After you’ve found the right place, next comes the process of making a formal offer. While it’s very similar to the US or Canada, there are some key differences with which you should familiarize yourself.
Pricing your offer
If you plan on offering below the asking price, it is typically prudent to have your agent connect with the seller’s contact the seller’s agent first. The local market in Cabo is moving at record pace, so there’s no sense in wasting time drafting a formal offer if the price you have in mind isn’t in the ballpark. With some basic due diligence, you can save a lot of time and frustration.
Presenting the written offer
Next, the ‘Offer to Purchase’ or Oferta is made in writing. Ask your real estate agent to draw up your offer. This form is sometimes referred to as a ‘Convenio de Compraventa’ which translates to provisional sale agreement. It is important that you clearly state your desired terms such as any contingencies or acceptance timeframes.
Additional notes on the offer to purchase:
- To be considered a legal contract, it must be in both English and Spanish
- All offers are written in US Dollars
- It should denote closing company and Notario
- It includes a promise to deposit earnest money into escrow, no less than $5k USD, on acceptance by seller
- Other conditions may be attached such as a property inspection
- Once an offer is accepted, the closing agent establishes an escrow account to manage inbound funds for the transaction
- The closing process in Cabo typically ranges between 45 to 90 days
Your offer was accepted
If the seller accepts your offer, there are a number of tasks that must be completed in a brief period of time. You need to deposit earnest money for the purchase of the property itself and also 50% of the projected closing costs (typically within 10 days of acceptance). You will need to supply your personal identification (i.e., passport), a utility bill from your home address, and complete a “Know your Client” form which is required by Mexican law.
The remaining escrow process is then managed entirely by the notary, liaising with the buyer and seller realtors. With today’s technology, much of the process can be done remotely however you will need to complete the closing in person unless you select to provide Power of Attorney to your realtor to sign on your behalf (which involves certified documents, translations, and an apostille seal).
Open the property trust account
As you likely have read already, when buying real estate in Los Cabos there are specific legal requirements for foreigners to purchase property in a so-called “Restricted Zone” (within 100km of the border or within 50km of the coast). This involves gaining the proper permission to facilitate purchase of the property. The property trust account can be based in either the US or Mexico and the earnest money deposit is then placed in that “escrow” account.
Approval by the Foreign Secretary
This step is a formality where a foreign buyer must obtain permission to purchase real estate in Mexico. You must sign what’s called a “Calvo-Clause” which states you will not seek foreign assistance in your property purchase in Mexico.
Title Check
At this stage, the notary will ensure that the property’s title is clear of encumbrances and that the deed can legally be conferred. Also, it must be validated that the purchase in question is not sitting on as ‘ejido land’ (which cannot be sold to foreigners). For new construction, the developer must also be investigated to make sure they possess all of the required permits.
The close
When the offer to purchase was accepted, a tentative losing date is typically set. The actual closing date is set by the Notario once the requisite documentation has been completed. A Mexican notary public (Notario) has much more responsibility than in a Canadian or American real estate transaction. They are licensed lawyers, certified and appointed by the Mexican government as an official representative. They are responsible for verifying property facts, ensuring legality of the deed transfer, registering the public deed, and collecting fees and taxes (and remitting them accordingly).
All final funds to cover the balance of the purchase price must be wired into the escrow account at a set date prior to the official closing. The buyer is responsible for all of the closing costs including notary fees, appraisal fees, translation fees, recording fees, acquisition tax (ISABI), and other associated fees (i.e, fiduciary acceptance). The seller is responsible for any agent commissions. The closing agent will prepare settlement statements and disbursement instructions.
Attendees at the closing will include: Buyer and their agent, seller and their agent, the closing agent, a translator if required (sometimes the closing agent), and the Notario.
To the signing, you will need to bring your passport and also your tourist visa. It is not required to have a temporary or permanent residency visa to purchase real estate in Mexico. The seller will provide the property deed and proof of fully paid utility bills, taxes, etc. associated with the property. The seller’s capital gains are also officially computed and documented at this time.
Once all the documents are signed, the Notario will submit all taxes and documents to the proper authorities for registration. You’re officially now a homeowner in Mexico!
This Cabo real estate buyers guide provides a summary walkthrough of the steps involving in purchasing a a home or condo in Cabo. Questions? Contact us – we’d love to chat.