Buying Real Estate in San Miguel de Allende A Step-By-Step Guide
Unlike Mexico’s coast, in the State of Guanajuato where San Miguel de Allende is located, foreign citizens may own property free and clear in their name, with all the rights of a Mexican citizen, no matter their immigration status in Mexico – Tourist or Business, Temporary or Permanent Resident. Below please find the steps that we at Golden Homes / San Miguel Sotheby’s use to ensure a secure and smooth transaction for our clients.
1. OFFER AGREEMENT
When a Buyer identifies a Property they wish to purchase, a written and signed “Offer Agreement” is submitted to the Seller’s Agent, preferably utilizing Golden Homes / San Miguel Sotheby’s Offer Agreement form. Signatures can be made by hand or by Docusign via email. This Offer – which is not legally binding – provides for an initial ‘good faith’ agreement between Buyer and Seller on the basic terms of the transaction – such as price and closing date. Offers are often countered by Sellers, but once an Agreement signed by both sides, an Inspection (STEP #2) should be scheduled immediately and foreign citizens will need to start their SRE Permit (STEP #5). To repeat, an Offer Agreement is not legally binding, so it is important to move expeditiously to next steps to secure the Property.
2. INSPECTION
Following an executed Offer Agreement, an “Inspection” by an experienced, professional Inspector of the Buyer’s choice should be conducted quickly –ideally within 3-5 days. Golden Homes has a list of experienced bilingual inspectors to recommend to our clients, and the cost ($400 – $600 USD, depending upon the size and scope of the property) is paid by the Buyer. The Buyer does not have to be present but it is recommended if possible. Regardless, the Inspection Report will be provided by email within two days – and will include a detailed checklist of photographs, descriptions, analysis and detailed recommendations regarding the property’s characteristics – clearly highlighting and significant issues. Upon receipt of the Report, Buyers may choose to accept the conditions of the house and proceed with the sale “as is”, or may rescind the offer without any penalization for any reason. A common third option is that a Buyer may require that issues identified in the Inspection become points of negotiation and contingency in the “Buy-Sell Agreement” (STEP #4)
3. ESCROW
If the Buyer wishes to proceed after the Inspection, Golden Homes will assist them to open an “Escrow” account with one of our preferred international escrow companies. This account will be used to receive the 10% Security Deposit, and ultimately to receive the remainder of the purchase price and all closing costs. Most escrow companies manage linked accounts in both the US and Mexico, and can therefore receive (and disburse) domestic transfers in Mexico or the US, making international transfers unnecessary. The cost of this Escrow account ($600 – $750 US) is split evenly between Buyer and Seller. WIth Escrow established, the Security Deposit — usually 10% of the Sales Price — may be safely deposited by the Buyer. Now the Offer Agreement is fulfilled, and the process may proceed to the legally-binding “Buy-Sell Agreement” (STEP #4).
4. BUY-SELL AGREEMENT
The legally-binding Buy-Sell Agreement contains all the detailed specifications of the transaction written in legal terms. It is ultimately ratified by the Notary governing the sale. Notaries are the legal authority governing all property transactions in Mexico, and among their many purviews they write and register all deeds. In San Miguel there are only 12 and they are lifetime appointments. It is the right of the Buyer to choose the Notary, and Golden Homes strongly recommends contracting a lawyer who is closely associated with one of our preferred Notaries. This lawyer will ultimately do a title search, issue a certificate of no-lien, and oversee an assessment that sets the property tax, but first they will work with Golden Homes and San Miguel Sotheby’s legal department to craft the language of the Buy Sell Agreement to reflect all the the terms agreed to between the Buyer and Seller. Once the Buy-Sell agreement is signed by both parties – in person or through Docusign – the property is officially Under Contract and Seller is obligated to stop showing the house and receiving offers.
5. SRE PERMIT
This is a pro-forma permit from the Ministry of Foreign Affairs (Secretaria de Relaciones Exteriores) required of all foreigners who wish to purchase property in Mexico. To receive the permit, a Buyer must simply agree to be governed by Mexican law with respect to this property. These permits are never denied, but cost about $8,000 pesos (<$400 USD) for each individual who will be on the Deed. Because it can take 2-3 weeks, the process should be started as soon as possible. One note, it is easier to apply for this permit while physically in Mexico using the immigration stamp received in your passport upon arrival to Mexico. It is possible to obtain an SRE permit while you are outside of Mexico, but requires that you obtain an “Apostille” of the Notarized application and send it to Mexico. Fortunately, there are many Apostille services available online.
6. CLOSING COSTS
Buyers are responsible for all Closing Costs – which amount to approximately 5 – 5.5% of the Sale Price. These Costs consist of filing fees and legal fees for the Notary (together roughly 1.5%) and a 4% one-time Deed Transfer Tax by the Municipality (subsequent property taxes are very low). If the property is being purchased in US dollars, the Closing Costs are calculated based on the exchange rate of the Peso on the closing date, but because this amount can only be estimated beforehand, the Buyer must transfer a small amount extra into Escrow to cover possible variation of the Peso. Whatever funds remain after the Closing are immediately returned to the Buyer.
7. FINAL DEPOSIT
No later than 5 days before the Closing Date, the Buyer must deposit the balance (90%) of Sale Price, plus all Closing Costs (and the small buffer amount).
8. CLOSING
At the closing the new Deed is signed by all parties involved. A legal translator will attend the closing if any party is not fluent in Spanish. It is not necessary to attend a Closing if you appoint a simple Power of Attorney – perhaps to the lawyer of the Notary. Otherwise, as soon as the CLosing is concluded, the Escrow company will disburse the money as specified in the Buy-Sell Agreement to the Seller, Notary, and any Agencies involved in the sale.
9. DEED
The Buyer legally owns their property as soon as the Deed is signed, and can therefore move in immediately. The official registered Deed will be provided by the Notary about 6-8 weeks after the Closing, as it must be filed and recorded in the Public Registry in Guanajuato.
10. WILL
We recommend that your deed include a simple Will, which can be added by the Notary at no cost. Although foreign wills are valid in Mexico, having one here will expedite your wishes significantly.
EXPENSES
– The Seller is responsible for: $300-$375 US for 50% of the escrow account, the Real Estate Agency Commissions, and State and Federal Capital Gains Taxes.
– Buyer is responsible for: $300 US for 50% of escrow account, around $7,000 pesos for each SRE permit, Inspection and Closing Costs.
