May 16, 2025For many Americans looking to purchase international real estate as a new residence, a vacation property, or an investment, Mexico represents an irresistible opportunity. Its proximity to the U.S. gives owners easy access, and property is relatively affordable with few restrictions on foreign ownership. Before a potential purchaser rushes ahead with dreams of enjoying rich culture and delicious cuisine on a fraction of what they might pay for a similar lifestyle in the states, however, it’s essential to understand possible pitfalls and how the process of buying real estate in Mexico works.
Just because Mexico is right next door does not mean that buying real estate is the same as at home. Taking time to understand the requirements will help protect those looking for their dream property from difficulties that could have been avoided.
One of the most attractive features of buying residential property in Mexico is that there are virtually no restrictions on foreign ownership. With one key exception, foreign owners may hold title in their own name, and they may not be required to hold the property in a trust (although they will frequently want to for estate planning and asset protection purposes).
However, special rules apply when buying in the zona restringida (restricted zone) within 50 kilometers of the coast or 100 kilometers of an international land border. Noncitizens have not been permitted to hold property in their own name in this area since the early twentieth century. To encourage foreign investment, the Mexican government created a workaround that authorizes the use of a trust known as a fideicomiso to allow foreign investors to purchase property within the restricted zone.
In this type of trust, a Mexican bank of the property owner’s choosing serves as the trustee, while the buyer is both the grantor and beneficiary of the trust. They are in full control of the purchase, sale, and management of the property. A fideicomiso is typically set up for 50 years and must be renewed at the expiration of its term.
A trickier potential pitfall to be aware of is purchases involving ejido land. Anyone who’s heard a horror story of someone who bought gorgeous Mexican beachfront property for a song only to have it confiscated by the government is almost certainly hearing about just such a purchase gone wrong.
Ejido land is communal agricultural land, which was often granted to an indigenous community, and pieces of it can’t be simply sold to private buyers. To legally purchase a portion, the buyer needs to get approval of 100% of the community members, separate the parcel from the ejido, and convert that parcel to a freehold title. Some have skipped the complicated, difficult process to do so legitimately, which means that buyers need to be extremely wary if they are offered property purported to be legally converted ejido land.
In Mexico, notaries are not just impartial third parties hired to confirm the authenticity of signatures to official documents, as in the U.S. Instead, a notary is an attorney with a minimum of five years of experience, appointed by the state to their position, who ensures the transaction is conducted legally and to the government’s requirements. Their scope is limited to confirming the authenticity of signatures to official documents, recording the new title, and collecting the taxes and fees for the transaction. For U.S. buyers who are not fluent in Spanish, it is strongly advised to hire an English-speaking local counsel. Although Notary Publics are licensed attorneys, they do not officially represent either of the parties nor bear any fiduciary duties to the parties. Their main duty is to attest to legal acts and facts with impartiality, without representing any of the parties.
In fact, buyers should take care to ensure that they have whatever translation assistance they need to have a clear grasp of the terms of their contract. Mexico’s official language is Spanish, and thus all official documents will be in Spanish, including the sales contract and closing documents. In the case of any discrepancies between the Spanish version of such documents and an English translation that may have been used to aid understanding during the sale process, the Spanish version will be the authority. In addition, it’s crucial to verify that any changes made on the English version are accurately recorded in the Spanish version.
As a U.S. buyer, you will be relying on your local counsel, working with your real estate agent, to complete the processes to make you a property owner in Mexico. The steps are:
| Make an offer and agree on a price | This is usually done verbally, through your real estate agent or directly with the seller. |
| Sign letter of intent or promissory agreement (Contrato de promesa) | This document specifies the price and terms and conditions of the sales, including any penalties for default or special payment arrangements. |
| Pay a deposit | Deposits are typically 5 to 10% of the sales price. |
| Set up or transfer a fideicomiso or an investment vehicle if necessary | If the property is within the restricted zone, you will need to create a fideicomiso, or alternatively, transfer the previous owner’s fideicomiso into your name. (Note: the transferred fideicomiso will need to be renewed 50 years from when it was created, not when it was transferred.) |
| Get permission to complete the sale from the foreign secretary’s office | You will be asked to sign a statement recognizing that Mexican property law will govern any legal dealings with your property transaction. |
| Conduct a title review or more thorough due diligence if needed | This step is crucial to determine if the property is legally ready to be sold or if there are any liens, easements, or other issues that may affect the ownership of the property. |
| Get an official property valuation (avalúo) | The official valuation is used to establish the home’s value for tax purposes, which may be used rather than the purchase price. |
| Sign the escritura and make the closing payment | This public deed, when signed and recorded, formally transfers ownership of the property into your name. |
| Pay taxes, fees, and register the property | These steps are completed by the notary; all the property owner needs to do is make the required payments. Final registration in the property register is typically completed and recorded within 3 months. |
| Pay closing costs | Closing costs tend to be about 5% of the property’s purchase price, including a 1.5% notary fee, 2% transfer tax, and fideicomiso fees (if required). Closing costs will be higher if you need a mortgage. |
Mexico offers welcoming real estate opportunities for international buyers, and with the right professionals on your side you can look forward to a smooth transaction. At MBL, we can provide the expert legal support you need to navigate not only the legal aspects of buying and selling real estate in Mexico, but also related financial, estate planning, and tax issues. To schedule your consultation, contact us here today.
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