Frequently Asked Questions About Real Estate Transactions in Cabo, Mexico
Explore frequently asked questions about buying and selling luxury real estate in Los Cabos.
Q: Can non-Mexican residents buy real estate in Los Cabos?
A: Absolutely. Although you can become a resident if you wish, you don’t need to be a resident of Mexico to buy and sell real estate in Los Cabos. Foreign investors can own property outside the restricted zone if they obtain a permit from the Ministry of Foreign Affairs. They can own property within the restricted zone through the mechanism of the fideicomiso. The restricted zone in Baja California extends 60 miles from the national border and 30 miles from the coastline, and it includes Los Cabos.
Q: What is a fideicomiso?
A: To buy property within the restricted zone, foreign investors must secure a trust called a fideicomiso that is renewable every 50 years. A Mexican bank of your choice will act as a trustee, and the buyer will be the beneficiary of the trust. As beneficiary, you have the same exclusive right over the property that you would enjoy as a property owner in the United States — including the right to improve, rent, sell, or simply dwell in the property. Mexican companies that are wholly owned by foreign buyers can also buy nonresidential properties located within the restricted zone.
Q: How many parties are involved in a typical real estate sale conducted using a fideicomiso?
A: In addition to the notary public and the seller and buyer, the seller’s and the buyer’s banks are involved if the buyer is establishing a new trust with a different bank. We also highly recommend enlisting the help of a local Los Cabos real estate agent — someone who knows the local laws and regulations, the lay of the land, and how to close the deal.
Q: What is the role of the notario público (Mexican notary public)?
A: A notario público has a very different role than that of the typical notary public in the United States. Notary publics in Mexico are attorneys acting on behalf of the state government and federal government in relation to a transaction. In Mexico, the purchase of a property takes place at the office of a notary public. The foreign owner may assign his beneficial interest in the trust to the buyer, and the buyer may establish a new bank trust with respect to which he or she is the primary beneficiary — all with the help of the notario público. The notary essentially closes the sale.
Q: Who is responsible for the closing costs, capital gains costs, and various real estate fees?
A: In Los Cabos, the buyer pays the closing costs, which range from 2 to 6 percent of the value of the property. Closing costs typically include an acquisition tax, a city appraisal fee, fees for foreign permits, a bank-trust setup and administration fee, an escrow fee, and notary fees. The seller pays the capital gains tax and must be up to date on his or her trust bank fees, property taxes, and other payments and fees related to the property.
Q: How long does it usually take to close a real estate transaction in Mexico?
A: Closings normally take 60 days or less, but can take up to 90 days. But you don’t have to be in the country throughout the process. We’ll oversee it and update you on each new step that is taken. We partner with federal and state agencies, including a bank and a notary public, to secure the trust and close the deal.
A few factors make the closing process a seamless one if you work with us. First, you can purchase title insurance right here in Cabo. Second, the attorney at Cabo Life Real Estate is an American who has worked in both the United States and Mexico. Third, the company that Cabo Life uses for the closing process is American-owned and works all over Latin America.
Q: Can you buy title insurance in Mexico? And do you need to buy it?
A: Yes, you can and should buy title insurance in Mexico. Although there is no specific guarantee of title from the state, title insurance is available to both buyers and lenders. Mexican title insurance companies are regulated under the Insurance Companies Law, and their clients are mostly U.S. companies and their Mexican subsidiaries.
Q: Can you secure financing through a Mexican bank or other bank?
A: Although getting a mortgage is not as common in Mexico as it is in the United States, financing is still possible for many properties, especially for new developments. Whether you’re paying cash or getting financing from a Mexican bank, consider using an independent escrow company to handle your finances and communications with the closing agent.
You can also get financing from an international company. Buyers often have access to international loans that pay up to 60 percent of the value of the house, and interest rates on such loans start at just 7 percent. It’s a great way to buy a property in Cabo without having to provide a lot of cash up front.
Q: Do you need a home inspection?
A: We do recommend that you get a home inspection before buying the property, just as you would if you were buying in the United States. Otherwise, you won’t know whether the property has any serious structural or other issues, like toxic materials, plumbing or electrical problems, and any other red flags that could cost you in the future.
Q: What is the best way to find properties in Los Cabos?
A: Your best bet is to hire a local Los Cabos real estate agency who will protect your interests and assets. This means hiring someone who thoroughly knows the local market and will effectively guide you through the assessment and buying process.
Find a real estate agent who is knowledgeable about the area, who can inform you about local market conditions and trends, and who knows how to get deals done in Mexico. Your agent must also be licensed locally. If you choose Cabo Life Real Estate, you will be working with realtors who have lived and worked in the Cabo community for more than 10 years and who own property in Cabo themselves.