Beware of Baja real estate "professionals"

We have been assisting foreign investors buy real estate since 1985. The amount of real estate scams have decreased greatly over these past 20 years. This is due to more U.S. brand name franchises exploiting the baby boomer market: Century 21, Remax, Realty Executives, Coldwell Banker and Prudential. However, it is still a "buyer beware" real estate world in Baja for the following reasons.

1. Foreign buyers don't speak or read the language. Depend on others to read and interpret contracts of sale.
2. Foreign buyers do not research real estate laws and acquisition processes in Mexico.
3. Realtors in Mexico are not licensed: their trade practices are not supervised or sanctioned by any judicial body. Unsuccessful used car salesmen in the states can become overnight real estate brokers in Mexico .
4. Non Spanish speaking realtors, who have not studied Mexicano real estate law, are typical representatives of foreign buyers.
5. Mexicano attorneys, who don't typically represent foreign buyers, often don't know the property laws that limit foreign property purchases.
6. Property purchase is not as institutionalized in Mexico when compared to the United States.
7. Exist lots of foreign realtors working ilegally in Mexico (beware, they need an FT3 working permit to do it !)
   

How do you avoid the above pitfalls?

First do your homework about mexico. You can learn the Mexicano real estate ropes by going to our website and clicking on real estate (Mexico & Baja).

Second, don't let a realtor or attorney talk you into signing a private contract for purchase and making payment without involving a Notario in the process. Notarios are attorneys who give up private practice to become "keepers of the public record". In a Mexican real estate purchase, they fulfill the role of what U.S. buyers call escrow agents.

Notarios, by law are required to certify there are no property liens, the seller is in fact the title holder and the pertinent process steps are followed to legally transfer title rights to buyers either Mexican or foreign born.

Notarios also collect all pertinent real estate transfer taxes and registries for the government. Their legal power is awesome, you cannot record transfers of title, establish corporations or record contracts without Notario review and authorization

Of the 350 attorneys in Ensenada , five are Notarios. Often, buyers will be convinced, by real estates brokers or lawyers, to "buy" property via a private contract without benefit of a Notario.

EXAMPLE: a client was Invited by a realtor to a very upscale law office near the Tijuana border. She was selling her Baja property and was presented with official looking, attorney prepared and witnessed, real estate purchase contracts. Upon signing the private contracts (contratos privados), everyone exchanged checks. Buyer paid seller, the attorney received handsome legal fees and the realtor substantial commissions.

The only problem with this scenario is that title was not transferred in the process. This "closing" and payment of legal fees will have to be repeated at a later date with the assist of a Notario.

The lawyer and the realtor quickly gained their professional fees without doing the necessary due diligence a Notario requires and supervises: property appraisal, property survey, certification free of liens, review of property title history, payment of transfer taxes, holding of deposits/payments and entry of the title change in the public record.

All of this work would delay payment of commissions and fees. Yet buyer and seller were charged for a property closing without benefit or protection of publicly recording the compromise of title. They are at the risk of death to one of the parties or law suits from third parties.

The "pros" told the buyers and sellers that since these were time pay contracts, recording would take place at the conclusion of payment terms. WRONG! Just like in the U.S. , Mexico provides for the public recording of mortgages (hipotecas).

Buying real estate in Mexico is a unique process for foreigners and requires professional assistance. If your lawyer, consultant or realtor suggests a private contract or exchange of monies, without benefit of a Notario's escrow, run like hell. Ask your professional for references from foreign clients and check them out. Your nest egg may depend on your due diligence. The last rule of thumb is buy title insurance. It is very affordable and will help you sleep better.