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

  • 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.

  • Kim 17 years ago

    Very informative, especially since I sell real estate in Playa del Carmen, and am continually educating clients about how purchasing real estate in Mexico works for foreigners.

    If you still have the article, please email it to me at kltracy@gmail.com

  • pat niles 18 years ago

    your article is great but i believe it has gotten easier to buy ejido land.

  • Alejandro 18 years ago

    Merida is a fantastic city, vibrant city and slowly all those abandoned houses are being purchased and renovated. Firstly by Americans and now by other Mexicans who see the value of these historic properties.As for squatters it really isn't a problem and one needs simply to have a caretaker to check on the property once a week.....the cost in minimal and it provides good piece of mind.

  • Working Gringos 18 years ago

    Hola Anne,

    Many people purchase property in Merida long before they plan to live here, usually as future retirement homes or as vacation homes.

    We've not heard of any problems with "squatters". Many of the homes for sale are either new or recently renovated with nobody living in them or they are old colonial homes that have been abandoned. In fact, we've noticed that while some areas of the U.S. have many homeless people, Merida has many people-less homes. That said, we have heard that it is difficult to evict renters under Mexican law.

  • Anne 18 years ago

    Is is possible to purchase a home in the Merida area when you are not ready to relocate to Mexico for a year? Also are squatters a problem? What can you do do purchase in advance and keep the home free from squatters? Does the law still favor "squatters"? Thank you so much for your reply. Anne

  • jose 18 years ago

    Who is a reputable property manager in the Chuburna area? There are many outsiders buying property in the Chelem/Progreso/Chuburna areas but they cannot occupy the property full-time.Who oversees the property for them and what is a reasonable monthly charge for this service? Thank you.

  • Suz 18 years ago

    Just would like to add, we also have had wonderful help from the folks at TierraYucatan, from Carlos Hassey Esparza specifically. He is friendly, a great communicator, and made sure we got to see every property of interest to us, drove us around for a full day. We are not high rollers, and were curious if we would be directed to more expensive properties rather than what we had researched...but he showed us exactly what we wanted, and even came up with a few others that we otherwise would not have known of. We have put a down payment, and now are in the waiting stage, but so far everything has gone exceptionally smoothly.

  • Tom 18 years ago

    Hi Folks! Just a short note to those who are hesitating. My parents have recently built a home east of Progreso on the beach. Their architect handled everything from the land purchase to handing over the keys. He and his family are dear friends now and I thought I would share his name with the readers:
    Carrillo e Peon arqitectos in Merida.
    carpe95@gmail.com
    Victor Carrillo speaks perfect English too!

  • Working Gringos 18 years ago

    Hola Dianne,

    There is always "wiggle room" in a real estate transaction. Offers and counter-offers are quite common here as they are in most places.

    You do not need to obtain an FM3 prior to making an offer. In fact, you do not need to obtain an FM3 unless you plan to live in Mexico full-time. You can live here on a tourist visa (FM-T) for up to six months.

    The fideicomiso will be established for you during the process of closing on your purchase. If the title on the property is clear and the building is not designated as "historic" and the law firm handling the transaction is not swamped, then this process usually takes less than six weeks. That said, patience is the highest virtue in Mexico.

    Several of the real estate web sites on our Links page have more details about buying real estate in Yucatan.

  • DIANNE CALIVA 18 years ago

    ENJOY READING YOUR INFORMATIVE ARTICLES. HAVE FOUND A FURNISHED HOME SELLING FOR $80,000. MY QUESTIONS ARE: DO YOU NEED TO SET UP YOUR FIDEICOMISO AND FM3 BEFORE YOU CAN OFFER TO PURCHASE A HOME? IS THERE WIGGLE ROOM ON THE PRICES OF SUCH HOUSES? HOW LONG DOES THIS PROCESS TAKE TO ESTABISH YOUR FIDEICOMISO?
    THANKS.

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