The Ultimate Guide for Foreigners: How to Buy Property in Los Cabos and La Paz, Baja California Sur
Are you considering investing in property in Mexico?
Los Cabos and La Paz in Baja California Sur offer pristine beaches, rich culture, and tranquility. Whether you’re drawn to the luxury and excitement of Los Cabos or the peaceful authenticity of La Paz, this guide will help you navigate the property purchasing process in these beautiful regions.
1. Understanding Mexican Property Laws for Foreigners in Baja California Sur
Trust (Fideicomiso)
- To acquire properties in these areas, foreigners can use a bank trust.
- A Mexican bank acts as the trustee, holding the title of the property in your name.
- As the beneficiary, you have full rights to use, enjoy, and manage the property.
- The trust is initially valid for 50 years, with indefinite renewals.
Restricted Zones in Los Cabos and La Paz
- According to the Mexican Constitution, foreigners cannot directly acquire properties in restricted zones, which include areas within 50 km of the coast and 100 km of international borders.
- Both Los Cabos and La Paz fall within these restricted coastal zones.
2. Professional Guidance
Purchasing property in Mexico involves several legal and administrative steps. Having experienced professionals on your side is essential to ensure a secure, transparent transaction that meets all regulations.
Specialized Real Estate Attorney
- An attorney will represent and protect your interests throughout the process.
- They will ensure you understand every step and that all documents are legally valid.
It’s crucial that the attorney has specific experience in Baja California Sur, as laws and regulations may vary between states.
The attorney should be well-versed in foreign ownership requirements and local procedures.
Document Review: Examines purchase agreements, trust contracts, and other legal documents.
Due Diligence: Ensures the property is free from liens or legal issues.
Negotiation: Represents your interests in contract terms and dispute resolution.
Tax Advice: Provides guidance on tax obligations related to the purchase.
Communication: Make sure they can communicate effectively in your language.
Mexican Public Notary
- In Mexico, the public notary is a state-appointed official who authenticates and legalizes transactions and documents.
- Their involvement is mandatory for real estate transactions to hold legal validity.
- Buyers may select the notary involved.
Costs and Fees
- Before starting, request an estimate of fees and expenses to avoid surprises.
- Understand what services are included and any potential additional costs.
3. Step-by-Step Purchase Process
Offer and Purchase Agreement
- Make a Formal Offer: Once you select a property, submit a formal offer to the seller, negotiating terms like price, closing date, furniture inclusion, and special conditions.
- Preliminary Contract: After your offer is accepted, a preliminary contract (known as a Promise of Sale Agreement) is signed, setting agreed-upon terms and legally binding conditions.
Earnest Money Deposit and Escrow Account
Upon signing the preliminary contract, it is common to make an earnest money deposit (usually between 5% and 10% of the property’s value).
This deposit secures your commitment and holds the property while legal steps are completed.
We recommend using an escrow account for added transaction security. An independent third party manages this account, holding the deposit until all terms of the agreement are met.
This protects both buyer and seller, ensuring funds are released only when contractual conditions are satisfied.
Legal Due Diligence and Agricultural Land Properties
A thorough legal due diligence is crucial when purchasing property in Mexico, especially if the land was once part of agricultural plots.
- Lien Verification: Confirm the property is free from liens, debts, or pending litigation.
- Agricultural Document Review: Properties from agricultural plots may have restrictions or require specific regularization processes for foreign purchase. Ensure documents validate the property’s conversion to a fully marketable status.
- Specialized Legal Advice: Your attorney will guide you through the review of documents, including the ejidal status if applicable, ensuring compliance with all purchase requirements.
Trust Establishment
Foreigners must set up a trust to acquire property in restricted zones, like Los Cabos or La Paz. This involves key steps:
- Foreign Affairs Ministry (SRE) Permit: The first step is to obtain a permit from the SRE, which authorizes the bank to establish a trust where the foreign buyer is the beneficiary, allowing property rights.
- Choosing a Trustee Bank: Carefully select the Mexican bank that will act as your trustee. Beyond costs, consider factors like communication, bank experience with foreign trusts, and customer service quality.
Finalization: Deed and Registration
- Deed Signature: The deed is signed in the presence of a public notary in Los Cabos or La Paz, formally transferring ownership.
- Public Property Registry: The notary registers the property with the local Public Registry, securing your legal ownership.
4. Associated Costs for Property Purchase in Baja California Sur
When purchasing property in Mexico, closing costs can amount to at least six percent of the property’s price, including taxes and fees beyond the initial deposit. These costs vary depending on factors such as the exchange rate, property value, the complexity of the process, and the location.
For lower-value properties, closing costs represent a higher percentage of the purchase price, while for higher-value properties, although the absolute amount of these expenses is greater, they account for a smaller percentage of the total price. It is advisable to estimate these expenses in advance and to include an additional cushion in your budget to avoid any unexpected issues at closing.
To learn more about the specific costs involved, visit our blog post: Associated Costs for Property Purchase in Baja California Sur.
Conclusion