This guide outlines the real estate purchase process in Mexico, covering essential legal and financial aspects.

1. Making an offer and signing a promissory agreement

The real estate purchase process begins with an offer to purchase (offer and acceptance), which specifies the price, payment terms, deposit amount, inspection contingency, and settlement date. If the seller accepts, the buyer provides an initial deposit, typically a percentage of the total price.

If there is a delay between offer acceptance and the final notarized sales agreement, it is advisable to sign a promissory agreement (promesa de compraventa). It is used to bind the parties to the execution of an agreement in the future because they are unable to execute it immediately. For example, in the restricted zone foreigners cannot hold direct title to property and it takes time to get the necessary documentation to transfer title to a real estate trust. This preliminary contract outlines the terms and conditions of the sale, including any special payment arrangements and penalties for default, allowing the parties a sufficient amount of time to establish the fideicomiso trust. Promissory agreements provide security for both parties before the final purchase agreement is executed.

2. Understanding real estate trusts (fideicomiso) in Mexico

Foreigners purchasing property in the restricted zone (within 50 km of the coast or 100 km of the border) must acquire property through a fideicomiso (real estate trust), managed by a Mexican bank. The buyer is the beneficiary and has full rights to sell, lease, or bequeath the property. Setting up a fideicomiso can take time, making the promissory agreement essential to secure the deal while waiting for trust approval.

3. Using an escrow service

To protect the transaction, buyers often use an escrow service, which holds funds until all conditions are met. While escrow services are not widespread in Mexico, many foreign buyers opt for US-based escrow companies for added security. This step minimizes financial risks and ensures funds are only released when all contractual obligations are fulfilled.

4. Conducting due diligence and legal verification

Due diligence is a crucial step in the real estate purchase process in Mexico. The public notary (notario público) is responsible for verifying property ownership, ensuring there are no outstanding liens or debts, and authenticating legal documents. The notary also calculates taxes and ratifies the transaction.

During due diligence, buyers should:

• Verify the property title (escritura pública) is properly registered with the Public Registry of Property.
• Check for unpaid property taxes or utility bills.
• Confirm that zoning laws and land use permits align with their intended use.
• Ensure there are no legal disputes over the property.

5. Signing the final purchase agreement

The final purchase agreement (contrato de compraventa) is a legally binding contract signed before a public notary. If the property is in a fideicomiso, a real estate trust agreement is formalized. If the property is already in a trust, an assignment of rights agreement (cesión de derechos) is used to transfer ownership.

At this stage, the buyer pays the remaining balance, final taxes, and closing costs. The real estate purchase process in Mexico is considered closed when the contract is recorded by the notary, allowing the buyer to take possession of the property.

6. Property registration and ownership transfer

The public notary registers the transaction with the Public Registry of Property, a process that takes up to three months. Once completed, the buyer receives a certified copy of the contract as proof of ownership.

7. Alternative purchase methods: reserve title agreements

A reserve title agreement (contrato de compraventa con reserva de dominio) allows buyers to make installment payments while the seller retains ownership until full payment is made. This method enables buyers to take possession and use the property while completing payments. However, failure to meet payment obligations may result in contract termination.

In Mexico, real estate agents typically represent the seller, meaning contracts may favor the seller’s interests. To protect their investment, it is recommended to hire an independent Mexican attorney to review contracts, conduct due diligence, and ensure your rights are safeguarded. Buyers should also be aware of tax implications. Consulting a tax expert can help optimize the purchase structure to minimize tax liabilities.