of “notario” offices appointed. This is very different from the concept of a notary in the US or Canada. Notaries in Mexico are the only entities that are recognized by the Commercial and Land Registry and and the taxation authority and they are empowered to collect taxes for all 3 levels of government.
At the appointed time, the buyer, seller and their respective agents will meet to ‘close’ – or as it is known in Mexico, ‘formalize’ the real estate transaction in the notary’s office. One can get a basic idea of the documentation required and the various entities that are needed in order to generate these documents.
.A few of the larger real estate agencies at Costa Alegre (such as Biencom Real Estate) have their own in-house closing coordinators. The closing coordinators have the skill-set needed to prepare all parts of the required documentation and are fluently bilingual. They perform a lot of the work necessary for the closing on behalf of the notary offices, and they are also able to explain important information and help the real estate buyer and real estate seller, along with their real estate agents, towards an orderly closing. At the closing, the closing coordinator will also appear at the notary’s office and will usually walk through and translate the deed with the buyer and seller, answering any questions, should they so request. Once the names have been verified as being correct in the document, official IDs have been verified and all taxes have been collected (from buyer and seller), the notary will appear in person to observe the execution of the deed, then very politely thank everyone and excuse him or herself from the room while keys are passed and congratulations are in order.
Once the notary has stamped the deed, you will be given a copy of everything you signed that day by the notary’s office. The real estate company acting as depositor will have previously prepared closing statements which signed by the seller and the buyer setting out exactly to whom and how much is to be wire transferred according to the detailed information provided in the statement. The real estate company will execute the disbursements immediately and funds are generally received by bank transfer that same day. At closings which take place after 3 PM and which involve international transfers, the money will not leave Mexico until the next day. Mexican transfers can generally be made until 5 or 6 PM local time, after which they will also occur the next day.
The actual deed will not be presented to the LRO for probably several days by the notary, everyone is protected from the possibility of any third party charges from being registered by means of the certificate of non-encumbrance and the preventative notice, both of which are generated by the LRO at the same time. The preventative notice issued by the registrar freezes the title for a period of 45 days and is obtained at the same time as the certificate of non-encumbrance showing that the property is free and clear and is generally renewed at some time during the initial 45 day period for another 45 day period giving everyone sufficient time to close and present the trust deed for registration. At Costa Alegre, the actual registration will take between 30 and 90 days and the buyer will be notified by his agent (typically) as to when it can be collected from the notary’s office.
Step 9: What You Actually Own
Foreigners don’t own the land directly in Mexico’s restricted zones (like the coast), but you own the rights to a 50-year renewable trust (fideicomiso), giving you full control of the property—sell it, rent it, or live in it.
Step 10: What if you decide to sell?
When you sell the real estate, you will become subject to capital gains tax based upon your cost base – in pesos – in your deed, which was or should have been, your actual purchase price at the exchange rate of that day – and, the sale price. The capital gains tax at the present time is between 20–36% of the gain and is subject to certain deductions, one of which is the real estate commission. If you have a resident visa (Temporary or Permanent), a RFC tax number and have lived in the property as your principal residence you should be exempt from capital gains tax up to a certain amount; otherwise you will be subject to this tax.
Critical Documents
- As mentioned earlier, your register deed/escritura will be available for pick-up from the Notary’s office approximately 90 days after closing. In addition to the deed you also need to receive the following important documents from the Notary:
- El Boleto de Registro – (the Registration Letter) from the Registrar that confirms that the deed was registered on a specific date at a specific time.
- A factura (tax receipt) in xml digital format (via email or delivered on a thumb drive) showing the actual amount in Mexican Pesos of the registered purchase price.
- A factura also in xml format showing the itemized breakdown of your closing costs.
Items #2 and #3 are particularly important because they are the only documents that will be accepted to evidence your cost base as deductions from future capital gains taxes (20–36%) upon sale. Failure to be able to produce these digital facturas will mean that the Notary formalizing the eventual sale of your property will only be able to deduct 10% of the sale price.
If you have any doubts or questions, please contact Biencom Real Estate agent who will be able to walk you through any parts of the above process with ease and get you quick and concise answers.
Need Help?
Have questions? Contact a certified agent at Biencom Real Estate. We’ll walk you through the buying process in Puerto Vallarta and ensure a safe and smooth experience from start to finish.
