Real Estate and Taxes in Mexico by Paradise Realty Mexico

http://www.paradiserealtymexico.com 

 

Costs and Taxes

When you buy property in your home country, you are usually faced with the associated costs like agent fees and taxes. Mexico is no different, although the net value of these costs as a percentage of the property values may be lower overall, but this is not guaranteed as professional fees have risen recently too. Worldwide companies such as: "PRM" Paradise Realty Mexico, Coldwell Banker, Remax and Prudential have flooded the area with satelite offices with makes Real Estate in Mexico Very competitive and almost the same as in other countries.

Costs and Taxes: Buying

Acquisition Tax: This tax is paid on the sale value of the property and is equivalent to about 2.5% depending on the state in which you buy. This tax is paid whether the property is sold, transferred, donated, placed into trust, split off or merged. VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax. Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report. Registry Fee: In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer. Public Notary Fees: You will be required to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes). 

 Bank Trust: 

If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from bank to bank. Set-up fees can cost around US$1000, with annual service charges between US$1000-$2000. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance. Land / Building Surveys: If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken. Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150. Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1000+ a year, depending on location, number of houses or apartments in the enclosure and amenities offered. Title Insurance: When you buy property in Mexico, you would do well to consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value. 

Costs and Taxes: When you sell your home in Mexico.

When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees: Income Tax on Property Gains: If the home has not been your main residence for at least the last two years, will be required to pay income tax on the property. You may either pay 20% on the gross amount of the transaction, or elect to pay 40% tax on the net profit obtained from the property. This law prevents short-term speculation on the property market. Commercial property is taxed at above rates, regardless. Agent Fees: If you employ an agent, expect charges of around 4-8% of the value of the sale as a fee, but you may want to negotiate on this beforehand. You will also need to pay IVA. (Sales Tax) on Real Estate Agent Fees

Time Scales

Whether you are buying or selling land or property in Mexico, you need to manage your expectations in regard to time scales. Mexico’s real estate markets are very regionalized and, in most cases, localized. The location where you intend to buy/sell will have an enormous influence on how long it takes for a property to sell. Property transaction volumes will be much higher in big cities and major resort areas than in smaller towns, villages and islandsand this transaction rate will determine, to a greater or lesser degree, how long it takes to match a buyer with a seller.

Buying a Home in Mexico

When you are in the market to buy a home, you may find the buying process frustrated by the seller—especially if it is a private sale. This may sound strange, as you might think that the seller will be keen to close the transaction. However, many factors come into play with Mexican property transactions; sellers may have to negotiate with family members, other ‘interested’ parties (e.g. distant relatives who may or may not be associated with the deeds), as well grapple with nuances of Mexican cultural behavior in regards to ‘letting go’ of things—like long-held heirlooms. Some transactions may go through very quickly: for example, when the seller is in need of fast-cash, or a developer is selling you a brand-new property. Expect the buying process to be different to what you are used to in the USA, Canada and Western Europe—and realize that you may have to be patient if you found your ‘dream home’ and think you can move in quickly; in some cases you can, in many cases, you won’t be able to.

Selling Your Home in the Riviera Maya.

When you come to sell your Mexican home, you will realize that the location of your property will not only affect its sale price, but also the time it takes to sell the property. Some properties can remain on the market for years before they sell; this is particularly true of homes situated in remote or rural areas. Conversely, some homes can sell almost as soon as they come to the market—these tend to be properties in larger cities (especially trendy neighborhoods of Mexico City or Monterrey) as well as popular resorts. Most of Mexico’s realty markets are not as “mature” as property markets in the USA or UK and transaction volumes are, generally speaking, lower. As a rule of thumb: land and property in rural and remote places, as well as those in areas with less well-developed amenities and local services will take considerably longer to sell—perhaps a year or more—than properties situated in larger towns and cities, popular resorts; places which offer nearby local services and amenities (shops, schools, community centers, clinics, hospitals etc.).

Closing Time With a "Notario"

Once a buyer and a seller have agreed to proceed in earnest, the paperwork can take anything from a few weeks to several months to reach a close. If you are buying, you should not rush your notary public or solicitor as they carry out the necessary checks as part of their due diligence. If any untoward matters arise, these may add delays, but addressing them helps to protect the buyer and the seller. Most real estate transactions in Mexico go through without major delays, and with all the necessary paperwork and title deeds completed to legal norms. The solidity of the legal procedures involved in Mexican real estate transactions have enabled US insurance companies to provide secure title insurance. It’s important, however, that both buyers and sellers exercise patience and understanding Mexico’s legal system is bureaucratic; managing your own expectations (and your practical plans) to suit will save a lot of unnecessary stress.


 Thomas Benes.
Paradise Realty Mexico
Retorno Akab # 101a Edificio Concha A
Playa Car, Playa del Carmen
Quintana Roo Mexico. 77710.
Cell Phone: 984-806-8557
Officce Phone: 984-806-8557
E-mail:thomas@paradiserealtymexico.com
Web: http://www.paradiserealtymexico.com


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