Rates and Fees in México
Closing costs in Mexico are quite different from the U.S. The fees outlined below are a simple explanation of the fees associated with a “cash-only transaction.”
Most closing costs fall to the responsibility of the Purchaser. The Seller will pay Capital Gains taxes and any other fees negotiated and agreed to in the sales contract.
- Third Party Fees
- Mexican Valuation Appraisal
- Annual Property Taxes (aka Predial)
- Residential Appraisal
- Mortgage / Weather Insurance
- Closing Agent Settlement Agent
- Closing Attorney
- Title Research
- Title Insurance
- National Registry Fees
- Trust Permit
- Trust Fees
- Anual Trust Fee
- Notario Fees
- Certificate of no liens
- Certificate of no tax due
- Public Registry Transaction Registration
- Acquisition / Transfer Tax (ISAI)
- Expedition of Deed
- Translation fee
Taxes and fees are calculated in the Mexican Peso, although the purchase price or a mortgage loan may be quoted in U.S. Dollars. This means that the exchange rate may fluctuate from the time an offer to purchase is accepted to the actual time of the closing.
($150 – $1000 USD per parcel)
- The appraisal is made by a Mexican government authorized appraiser.
- This appraisal is similar to assessments used in the U.S. and are primarily used for taxation purposes. Appraisals fees are assessed per parcel and calculated on the real estate value.
(1% of the Mexican Valuation Appraisal)
Known in Mexico as Predial. Taxes are paid annually, with the assessed value determined at the time of sale. With Mexico’s rates less than 1%, these taxes are based on the Mexican Valuation Appraisal and are substantially less than U.S. appraisal fair market value.
($1550 – $5000+ USD)
The residential appraisal is a market appraisal done by a third party to determine the market value of the property in comparison with the purchase price of the property. A real estate agent’s market “appraisal” differs greatly from an appraisal done by a Certified Appraiser.
($400 – $2000+ USD annually)
Hurricane, Fire, Theft insurance can be obtained. Most external structure insurance is covered by the monthly maintenance fees, while the interior products are insured by the home owner. Avg. costs are from $400 up to $2,000 USD per year based on the quantity of electronics and furniture secured.
($600 – $2000 USD)
The Closing Settlement Agent is used to coordinate and manage the closing process in a purchase or in a mortgage transaction. Fees are approximately $1,500 USD and are for the services associated with the transfer of the title, including Trustee Bank approval or transfer, as well as communication and coordination of all municipal and federal permits and coordinating with all parties to the transaction for closing.
A Closing Attorney can act as the Closing Settlement Agent, while giving legal advice to a Buyer or Seller.
($1000 – $5000 USD)
A title property search will generally cost $1,000.00 to $3,000.00 depending on the region and complexity of the search.
Property search will reveal existing liens, history of the property, easements, and any other details pertinent to the property. Existing Condominium Regimes, developments and new construction projects require an updated title search from when the Regime or project was started and approved.
($7 per $1000 purchase price /loan value)
The title premium is paid based on the purchase price or loan amount at the rate of $7/$1,000. The first step is to conduct a title research on the property and Opinion on Title (Legal examination of the search).
After a positive result of the investigation and if the property merits, the Opinion on Title is sent to the Title Underwriter. An application is opened on behalf of the Buyer and the appropriate documentation from the Buyer and Seller is sent with the application.
Once the documents are completed, it typically takes 4-6 weeks to complete the process, including issuing the Commitment. Additional time may be required if the chain of title is extensive or if the property is located outside of a well populated area. Stand-alone property (not located in a condominium or planned unit community with an existing Master Plan) may also require additional time to process.
($800 – $1500 USD)
Mexico has adopted the U.S. West Coast practice of “opening escrow”. An escrow agent may work independently but always in tandem with the Settlement Closing Agent.
Typically, the escrow account is a secured, escrow trust account, located in the U.S. with a licensed title agent or licensed attorney who is approved, by law to handle real estate trust accounts.
The Escrow Agent receives earnest money deposits, down payments, disburses funds for pre-paid charges such as property certifications, payment to the current Fideicomiso Trustee and to the new Fideicomiso Trustee (if the old Trust is being extinguished and a new Trust is opened).
RNIE ($300 – $600 USD)
The Trustee is responsible for ensuring the registration with the RNIE. This is completed after closing. Fees are paid in behalf of the buyer/borrower
SRE ($1300+ USD)
Along with the RNIE, the Trustee is responsible for obtaining the SRE Permit. A Trust cannot be obtained without this, so the Trustee will ensure it is completed – with the buyer paying the fee.
(Set up Fee $800 – $2000 USD Annual Fee $500-800 USD)
The Trustee Bank is the Mexican Financial Institution who is organized by the Mexican Government and is authorized to be a Trustee.
- There is a set-up fee for creating a new trust.
- There is an annual trust fee to manage the trust on behalf of the property owner.
There is an annual trust fee charged by the bank to maintain the Fideicomiso Trust. This is paid in advance, with the first year being paid at closing, which is in addition to the one-time setup fee.
(% of transaction price starting at $1000 USD)
A Mexican “Notario Publico”, is an attorney who, after passing rigorous examinations, is commissioned by the government as a public notary. A Notario holds high office for life, unless he or she is removed for cause. The Notario fulfills a public function delegated by the government. Although licensed as an attorney, the Notario is not in a position to provide either of the parties with legal advice. The Notario acts as “third party uninterested.”
Notary Fees are based upon a percentage rate schedule and are tied to the amount declared in the property transfer or the new loan value. Fees can range from $1,000 USD to several thousand dollars depending upon the declared value of the property. It is advised the buyer/borrower ask the Notario to provide them with an official receipt for the fees charged for performing services.
The certificate of no encumbrance shows that there are no conflicting claims to the property. It also contains the chain of title and a description of the property.
A certificate of no tax liability. This certificate is used to prove that there are no outstanding property taxes or other assessments on the property at the time of the agreement. If so this should be liquidated by the original owner of the property.
0.25% – 2% of assessed property value)
These fees vary from state to state but range from .25% up to 2% of assessed value.
(2% – 3% of property value)
Individuals or companies purchasing real estate, consisting of land, or land and its improvements in Mexico, are subject to an Acquisition Tax (Impuesto Sobre Adquisición de Inmuebles). The rate is 2% – 3% of the value of the property depending on the state. Every individual or company is responsible to realize this tax payment for all transactions including purchase and sale agreement, trust, donation, assignment, mergers of companies, split-off, or payment in kind.
($25 – $50 USD)
This is a fee to issue the hard copies of title,. This fee covers the delivery of the legal document given to the buyer, to the seller, to the creditor and to the Trustee Bank.
($22- $33 USD per page)
In Mexico, certified translations are carried out by both the expert translators authorized by the Council of the Federal Judiciary and those authorized by the corresponding councils of each of the states of the Federation and the Federal District . Although, in principle, the validity of certified translations is restricted to the jurisdiction in which the expert is registered, in practice it is often recognized in other states. In this way, the person or institution concerned may choose more freely the translator expert whom he deems appropriate for his need.
There are translation agencies that provide this service; however, translation experts must be registered in the jurisdiction where they carry out their work. Although it is possible to recognize the translations of experts in other states, this is often the case when the state does not have expert translators in some languages.
Closing Costs Time Line
This outline has been prepared on the basis of a standard, cash purchase transaction. There are many variables that can occur, and the timeline is always subject to the Offer to Acquire and the dates established for deposit and action.
While every effort will be made to close a transaction in a timely manner, the process is ultimately subject to the Mexican requirements for Purchase and Sale as well as the availability of the Trustee Bank, Foreign Affairs Ministry, Lawyers involved, the parties involved, the closing coordinator, the Notario Publico and others. Indulgence, patience and understanding is requested if dates are delayed – the process has been simplified over the years, however it is still a process without shortcuts.
1 – Purchaser and seller execute the offer to acquire (‘offer’), which constitutes an accepted offer to purchase the property.
2 – Purchaser executes an escrow agreement with the ‘Escrow Agent’ and escrow company., escrow notification letter with the offer and both seller and purchaser provide a copy of his/her US passport(s) and driver’s license(s) Know Your Customer (KYC) forms, privacy notices forms and others.
1 – As normally indicated in the offer, purchaser will deposit the agreed upon initial deposit (usually $5,000 to $10,000 USD), plus the escrow fee into escrow within three (3) business days of acceptance (the latest date on Offer signature line).
2 – Purchaser’s real estate broker will submit the fully accepted offer, escrow notification letter, purchaser and seller’s IDs and all seller’s ownership documentation to the closing officer and or closing company.
3 – Closing officer and or closing company will contact purchaser upon notification that the initial deposit has been received, provide a closing costs estimation and additional settlement requirements and closing information and will work with purchaser and/or purchaser’s legal or fiscal counsel to determine how purchaser will take title of the property, as well as work through all due diligence requirements and conditions established within the offer.
4 – Real Estate Broker will work with the both parties, including closing company and/or lawyers and/or closing officer, seller and buyer to remove any contingencies, finalize inspections or inventories, etc., to remove all conditions that would delay the earnest money deposit.
5 – Should purchaser continue to be committed to the purchase of the property, real estate broker will then, through their corresponding broker or officer, provide the wire transfer instructions and escrow agreement to purchaser for the earnest money deposit.
6 – Should purchaser decide not to move forward, the real estate broker must facilitate the refund of the initial deposit and advise seller and the transaction will be cancelled.
End of Due Diligence Period
1 – Purchaser executes the escrow agreement, a standardized agreement with the escrow company.
2 – Purchaser funds the earnest money deposit as indicated in the offer. This deposit should be the full earnest money deposit, less the initial deposit; example – if the earnest money is $100,000 USD and the initial deposit was $10,000 USD, the balance due is $90,000 USD (unless otherwise indicated in the offer).
3 – Purchaser additionally deposits the pre-closing costs fee (between $3,000 and $6,000 USD – some companies request up to 50%). This fee will be applied to the closing costs due at closing and will offset the costs of pre-closing permits and requirements.
4 – Should purchaser not deposit the earnest money deposit, broker will provide notification to the real estate broker(s), escrow agent, purchaser and seller, and purchaser shall have days to “cure” (deposit). If the deposit is not received within the five (5) days and no extensions have been negotiated, the transaction will be cancelled with no further responsibility to purchaser or seller and the initial deposit shall be returned to purchaser by escrow agent.
1 – Purchaser and seller will provide all pending documentation to the closing company, closing officer and/or Notario Publico, to complete the transaction file to be submitted to the Notario Publico and Trustee Bank. This will include all information to follow this timeline.
2 – Closing officer and/or closing company and/or law firm in charge of closing will provide the Notario Publico and trustee bank with the transaction file with all requirements to the Notario Publico, who in turn will appoint an associate attorney to oversee the legal process of the transaction. The associate attorney and the Notario Publico will be available to answer questions to purchaser, seller or their respective counsel at any time.
3 – The Notario Publico will prepare a capital gains tax estimation for the seller’s review (this is normally done now prior to offer acceptance). Taxes are calculated over the adjusted peso value of both the seller’s purchase (cost basis) and the sale price of the property based on the estimated peso value of the USD value at closing (capital gains tax or ISR for 2015 is 35% of the profit or gain in pesos).
4 – The Notario Publico’s office will prepare the trustee bank instruction letters to be signed by both purchaser and seller. These letters are the parties’ notification to the
Trustee Bank indicating the property has been sold, the terms of the sale and acquisition, the appointment of the Notario Publico as the official overseeing the sale, and also provides a proxy to one of the Associate Attorneys in the Notario Publico’s office to sign the deed of title on behalf of Purchaser and Seller at closing, so neither Purchaser or Seller need be present. This letter will be submitted to the Parties’ with instructions on how to have the document authenticated in accordance with Mexican Law, including apostilles, Notary Public in the U.S Consular Certifications, Translations and others.
5 – Upon or before receipt of the Letters of Instructions by both Seller and Purchaser, the Notario Publico and/or Closing Company, or Law firm, will request the Foreign Affairs Permit (FAM or SRE Permit) from the Ministry of Foreign Affairs – a requirement for any foreigner purchasing in Mexico.
6 – The Notario Publico will prepare the Deed of Title held in Trust (‘Trust Deed’)for the Trustee Bank’s review, as well as the parties. The Trust Deed, also called a Fideicomiso, is the ownership mechanism for foreigners (non-Mexican citizens) in Los Cabos, as well as all coastal and border areas of Mexico. The appointment of the Trustee is generally determined by the Notario Publico and will often be the same Trustee as the Seller’s for reasons of cost and continuity.
The Trustee’s only responsibility is to hold the Trust Deed on behalf of the Beneficiary Owner(s) and to act in accordance with their instructions. Property held in trust is not considered an asset of the Trustee Bank in accordance with the Mexican Constitutional Law. Also if there is an existing Trust, then an assignment of Beneficiary Rights can be prepared . If the Purchaser is Mexican then there is a cancellation of the Trust and if both are Mexican there is a Deed Transfer.
7 – Upon review and acceptance of the Trust Deed, as well as the additional closing documentation requirements (see attached list), the Trustee will authorize the Notario Publico to execute the Trust Deed with the Parties’ or their authorized Proxy(s).
1 – Upon the Notario Publico’s receipt of the Trustee Bank’s letter of instruction and authorization to close on behalf of the Parties, the Notario Publico will prepare his notification to Purchaser to fund escrow within five (5) days of the established closing date or as soon as possible.
2 – Closing Officer/ Closing Company will prepare a draft settlement for Purchaser and Seller’s review, as well as the final wiring instructions for Purchaser’s final deposit to Escrow.
3 – Purchaser and Seller authorize and sign the final Settlement Statement, which will be provided to the Escrow Agent.
4 – Purchaser funds Escrow with the balance of the Purchase Price, balance of Closing Costs and any additional fees assessed or negotiated.
5 – Upon receipt of written confirmation from the Escrow Agent that escrow has been funded in accordance with the Offer and Settlement Statement, the Notario Publico will complete all necessary documentation for Transfer of Title and obtain the signatures required from the Trustee Bank as well as Purchaser and Seller or their respective Proxy(s).
6 – The Notario Publico will submit to the Escrow Agent the following documents: a copy of the executed Trust Deed in favor of the Purchaser, Certificates of No Liens and No Tax Debt, a Preventive Notice of Sale filed in the Public Registry in favor of the Purchaser and a letter of confirmation that title has been duly transferred by Seller to Purchaser in accordance with Mexican Law.
7 – Escrow Agent will review all documents received by the Notario Publico, verifying all conditions in the escrow agreement for the release of funds and within two (2) business days will release all funds in accordance with the Escrow Agreement and the Settlement Statement executed by Purchaser and Seller.
This transaction has been successfully closed!
Where is my Trust Deed?
1 – During the immediate weeks following the transfer of title, the Notario Publico will take the necessary steps to register the updated Trust Deed with the Municipal Tax and Public Registry Offices, as well as pay all requisite sale and acquisition taxes for both Purchaser and Seller.
2 – Within 10-14 days, upon payment of the Purchaser’s acquisition tax, the Notario Publico will issue a simple (non-certified and non-registered) copy of the Trust Deed, to the Purchaser and their representative(s) to assist in transferring utility contracts, finalizing club memberships, etc.
3 – Approximately 3-4 months after closing, and upon recordation of the Trust Deed in the Public Registry, the Notario Publico will issue the final closing package which will include;: A certified original Deed of Trust in favor of the Purchaser, a certified English translation of the Deed of Trust, a summary of all Property and Deed information, a final closing statement and all receipts for closing expenses, fees and taxes paid, as well as a closing Escrow ledger to reconcile the deposits. All documents will be submitted both in paper and digital formats to the Closing Officer who will forward to or hold for Purchaser as requested.
4 – Simultaneously, the Notario Publico will provide Seller with a copy of all fees and taxes.
(ISR) paid on his/her behalf for credit in the U.S. for taxes paid on foreign income earned
Final Closing Package Delivered to Purchaser:
1 – Certified copy of registered Trust Deed.
2 – Certified translation of registered Trust Deed.
3 – Trust Deed Summary form, itemizing the most important facets of the Trust Deed itself (Legal Description, Owner of Record, Registered Value, Tax ID Number, etc.).
4 – Final settlement statement & escrow disbursement ledger and any applicable refund.
5 – All closing expense receipts including acquisition tax, bank fees, Notario Publico’s fees., etc.
6 – Copies of all prorated expenses paid, including property tax, HOA fees, etc.
7 – Title Insurance Policy.
Final Closing Package Delivered to Seller:
1 – Certified Letter of Payment of Capital Gain tax (ISR) or exemption as applicable from Notario Publico
2 – Copy of Receipt of Payment of Capital Gain tax (ISR)
3 – Copy of Receipt of Payment of any other affiliated expenses
4 – Final Settlement Statement