Real Estate FYI / Mexico Real Estate Horror Stories

Mexico Real Estate Horror Stories

Mexico Real Estate Horror Stories

29 May 2015 Real Estate FYI 164

Nearly every week, we see another article in the press about expatriates buying real estate in Mexico. When we first wrote this article, we had seen one from the Kansas City Star, reprinted from the Wall Street Journal. It was about retired and soon-to-be-retired baby boomers buying real estate in the Yucatan and on the Mayan Riviera.

Here are some excerpts:

A big cadre of American baby boomers looking to retire someplace sunny and cheap is fueling a land rush in the Riviera Maya, an idyllic slice of Mexico’s Yucatan Peninsula... But many land-seekers are encountering obstacles, including skyrocketing real estate prices, confusing laws and con artists... The land rush is occurring at the beginning of a demographic tidal wave. With more than 70 million American baby boomers expected to retire in the next two decades, many without adequate pensions or health plans, some experts predict a vast migration to warmer — and cheaper — climates. Often such buyers purchase a property 10 to 15 years before retirement, use it as a vacation home, and then eventually move there for most of the year. Developers increasingly are taking advantage of the trend, building gated communities, condominiums and golf courses...

Mexico, already thought to be home to as many as 1 million American citizens, or roughly a quarter of all U.S. expatriates, is set to get the lion’s share of new arrivals...

No place has boomed in recent years like the state of Quintana Roo in Mexico’s far southeast corner. Anchored by the high-rise resort destination of Cancun at one end and cosmopolitan Playa del Carmen an hour to the south, Quintana Roo is the country’s fastest-growing state, with over a million residents. An estimated 1,500 to 3,000 American citizens live there more than six months out of the year...

If you read the article in its entirety, you'll see a lot of references to "unscrupulous" deals, "problems", "obstacles", "confusing laws" and "con artists". There's the developer in Baja California who sold condos built on ejido land and afterwards all the tenants were evicted. There's a couple near Puerto Vallarta who lost their ocean view when local Mexican developers built a resort between their beach house and the water. There's a woman near Tulum who put a down payment on ejido land but then disappeared for three years and the seller assumed she was dead, so he reoccupied it. But she wanted it back. Then a dead body showed up on the property.

Lions and tigers and bears, oh my!

Not Kansas, Kanasin...

It's true that we are not in Kansas anymore, but like "The Wizard of Oz", all of the news stories we read seem to reuse the same actors in a rather familiar plot. Act I: Gringos are moving to Mexico in record numbers. Act II: Mexico is a lawless land where it is "not uncommon" for Gringos to be duped, or worse (insert the same two or three examples from above). Act III: Let these cautionary tales serve as a warning. Act IV: Here's what you need to know to avoid being "victimized" (i.e. "there's no place like home").

It never fails to amuse us how the Press relies on fear to sell papers, in this case portraying Mexico as such a dangerous, lawless and corrupt country. We have purchased five properties in Mexico. Four are here in the Yucatan Peninsula and one is in the state of Michoacan. We have many clients who are real estate agents, and through them we are personally aware of scores of real estate transactions among the hundreds conducted here each year. In over ten years of living here now, we have only heard of two or three "unscrupulous" deals out of a thousand.

Frustrating Process

That's not to say we haven't met several expatriates who were frustrated by the process of buying property in Mexico. Many of these are head-strong, impatient types who bring their own ideas of what the rules should be and don't take no for an answer, even though that is one word we share with Spanish. Mexico is a different culture that speaks a different language and has different laws arising from a different history. There is much to learn and we always recommend you don't go it alone. Even after living here for as long as we have, knowing the people we know and having our experience, we would never consider buying or selling a property in Mexico without the two most important ingredients: a Mexican accountant and a Mexican lawyer. And for most of the time, we would throw in that third almost-essential ingredient, a knowledgeable Mexico-based real estate agent.

Por Ejemplo...

For example, ejido land causes "problems" for those who don't understand it. The majority of Mexico's population is Native American or "indigenous". They were not killed or herded off to reservations like in the United States. During the Mexican Revolution, the government took land away from large haciendas that had acquired it illegally and placed it in trust to the indigenous inhabitants who had lost it. This land is technically owned by the Mexican Government but used by local indigenous communities. In recent years, laws have been enacted that allow the heirs of the original families to whom the land was entrusted to privatize and sell it, but the process can take years as each interested party is tracked down for their signature. If you deal directly with a member of an ejido, he or she has the right to take a down payment in return for a promesa, or agreement to sell you his share after it is privatized. He or she will undoubtedly offer you a great price. You may be tempted. But it is a highly speculative deal because the ejido may never be privatized, at least not in your lifetime. We suggest you do not even consider this kind of deal. But if the Mexican citizen in question has lived through the division of the ejido and has a clear title, then go for it. Some of the best property we know of has been purchased that way.

Obtain the Basics

We have heard of several cases where expatriates without a clue try to deal directly and end up stymied or frustrated. In general, they are over-confident and trying to find a "better" deal and avoid paying a commission. For most of us, this is not a good idea. Find a good real estate agent who has references. He or she will hook you up with a good Mexican lawyer (called a notario), and if you need one, an accountant (called a contador). They will help you learn what to expect and how to follow the rules. Then, follow the rules. In many places in Yucatan (and throughout Mexico), you will have to purchase your land through a bank trust (called a fideicomiso). We suggest you might consider a fideicomiso even if you are in the zone where you don't have to. It will ensure you a clear title and it offers some tax advantages, too. Within 50 kilometers of the coast, it is required by law. There are some rumblings in Mexico City that they may be doing away with the fideicomiso requirement, but as of late 2015, that has not happened.

Booming From Coast to Coast

What the Kansas City Star says about the real estate boom in Playa del Carmen, Tulum and Cancun is definitely being seen here in Merida as well. You cannot drive down a street in Merida for more than three blocks in the centro historico of Merida without seeing at least one major colonial renovation going on. And of course, most of the people paying for those renovations are coming from the United States, Canada or elsewhere, because most local Yucatecos with money wouldn't dream of living in el centro. Just like in the United States 30 years ago, they are moving out to the suburbs, either in gringo-like, ranch-style homes or in gated communities like La Ceiba, the Yucatan Golf Club or Xcanatun residential communities, or even those high-rise Yucatan Country Towers in the Alta Brisa neighborhood.

Meridanos are selling the homes of their tias (aunts) and abuelas (grandmothers) to the incoming expatriates, who are salivating at the beauty and potential of these old colonial homes. In the USA of course, you can't find these stone-walled, tile-floored homes with high, beamed ceilings and arch-lined corridors for love or money, let alone for the price of a down payment on a tract home in California.

Despite the somewhat negative tone of most news articles, they often do tell a "rare" success story. The Kansas City Star story talks about the abandoned mansion of the famous and now deceased drug lord Pablo Escobar, that was turned into the Amansala Hotel and EcoResort by a resourceful gringa. That was a few years ago now, and that was just the beginning. The beach in Tulum is now rimmed with a plethora of successful small hotels with restaurants, sushi bars and yoga studios, Playa del Carmen and other beach communities are still growing like crazy and even Merida is becoming hip and popular (see link below).

So hundreds of Americans, Canadians and people from around the world, maybe thousands, are buying homes annually in Merida or on the nearby beaches of the Yucatan Gulf Coast for retirement, vacation rental income and investment. And more and more of those are moving down here every year. We have heard recently that over 7,000 expatriates live in Merida, a surprising number if you believe the 1,500-3,000 on the Mayan Riviera. Frankly, we did not think those numbers were accurate when that article was written (too low) and they have risen steadily since then.

We Working Gringos are just the visible tip of the Yucatecan expatriate iceberg, so to speak. An iceberg that has grown exponentially since this article was written and shows no signs of melting, even in this tropical heat!

****
Looking to buy real estate in Merida or Yucatan? Try our Real Estate in Yucatan section or the For Sale in Yucatan pages.

Looking to rent? Try our Vacation Rental Listings!

Want to know what it is like to LIVE in Yucatan? Try our Yucatan Survivor section!

Helpful Links & Resources

Comments

  • Moby Grape 17 years ago

    I am looking at purchasing a beach front home near Merida. Have the previous hurricanes created a storm surge that has effected the homes along the coast. I guesss I am one of the many looking for a piece of paridise as I retire.

    Thanks in advance.

    Moby Grape

  • Alen 17 years ago

    Do you need a FM3 to sell the only house we live in under the Fideicomiso and not pay capital gain tax.

  • Working Gringos 17 years ago

    Yes, Working Gringa has just worked with Stewart Title in Playa del Carmen on a closing and found them to be an invaluable resource. We can highly recommend a gentlemen named Gabin Palafox there.

  • Gregg 17 years ago

    Does anyone have experience with or an opinion about using a title company such as Stewart Title to handle closing and escrow deposits? Stewart Title seems to have a larger presence in Costa Rica and Riviera Maya where we also looking.

  • raketas 17 years ago

    hello casi yucatecan it's nice to hear you are from kck i being living here for 9 years i think this is a nice area to live, make decent money and to raise my kids compared to other places like,los angeles .chicago ,new york i got a few more years to go before i move back to yucatan my dream is to build a house by the beach some where in TELCHAC PUERTO only a few miles where i was born (motul) and spend my last years of my life with my people i think america's biggest problem righ now with the hispanics is called ''RACISM'' for this reason i have decided i case IF I DIE HERE to be buried in MOTUL DE FELIPE CARRILO PUERTO ,daniel gallegos i think you got a good point i mean really if you got money you can go to live anywhere in the world ,and casi yucatecan i would to hear more from you and why not maybe one day we will drink a beer together who knows (www.raketas74@yahoo.com)

  • CasiYucatecan 17 years ago

    Hello Raketas! I am from the Kansas City Kansas area. It's where I grew up and lived until moving farther away for work. I hope KCK is a great place for you for now. Maybe we will cross paths in Merida or Motul someday soon. (coincidences never cease to amaze - doesn't it sometimes seem like there are only a couple dozen people in the world?) (well, you know what I mean).

  • Carlos Daniel Gallegos 17 years ago

    Someone here in the U.S. said we should just trade countries. Since all the illegals are coming to the U.S. and the gringos are going to Mexico. We should just trade. Give the United States to the Mexicanos. Give Mexico to the Gringos or U.S. citizens. Ariadna and her familia and amigos, all native Yucatecos are worried about the many outsiders moving to their homeland. They are the middle class of Merida. Has anyone done a survey of local Yucatecos about the influx of gringos and other foreigners to the region? No, not those who stand to make money off of sales of property, but the everyday Yucatecos?

  • raketas 17 years ago

    ja ja ja como son las cosas los gringos aconsejando a otros gringos de como comprar propiedades en yucatan y nosotros los yucatecos aconsejando a los mexicanos de como comprar propiedades aqui en estados unidos. I don't have a problem with that ''feel like home'' because really this not my home, ''kansas city kansas'', because one day i will go back where i belong: motul de felipe carrillo puerto en el estado de yucatan, and working gringos i want to thank you for the photos, videos and articles about ''mi querido yucatan''.

  • Lance Babcock 17 years ago

    Just a short perspective about buying property in the Yucatan. Firstly we were strongly advised not to buy eijado land by lawyers and friends. We have also used Alvaro Baqueiro as a lawyer and found him to be very good. We have purchased a beach home and beach lot in Telchac Puerto, east of Progreso and put both properties into one trust at Scotiabank inverlat on the Paseo Montejo without any problems. Our experience with buying and owning property in Telchac has been great as we have spent a lot of time and asked a lot of questions about property along the coast. Prices and development along the Gulf coast from Progreso to San Crisanto seems to be changing quickly. If you have any questions about property along the coast, we can try to answer them and you can e-mail us at tiki@sympatico.ca Buenas Suerte Lance

  • Karen Ferguson 17 years ago

    Without going into much detail, I recently visited Merida. I don't remember what drew me to the city, but I thought it was time to extract myself from always going to the beach towns.
    The first week, I walked around every where and stayed lost. The second week, I fell in love with the city, a three dollar hair cut, and the graciousness of the people both locals and gringos. There is a spiritual air about the city.
    Three days before I was to leave, I looked at 20 or so houses. I bought one! My husband has never been to Merida. *chuckle* That was my first trip and I had forgotten my business file on my desk at home, so I was winging it. Chris is going in October. Needless to say, he's a good sport. For the record, I've been looking at real estate property for retirment for 6 years so he knew I *knew.*
    I agree with Working Gringa's comment...fear sells newspapers. I still have people asking me about the banditos & re-telling 20 year old tales: God only knows what the truth was then. But, that's okay with me because, frankly, I am already feeling territorial and hope those with fear-mongering mentality stay away. :-)
    Estoy feliz!
    Adios,
    Karen

  • Mandy Ruiz 17 years ago

    There are warnings by the Arizona state real estate department and the United States State Department about the risks of buying real estate in Mexico. Remember, the "Gringos" already there have a vested interest in getting more company. You drive thier property values up, and they need someone to dump the risky investment onto. I saw good information when researching Baja real estate complaints, and Mexico real estate complaints. That is how I found these addresses:

    http://www.re.state.az.us/PUBLIC_INFO/Documents/Consumer_Guide_MEX.pdf

    http://travel.state.gov/travel/cis_pa_tw/cis/cis_970.html#real_estate
    Copy and paste them into your browser.

    It is important to understand the current housing crisis in the U.S. is having a direct impact on the Mexican boom, which has come to a screeching halt, because Americans were pulling home equity out of their homes to buy in Mexico. If you have a house in Mexico it could be years before a qualified buyer can come along.

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