Depending on where you buy your house, the costs can be similar to what you would pay in the United States or Canada. Obviously most everything is cheaper in Mexico, and although they have houses here for $50,000USD, an average home for an expat will most likely cost $100,000 to $300,000. We’ve seen decent looking and new condos for around $50,000 that include a community pool and gated complex, but are bare bones units without appliances or cabinets, and are located away from the touristy areas. And a penthouse condo or a nice gated house with pool and some property near the beach can run $500,000 or more. Any foreigner purchasing property within 50km of the ocean or 100km of the border must purchase their property through a fideicomiso / bank trust or through opening up a Mexican corporation. Below is information on the fideicomiso fees and other associated fees that we spent in buying a house from another American in México.
Notary fees. This is your most expensive fee outside of the property itself. Notaries in México are attorneys assigned by the state to provide security to public records and documents. There are about 15 different fees that the notary charges, mostly a lot of form filing fees. But some of the biggest expenses include taxes on the aquisition, the appraisal, and the notary’s fee for providing his services. All in all, we paid the notary 165,181 pesos. Since many of the taxes and fees are connected to the cost of the house, and the house is often purchased in USD, you may be able to negotiate the currency exchange rate. The rate when we purchased was about 23 to 1, but we negotiated it down to 21 to 1, and this ended up saving us 14,000 pesos in notary fees. The actual rate was 22 to 1 when we finalized the process, so it wasn’t too far off. I believe the general assumption is that you can expect to pay an additional four or five percent of the purchase price in fees to finalize your home purchase.
The potential negative effect of paying less up front is when you sell you’ll pay more in capital gains taxes. But in México I have heard everything goes out the window when it comes to capital gains. How much you pay is a combination of luck, a cooperative notary, a good realtor and / or a good attorney. Supposedly if you lived in the house for the previous three years, or something like that, then you don’t pay capital gains, but I’ve heard that the notary has a lot of control over whether to honor this claim. We decided that we’ll deal with capital gains down the road. We want to save as much money as we can now.
Bank Trust Fees. I don’t get it, but this is how it always works. You need to pay the annual fee twice up front and that will cover you for the following 12 months. I believe the first fee is for the trustee to review the documents and the second fee is to cover the actual first year of the trust. ScotiaBank charges $568.40 per year, or 11,936.80 pesos. They also charged 2,320 pesos to change the fideicomiso into our names. So we ended up paying ScotiaBank 26,193 pesos for the fideicomiso.
We paid $512.31 or 9,576.20 to Intercam for our condo’s fideicomiso this year. With the banks I think they often charge in USD and then convert it to pesos. This way works in the bank’s favor, generally, as history shows that year over year the peso is weaker versus the dollar. And since only foreigners hold fideicomisos the bank is charging in a common foreign currency, the USD. Right now it seems that Intercam is a better bank for your fideicomiso, so we may have dropped the ball by leaving the fideicomiso with ScotiaBank. Although we paid Intercam $450 three years ago, and this year we paid $512.31, so they may increasing their fees by 5% a year or so. It just seemed easier to us to stick with ScotiaBank on this new home purchase, but it may cost us more in the long run and be more of a pain to deal with by having fideicomisos with two separate bank
Attorney Fees. Since we used the seller’s realtor, we hired an attorney to help with a few things. I don’t think he added that much value, but having him perhaps kept the realtor honest. Depending on how good your attorney is and whether he or she is bilingual, you can expect to pay as much as 40,000 pesos. We only paid 10,000 pesos for our attorney, and we probably got what we paid for. When buying an existing property any staff from the previous owners are attached to the property. We asked the attorney to make sure the owner liquidated any employees or paid help he had. This is done at the labor department with the employees. If you don’t have the owner do this then you could be required to hire on or pay off the owner’s employees. The owner had to pay the housekeeper about 6,500 pesos and the gardener was paid 23,000 pesos for their liquidation. We were given documents that absolved us of any responsibility to them. This is important. If you buy an existing property then make sure you aren’t stuck in a bad situation with some former employees demanding a payoff.
Other fees. There aren’t a lot of other major fees. We ended up paying about $87 in wire transfer fees. We didn’t use an escrow service, so there was a bit of concern with wiring the owner money direct. When we sent the final payment to the owner we had to wait for the owner to confirm he had received the money, at which point we would get the deed and the keys. The owner took his time confirming our payment, and I spent several hours sweating profusely waiting to get word that the money was transferred and we could finalize the agreement.
Once finalized we had to change over the electricity and the water, and set up internet. Setting up internet was easy. The electricity name change took about five hours, mostly waiting in line. I needed copies of my ID and the deed contract, which is like 50 pages long, plus the last bill to the address. For the water, I first had to get a document from the government office, called a predial, then pay the last bill, which was 238 pesos, then pay an additional 950 pesos to change the name. They also required a copy of the deed.
In total, we spent about $9,777 to complete the process of purchasing our home. From the day the owner accepted our offer until the day we finalized the agreement and took control of the house over sixteen weeks had passed. To buy in Mexico requires patience.
Some Final Thoughts. We have now bought an old house and a new condo here in Zihuatanejo. Of course there are pros and cons to both. That’s probably a separate post. Purchasing a “used” home or condo usually will mean you’re also purchasing the appliances and furniture that come with the home. Any appliances a new casa includes are probably cheap products, and you’ll be responsible for furnishing the entire place, installing kitchen cabinets and appliances, and so on. But you’re getting a new place. So in one situation you may be spending money on repairs and remodeling and the other you are buying new appliances and furniture. The fideicomiso costs are about the same in each situation. I think overall we were able to take the knowledge we learned from our first buying experience and make the second buying experience a little smoother. We are still enjoying the adventure of living in México!