Thursday, April 22, 2010

What are the Closing Costs for Purchasing Property in Mexico?

I am often asked what the closing costs are in Mexico.  There isn't a simple answer.  The price of the closing costs depends on a variety of factors.  Each purchase may be different.  There are some basic costs that apply to each transaction.  There are other services (like an attorney or title insurance) that a buyer may opt to have as well.

This price guide lists a variety of common expenses.  The prices listed are current for 2010.  You will always need to solicit a price quote for the most current rates.


~~ FEES CHARGED BY THE NOTARY ~~

Whether you are a Mexican national or a foreigner, all sale transactions must pass through a notary.  In addition to the Notary's Fee, they will also charge for a variety of paperwork and taxes/fees that are required for the sale.  Click Here to View a Prior Blog Post About the Notary's Role in the Sale/Purchase of Property.
  • Notary Fees:  The notary fees vary depending on the deeded value and also vary from notary to notary.  Notary fees are assessed as a percentage of the deeded value.  In general, the percentage is less as the deeded value goes up.  A good rule of thumb, for most properties, is between 0.75% - 1% of the deeded value.  The notary charges this fee to write the sale contract, coordinate the paperwork, and perform the due diligence research of the property's paperwork.
  • Acquisition Tax (ISAI): 2% of deeded value 
  • Municipal Tax: 1% of ISAI 
  • Public Registry of Property Fee: 1% of deeded value 
  • Public Deed Fee:  500 pesos 
  • Appraisal (Avaluo):  Prices Vary according to the value of the property.  Typically between .2% - .4% of the property value.
  • Certificate of No Liens (Certificado de Libertad de Gravamen): 285 pesos*
  • Tax Certificate (Cedula Catastral):  approx 300 pesos*
  • Water Certificate (Constancia de No Adeudo de Agua): 71 pesos*
* The notary usually includes a small service fee to acquire these documents, but this fee is well worth the time that it would take to acquire them yourself!


~~ TRUST FEES CHARGED BY THE BANK ~~

Trust fees are a requirement for foreigners who are purchasing property within Mexico's Restricted Zone. Foreign buyers purchasing property in this zone will need to open a new trust in their name or transfer an existing trust (if one exists) from Seller to Buyer.  The Service and Administration Fees that banks charge also vary from bank to bank.

  • Fee to Transfer a Trust from Seller to Buyer:  approx $6500 pesos
~ OR ~
  • Fee for the Foreign Ministry Permit to Open a New Trust: $13,000 pesos
  • Bank Administrative Fee:  approx. $6500 pesos
  • Bank Fee for the First Year of the Trust: approx. 6500 pesos
  • Registering Trust with the National Registry of Foreign Investment:  approx. 4000 pesos.  [Some Banks Include this Fee in their Administrative Fees, others charge separately.]


~~ ATTORNEY FEES ~~

While not a requirement (unless you are purchasing title insurance -- see below), many buyers opt to have an attorney review the paperwork, perform a title search, and provide general legal counsel on their behalf during a sale transaction.  Remember that notaries are attorneys, but are also neutral, third parties in the transactions.  Attorney fees vary greatly depending on the amount of work that is involved during a particular transaction.  Some attorneys charge a flat fee and others charge a percentage based on the amount of the transaction.  $1000 USD - 2% of the transaction amount.


~~ TITLE INSURANCE ~~

Title insurance is not required to purchase property in Mexico.  However, some buyers opt to have title insurance policies for their property.  Click Here To Learn More About Title Insurance from a Prior Blog Post.  Both Stewart Title and First American Title insure properties held in trusts here in Mexico.  We have found First American have better rates than Stewart, but both are equally good companies.

Title insurance policies can be purchased at any point during property ownership.  However, the ideal time to acquire a policy is at the time of your property's purchase.  Policies are reasonable in price and are a one-time payment.  Title insurance companies require a vigorous title search process that is performed by one of their attorneys.  So, if you decide to purchase title insurance, be sure to hire an attorney that is a part of, or approved by, your title insurance company!

Cost of a Policy from First American:  Expense Due Diligence Title Research by Approved Attorney + $5 USD per every $1000 USD insured.


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