Interested in escaping to the relaxed lifestyle of Baja? Here’s some good news! You, as an American citizen or foreign investor, can buy Baja real estate and have permanent ownership of that land and home. While you may have heard rumors of 99 year leases or the Mexican government taking away property, have no fear. These myths and others have kept many from investing in Baja, but it can be done. While owning your dream home in Mexico is 100% possible, let me caution you that there is often a big difference between buying property in Mexico and owning property in Mexico. The purpose of this article is to teach you all I can so you can make wise decisions throughout your purchase process. Here are some basic instructions for buying real estate in Baja California, Mexico.
The first difference you will encounter has to do with obtaining title to your new home. In the U.S. and Canada, receiving title for the property you are purchasing is simply taken for granted. You know that all properties have titles that transfer automatically to the buyer during the closing process. While most Mexican properties have legal title, there is no guarantee that you will receive that title unless you do your homework first. In Baja, there are many people who “control” property without actually having title or legal deed to that property. That’s the first thing you need to check before signing a contract. Does the seller hold the legal title? If he doesn’t, or if you won’t be able to get title for some other reason, you may either lose the property or get stuck with it and not be able to sell it later on.
It’s not difficult to obtain title for properties in Baja, but there is a definite learning curve you will need to follow to get it. The first thing you need to investigate is purchasing a fideicomiso, or Mexican bank trust, which is designed for foreign investment. This is the most secure way for foreigners to own and control property in Mexico. Mexican nationals typically use an escritura publica or other form of ownership document, but as a non-Mexican, I highly recommend the fideicomiso, which is one of the highest forms of title in Mexico and guarantees your ownership rights as a foreigner for a minimum of 50 years. With your fideicomiso, you will receive title to your property in your name, and you will have all the rights to do what you wish with your home.
Escrow is another important factor that you must consider. Using an escrow account is not necessary when purchasing a home in Baja, but it is the best way to assure that you don’t lose money in the process, especially if you are purchasing a home or condo that is still under construction. Even though it is not required, I highly recommend you use an escrow account as a first-time buyer of Baja real estate, just like you would in the U.S. or Canada. One final word of caution: since most escrow companies are U.S. based, make sure the person managing your escrow account has plenty of experience with Baja escrow accounts and closing real estate transactions here in Baja.
As a newcomer to the Baja real estate market, you will probably need some help to complete the transaction. I recommend that you hire a pair of experienced professionals to work alongside you and help you close the deal: a Baja real estate agent with closing experience and knowledge about escrow accounts, and a reputable closing coordinator to keep things moving and take care of all the bilingual communications and paperwork. For a first-time buyer in Baja, this is the essential combination to guarantee that you finalize your closing and receive title to your new home in the shortest and most economical manner possible. Many attorneys will promise to do that for you, but beware: while they may be able to help you, they often take a very long time to close transactions and usually charge a lot more for their services. By sticking with a Baja real estate agent and reputable closing coordinator, you are sure to have a much better experience.
And what about financing? Here in Baja, mortgage loans are very rare. It’s both difficult and costly to obtain financing here in Baja. Mexican banks often advertise lower rates than they actually offer, take up to four months to these high-interest loans, charge exorbitant closing costs, and often fail to deliver when it’s all said and done. Since most people here in Baja own their homes outright, sellers are often looking for a quick cash transaction. When you come down to make your purchase, you want to arrive with cash in hand if at all possible. If you can’t bring all of the cash with you, however, don’t worry. Just bring as much as you can. U.S. financing is often an option, and many sellers are willing to offer partial financing for a serious buyer with a large down payment.
While this is just a basic introduction to buying here in Baja, I hope you have found this information helpful. I encourage you to keep reading and learning all you can about Baja real estate, including topics such as escrow accounts, fideicomisos, financing, and more before making your big Baja purchase.