Mexican Real Estate has changed dramatically
It is truly amazing what has occurred in Mexico’s real estate industry. Or maybe it was just a matter of
time. As recently as eight years ago, headlines from the L.A. Times, San Diego Tribune, Arizona
Republic, CNN and the Wall Street Journal all chronicled stories about Americans losing their properties
in México. Sensational articles headlined “Paradise Lost” (L.A. Times, September 1995) and “Rocky
Point, a Ramshackle Beach Town” (Arizona Republic, January 1996) espoused the plight of unsuspecting
American buyers who had been mislead, misinformed and ultimately “cheated” out of the homes and
investments they had made. Unfortunately, it was true. A U.S. and Canadian buying public was not yet
educated to the beneficial and protective changes in Mexico’s foreign investment law and local
development criteria, nor was there an abundance of accessible information about the nuances of
transacting real estate in this country. Moreover, U.S. title insurance companies and the services they
could provide were just beginning to emerge after Mexico’s peso devaluation in 1994. Instead, buyers
went to their favorite Mexico destination and had to rely on sellers, developers and agents in the local
market telling them, “trust us, that’s the way we do business here.” Well, buying public, “it ain’t that way
no more”!
The Dec. 28, 2004, Houston Chronicle business section featured a front page article written by Jenalia
Moreno on Americans buying property in Mexico entitled, “American Invasion, U.S.-Style Real Estate.”
The article said, “Mexican beach resorts are so popular with retired Americans, baby boomers nearing
retirement age and even middle-aged couples wanting vacation homes that condominium and housing
developments are often sold out before construction is complete.” Happily, this IS the truth. So why the
dramatic change from ‘Paradise Lost’ to ‘American Invasion’? Quite simply, Mexico’s real estate markets
have changed, real estate agents have adopted a mindset favoring security and disclosure for purchasers,
and American buyers have became much better informed and educated. We also have seen the emergence
of a U.S. transactional process utilizing extended title searches, issuance of commitments for title
insurance, third party escrow and closing services, and ultimately title insurance policies guaranteeing
one’s rights of ownership, whether fee simple in Mexico’s interior regions or entitlement via the bank
trust (fideicomiso) or a Mexican corporation for foreign purchasers in the restricted zone. In all of these
markets, what is equally important are the changes made by developers, sellers, real estate agents, and
local and state governments in each locale. Significant strides have been made for the enhancement and
protection of foreign real property investment. What is truly amazing is that these changes have ultimately
occurred in the last three years. Here are a few reasons why:
- Mexico is deeply dependent on tourism and the investment of foreign capital into its real estate
market. Americans have realized that internal rates of return and appreciation on acquired
properties with our neighbor to the south exceed that in the United States. It’s a simple case of
supply and demand.
- FONATUR, the tourism agency of Mexico, has increased its efforts to promote and enhance the
investment of real estate acquisitions by foreigners in the Republic.
- The creation of AMPI (Mexican Association of Real Estate Professionals) and MLS groups in the
markets of Cabo, Peñasco, Vallarta, Nayarit, La Paz, San Miguel and the Riveria Maya are
helping to promote higher levels of professionalism and service in Mexico real estate markets.
- The creation of a Real Estate Task Force ad-hoc committee comprised of real estate professionals
on both sides of the border and appointed by each respective governor in the states of Arizona
and Sonora are shining an even brighter light on real estate practices in the Sonora market.
- A brochure provided by the Arizona-Mexico Commission entitled “Buying Property in Mexico”
that includes a Buyers Checklist is helping enlighten a U.S buying public about transacting real
estate in Mexico.
- The State of Sonora passed the first-ever real estate agent registry law also containing a
continuing education requirement for those engaged in the sale of real properties in Sonora.
- The bar was raised even higher when the first real estate sales company in Mexico provided third
party escrow services and title insurance policies on the properties it lists and sells. Chris Snell,
President of Snell Real Estate, pioneered this concept and is the only company to offer this
protective and innovative service to his buyers in the Los Cabos market.
- With the continued emergence of U.S. lending companies originating mortgages on Mexico
residential properties, the market has become energized with pent-up demand for secured real
estate lending. Mexican trust banks have been more willing to provide trust services to U.S.
lenders at competitive rates.
- The vast amount of information offered through the Internet on developments, agents, listings,
markets and educational information means there is no reason interested buyers cannot find a
wealth of knowledge about the Mexico real estate experience before they make a trip there.
- Most agents in any given market are aware that the dynamics of transacting real property has
changed. Some are still slow to come around and give up their “old school” ways, but many have
realized that a sophisticated and better-educated buying public will demand greater transactional
security and title certainty.
- Lastly, title insurance companies with established offices have come to the local markets with the
concept of “title assurance” and coordinated title services comparable to what a buyer would
receive in the United States from a title insurance company. The markets have finally realized and
embraced the fact that for Americans, the title insurance process is the cheapest part of the
transactional process when compared to other costs of closing. Most importantly, dealing with a
U.S.-based title company in Mexico gives U.S. buyers a sense of confidence, reliability and
security.
As has been said before, any form of investment has a choice. It must be viable and secure or it will go
elsewhere. Mexico’s real estate market has something to offer for everyone. It all depends on what one is
comfortable with and feels secure in, where one likes to go and what one wants to invest in. Let’s make
2005 a year to remember. |