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Question: I have been approved in the past to be exempt from capital gains
because I have an FM3 and copies of bills on my property for the past 6
months, 2 years. Am I exempt?
Answer: The law is being more strongly enforced than in the past. Anything you
were told previously needs to be rechecked with the notary of your
choice. Do not assume that you know what the current guidelines are
which are being used. Check before being surprised.
Note:
a listing agreement and sales contract in Mexico through an Ampi member
should include a statement by the seller that he knows he will need to
pay capital gains tax if he is not exempt.
Question: What is the federal maritime zone? I just bought my home in front of the beach and no one can build in front of me.
Answer: All beaches are public in Mexico. Beaches belong to the Mexican government for the use and enjoyment of all.
No
one can buy the maritime zone. The adjoining land owner to the maritime
zone should pay the annual taxes on this adjacent land and should work
to acquire the concession agreement to this area. Paying the annual
small amount of tax for the concession in front of your land only gives
you the first right to proceed with the concession agreement. You need
to hire an expert lawyer or qualified professional to work with the
government on acquiring the concession of the federal zone for as long
a period as is possible to be granted. Be sure you have the concession
documented in your beneficiary rights of your fidecomiso.
The
term of the concession agreement can be 10 years, 20 years, whatever is
being done at the time you make your formal request. There is a
substanial cost required in obtaining the formal concession from the
government, and it is not automatic. There is an annual tax due, as
well. Do not confuse the small yearly tax on the concession as the same
thing as a formal concession agreement for determined period of time.
Your yearly tax then will be related to the formal concession agreement.
Ignorance of the law is not a defense. If you wake up some day and find
someone working on the federal zone in front of your home, you will not
be happy.
Question: Do I need to have an FM2 in order to work in Mexico?
Answer: No, you can work with government approval noted in an FM3. There is
also a retirement FM3 available to foreigners. Immigration will give
you the requirements of each. If you are working in Mexico with a
retirement FM3, you are taking a risk of being fined and/or deported.
Question: Can I bring in household goods and my car in to Mexico on my FM3? Yes, if your FM3 is current, you may import your car.
Answer: You can also drive your car in on a tourist visa, but you will need to
drive back out and re-enter according to whatever rules are in place at
the time. Contact your nearest Mexican Consulate for more information
about the requirements for using your FM3 for these import purposes.
There is a time limit in which to bring in household goods once you
have activated your visa.
Question: Is there escrow in Mexico to hold the deposit of funds required in my purchase agreement?
Answer: Escrow is highly regulated in Mexico, and certain Mexican banks are
permitted to hold your money as a third party. Check which ones you may
use through your Ampi real estate agent and/or Mexican attorney. You
can also check with the banks themselves. Not all Mexican banks have
escrow departments.
Some US title companies may
also be granted permission to escrow deposit funds on behalf of a buyer
and seller in regard to Mexican real estate.
Question: Should I get title insurance?
Answer: You should investigate the title companies which issue title insurance
in Mexico. Find out what their exceptions to coverage are in their
title commitment.
Also ask your attorney what the
notary and title insurance have and do not have in common. Ask your
lender, if you are using one, if they require you to have title
insurance.
Make your decision after you have researched this question thoroughly to your satisfaction.
Question: What is an exclusive listing agreement on property in Mexico?
Answer: An exclusive listing agreement in Mexico is similar to those in the US.
A real estate professional is given the exclusive right and
responsibility to market the property and receive offers to present to
the seller. The seller agrees to compensate his exclusive agent for
accepted offers during the term of the exclusive listing contract. The
real estate professional may agree to offer the property to other real
estate agencies and to pay them a fee or percentage of the real estate
commission on the property.
The exclusive listing
agreement and compensation to the real estate professional applies to
all offers, regardless of who brings in the buyer. If there are
exceptions permitted in this agreement as to whom may be named as an
exception where no payment is due the broker, this has to be so
mentioned in the agreement.
Question: Why are buyer closing costs so higher in Mexico than in the US? Why
doesn’t the seller or mortgage company roll these costs into the
purchase price and loan?
Answer: If you are purchasing in the restricted zone in Mexico, you will be
required to acquire your property through a fidecomiso bank trust. The
bank trust holds the property and cedes to you the rights to own,
build, remodel, sell, tear down, and give away the property. There is a
cost associated with applying for and receiving permission to buy as a
foreigner. There is an annual fee to the bank for administration of the
trust.
In non-restricted areas, no bank trust is required and this expense is not part of the buyers closing costs.
Additional
buyers closing cost: There is also an acquisition tax to pay when
acquiring property. This can be on average 2% of the price of the
property.
There also notary costs, no lien certificates, tax appraisals, state and federal fees and taxes.
All
of these buyer expenses are not looked upon as usual for the seller to
pay or assist with. The seller typically has costs which include real
estate commissions, capital gains tax, and trust cancellation fees.
Lenders may have a different method of allocating buyer closing costs.
Question: Why is your commission as a broker higher than what I am used to paying elsewhere?
Answer: Real estate commissions vary according to the area in the country, type
of property, and policies of the real estate community or individual
agency in Mexico. It should be noted that the scope of work by your
real estate professional can be more than is typical in the US. The
cost of doing business can also be higher for the broker. Ask what the
real estate fees are based upon.
Question: What is IVA? Why do you want me to pay it?
Answer: IVA is an excise or sales tax due the Mexican government. The amount of
IVA due varies by state. For example, Jalisco has a 15% IVA tax and the
Baja, when I last checked, was 10%. The IVA tax is on goods and
services. It is a federal requirement to pay this tax.
The
advantage to the person paying the IVA is: he is doing things legally,
and the receipt or factura with IVA in most cases becomes a deduction
against income or profit. Without IVA being properly collected and
paid, a person loses the ability to deduct that particular expense.
Question: Why do I need to sign the contract in Spanish? I want to use the English version for my transaction.
Answer: The property is in Mexico, so it is under Mexican law. In order to
acquire the property, you agree to be under Mexican law as well in
regard to the property.
If you execute and work off
an agreement in another language, at some point you may need to have
the instrument translated in to Spanish. The agreement has to be in
Spanish to legally pursue an action if there becomes a problem during
the transaction. Your deed or ownership in a fidecomsio trust will be
in Spanish, as will as your condo regime, property tax statement, and
utility bills. All your legal records are in Spanish.
Question: Are real estate agents licensed in Mexico?
Answer: The only licensing certification available at this time is through
CONOCER. This licensing is not required, but voluntary and involves
taking classes and passing a test. At some time in the future, this
license may become mandatory. Currently it is not, and agents do not
have to have this certificate to work in real estate. One way to judge
the level of professionalism you are seeking from your representative
is to determine if they has this certification.
AMPI
is largest national professional organization of real estate
practitioners in Mexico. Membership is by the request of an individual
to become a part of the organization. National and local chapter have
requirements for membership. AMPI chapters oversee their membership and
attempt to uphold standards through their guidelines.
Another
way to judge the level of professionalism is to decide if you want the
services of an agent who is a member of a national real estate
organization.
Harriet Cochran Murray
Broker, Cochran Real Estate
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