By Jose Perez (mexicomatters.net)
Our company has spent eighteen years buying and selling Baja real estate. In addition to our investments, we have represented more than 200 foreign buyers by providing due diligence and title insurance.
Far too often, clients come to us after making costly mistakes. Folks who suffer the horror of losing their life's savings. The following are tips to avoid disaster and get the best deals on secure real estate in Baja.
The first step in the process is to recognize and mitigate the consequences of succumbing to "RAPTURE OF BAJA". This malady can progress to the sometimes incurable "leaving your brains at the border" syndrome.
Unsophisticated buyers are usually blown away by the availability and affordability of gorgeous beach properties on both coastlines (Pacific and Cortez). Rapture plus ignorance of Mexican property law, and an American friend or salesperson who claims expertise is a formula for bad decision making.
Often these seemingly great deals are on property whose title is clouded or only available for lease. In the case of a lease, you pay the former lessee for the improvements (home construction) and continue the existing lease with the property owner.
Rule number one - Do not "buy" a house on leased property unless you are prepared to lose your investment at the end of the lease period, 10 to 30 years.
We do not consider leasing an investment. You are renting, improving and maintaining the property of the owner.
Mexican and U.S. law are the same regarding leased property. Any improvements belong to the lessor at the end of lease term. The option of ownership is far better. There is an abundance of affordable homes that can be purchased by foreigners via a living trust. Bank trust properties are eligible for U.S. title insurance. to insure a safe investment.
RENT (not lease) your first home in Baja. Beautiful beach rentals are available at $500 per month throughout Baja (see classifieds in this publication.). Renting will reduce rapture of Baja symptoms and improve your chances of securing the best property at the lowest price.
After renting, in an area you are first attracted to, you will likely discover better options. Renting will give you the time and experience to verify your ideal Baja property purchase criteria. Time to shop, be patient and uncover great bargains..
Institutional real estate financing is generally not available to foreigners in Mexico. However, seller financing from a Mexicano owner is very common.
Gringo sellers typically want cash. they are leaving Mexico so they prefer avoiding the risk of returning to sue for non payment. Mexicano sellers are more likely to provide seller financing. However, with proper guarantees of payment, attractive terms and interest rates, some foreign sellers can also be convinced to accept time payment terms.
In developing criteria for your purchase, think carefully about "planned communities" as opposed to a single family home that is not part of a gated gringo ghetto.
Some folks need the security of a gated community but others feel stifled by the covenants, conditions and regulations of these enclaves. The other disadvantage, is the monthly maintenance and security fee that individual owners have no control over and continually escalate.
CHOOSING A REALTOR IN MEXICO in helping you generate purchase options is not as easy as it is in the states. Realtors in Mexico, are not subject to any licensing requirements nor are they regulated by any agencies or commissions.
Most English speaking buyers seek out English speaking realtors in Mexico. The resulting limitation is that non Spanish speaking realtors cannot negotiate directly with Spanish speaking sellers, nor read real estate law, or interpret title documents, property descriptions, lien reviews, sales contracts or escrow instructions.
I am not suggesting that mono lingual English speaking realtors be avoided. They can be helpful in locating properties and negotiating with English speaking sellers. However, without trained legal assistance, they may, out of ignorance, sell you a property that is "problematical".
I recommend foreign buyers hire a real estate consultant or attorney who speaks both English and Spanish. Of course, ask for references of foreign buyer clients.
Our experience with the two major chain realtors in San Felipe and the gracious and lovely Margaret has been excellent. They are folks to be trusted. However, in the rest of Baja, -"watchaley" Spanglish for "be careful".
LOOK FOR ABANDONED PROPERTIES - These homes are quite common in Baja. U.S. retirees abandon their beach homes to return to the states for medical or convalescent care. Mexicanos also abandon homes to seek work in other parts of Mexico, but most commonly, (in the border region) move to the U.S..
These home owners are eager to sell a home that has been vacant for a few years and depreciating in value from a lack of maintenance. In these "distress sales", seller financing is more likely and down payments are minimal or not required. The seller is just happy to have someone improve and care for the property.
We favor buying a home already built. Generally, Baja homes can be bought for less money than it costs to build-and the land value is an added bonus.
A completed home is a known commodity. A home in construction presents more risk and requires constant vigilance on the part of the owner to assure quality of materials and construction..
If you insist on building your custom dream home, we suggest the following
- Ask for written quotes and references from prospective builders.
- Require your builder to provide receipts from the county planning department for permits paid.
- Insist on receipts from the Social Security Department for payment of worker benefits.
If the contractor does not pay the above obligations, you, as the home owner, are ultimately responsible for payment. Fines for non conformance and interest for paying late are also charged to the home owner.
Do not accept the contractor specifying you as the builder on the Social Security registration, usually a veiled attempt at avoiding contractor responsibility. .
You can use $50.00dlrs. per square foot, for finished construction, as a guideline.
As in the process for managing property purchase, we suggest a professional consultant or attorney who speaks English and has foreign client references to protect your interests.
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