Frequently Asked Questions

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How can a foreigner buy a property in Yucatan?

Merida and a good part of Yucatan state are in the restricted area, 31 miles from the coast and 62 miles from the border. To purchase a property in this area a bank TRUST (Fideicomiso) is required.

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The trust entitles you as a foreigner to improve, enjoy and sell the property with all profits derived from this operation. You can sell the property to another foreigner by ceding the legal rights of the bank trust to the new buyer. If you sell your property to a Mexican, they may cancel the bank Trust and process the property title as a Mexican national.

Through a trust you can also buy a “lot” to build a house on long as you commit to the Mexican government to build a property of at least $200,000 pesos of current market value (including the cost of the land) within a specific period of time (2 years).

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Can a foreigner acquire a property through a corporation?

You may acquire a property through a corporation created in Mexico and in most cases you do not need to have a Mexican partner. The Mexican government currently requires corporations, to make monthly tax returns, to meet this requirement you will need to hire a Mexican accountant which can cost between $50 to $100 USD per month.

We recommend that you have the assistance of a Mexican lawyer as the requirements change from time to time.

NOTE: If you form a corporation, you should consider a Mexican will for the protection of your estate.

If my house is beachfront is the actual beach considered to be my property?

No one, including Mexican nationals, can own the actual beach itself within 20 meters (about 66 feet) of the average high tide line. This strip is owned by the Federal Government of Mexico under the Federal Maritime Land Zone.

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What are the costs associated with buying and selling a property in Yucatan and who covers them?

It is common in Mexico that most closing costs be paid by the Buyer. Costs will be based on the appraisal value of the property, which may be less than the actual sale price. There is an acquisition tax of 2.5% of the purchase price in most of Merida, but on the Gulf Coast of Yucatan, the tax rises to 3% in places like Progreso, Chelem and Chuburná. The tax in Telchac Puerto and some other areas is 4%. The buyer must also pay the Notario´s fees (attorney) which generally equate to 2-3% of the appraisal value of the property.

Setting up a bank trust costs a little more than assuming ownership within an existing one. Setup fees for a trust will vary from bank to bank and property to property. In addition, there are trust costs for annual maintenance paid directly to the bank yearly. In general, real estate commissions are paid by the Seller and these represent 5% to 6% of the sale price.

If the property involved is not land or a personal residence, it is considered COMMERCIAL property and is usually owned by a corporation. As such, the buyer is subject to an additional tax, called a Value Added Tax (IVA for its acronym in spanish), this tax is 16% over the sale price of the property.

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What are the taxes paid by the seller?

When income is earned from the disposal of a property, the seller must pay income tax (ISR). In most cases the notary (attorney) will collect these taxes at time of closing. In the case of corporations this income is also taxed. The seller is exempt from the (ISR) tax on income earned from the sale of the house for approximately $4.4 Million Pesos providing it is the house they live in.

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If you are a foreigner and wish to enjoy this exemption, it is also necessary to have a permanent residence visa. If you are not a permanent resident and cannot obtain a permanent visa, you will be asked to pay capital gains tax on the difference between the original “purchase price” of your property as stated in your trust and the established sale price (new value assessed) as recorded in the transfer.

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The other tax a seller must pay is the “Cedular” tax ( collected by the state). This tax will be 5% of the value shown on the new title. This tax is charged by your Notario (attorney) at closing. If you own the property through a corporation, you will certainly have a Notario (lawyer) and an accountant who are involved. They will help you determine the best way to sell the property.

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Can a foreigner buy his home with financing?

In most cases there is no home financing available to foreigners here in Mexico. Virtually all transactions will be made by wire transfer actual cash can be used with a limit of around $700,000 pesos per government regulations concerning money laundering.

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Inspections and repairs

Although property disclosures are not required by Mexican law, It is our commitment to ask the seller for as much information as possible about the property, including needed areas of improvement. If you wish we can refer you to contractors who will be able to carry out inspections, however you must be aware that in México there are not standard regulations for plumbing and electrical installation. The result of the inspections, will not commit the seller to perform any repairs or improvements.

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How is the closing process and how long does it take?

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In Mexico, the normal practice is for your real estate attorney to prepare a contract (Promise of Sale) with the details of the transaction and that must be signed by the buyer and the seller. At this stage, an agreed amount is paid, by Mexican tradition, directly to the seller to secure the sale. In case of non-compliance for any reason, the seller must refund the money. The final sale agreement will be executed by a Public Notary (Notario Publico), a respected lawyer with special recognition from the government to perform real estate transactions. It is the notary´s responsibility to review the deeds and property titles, to ensure that there are no existing levies, to assist the bank in setting up its trust and then to formalize the final contract of sale, draft the new deed, collect and pay the taxes to the government, and record the transfer of ownership as required by law.

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The formation of a trust usually takes about five to six weeks, as a permit must be obtained. If the property is already in an existing banking trust, this process can be accelerated and the cost is also lower.

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It can take five or six weeks to form a corporation and close a transaction. However, there may be exceptions, particularly in the case of historical (or older) properties, which may take much longer to close When it comes to inheritance, courts move very slowly and the system is cumbersome. In these rare cases, it is difficult to predict how long the closing might take.