How Much Are Closing Costs In Mexico?
Too often the topic of Buyer Closing Costs in Mexico comes up much later in the buying cycle – after the Buyer has offered on a property! While it’s not practical, it makes sense to a certain extent. Buying a property in Mexico is often a secondary residence, investment property, or retirement dream come true. As such, one can see how buyers get a bit more excited and caught up in the emotions of finally owning a piece of paradise vs the more practical needs of buying a principal residence at home.
The question we don’t get often enough, but always clarify for our Buyers at the onset of the Buying Cycle is this: For Mexican Real Estate, what do Buyer’s Closing Costs, Cost?
We get blanket statements all the time. Closing costs in Mexico are “2?”, “15%?” Or, “I didn’t even really think about closing costs.” Well it’s very important to consider. If your Buyer budget maxes out at USD$400,000, but you have to add closing costs to that, it may push you beyond your financial comfort zone.
So How Much Are Closing Costs In Mexico?
The short answer: Budget for anywhere between 4% to 8% in Buyer Closing costs as a percentage of the eventual purchase price.
To expand on this, you really won’t know the exact value until you offer on a property and obtain a formal Closing Costs Estimate from the Notaria who has been designated to facilitate the closing. The closing costs estimate is obtained during your due diligence stage. If you aren’t happy with the estimate, get a 2nd opinion from a different Notaria.
Buyers of Mexican real estate contractually have the choice of which Notaria they assign to represent their closing. However, it is often mutually agreed between Buyer AND Seller. You’ll often see the Seller mandating the Notaria if they were properly prepared and obtained a Capital Gains Estimate prior to listing their property. They may have acquired more than one capital gains estimate and will want to work with the Notaria who gave them the most competitive (lower) “fiscal strategy”.
There are 3 points to consider for designating a closing Notaria in your Offer Contract:
- The Buyer can leave it open ended by stating, “SAID PUBLIC DEED WILL BE CONVEYED BEFORE THE FAITH OF THE NOTARY DESIGNATED BY “THE BUYERS”. Clearly this clause favors the Buyer.
- Or, the Buyer Offer can state “SAID PUBLIC DEED WILL BE CONVEYED BEFORE THE FAITH OF THE NOTARY DESIGNATED BY “THE SELLERS”. Clearly this clause favors the Sellers and removes barriers to acceptance.
- In a competitive market, it may be prudent to find out if the Seller has acquired a capital gains estimate and already has a preferred Notaria. In which case your Agent can specify the Name & No. “NOTARIO PÚBLICO DESIGNADO” of the Sellers Notaria. This clearly extends respect to the Seller and your offer may be viewed favorably in a multiple offer environment.
In reality, closing cost estimates as a percentage of purchase price should be fairly consistent from one Notaria to another. There are fixed fees such as 2% property transfer tax. Or, fixed fee to establish a new bank trust in addition to the first annual fee. This varies by the Bank chosen to hold the Fideicomiso (Bank Trust).
Notary fees in particular do vary, but remain relatively similar. Consider this – The amount of time, documentation and due diligence required to close a USD$200,000 property vs a USD$2,000,000 property is more or less the same.
That said, download our Mexican Closing Costs Infographic for practical examples and more specific fees. And in the meantime, keep this general rule in mind – The lower the purchase price, the higher the percent of closing costs. Example: A $150,000 lot could represent 8% in closing costs. A $1,500,000 Villa, could be closer to 4%.
Happy buying and be sure to discuss closing costs with your qualified AMPI Real Estate Professional *early* in the Buying cycle, as it will form an important consideration for Buyer Budget.