FAQ's - Buying A Home In Lake Chapala: Part 2
As a real estate agent I find I get asked the same questions time and time again. So here is a blog which answers the most frequently asked questions and walks you through the buying process for purchasing residential property in the Lake Chapala area. If you haven't already read Part 1 of this blog, make sure you do!
Q) How much are closing costs and who pays them?
A) Closing costs are between 3-4% of the purchase price and are paid by the buyer. These fees cover the government transfer taxes and Notary fees.
Q) How does the closing take place and what do I need to bring?
A) The closing takes place in the office of a Notario Publico, or the public notary. The Notario is a high standing lawyer with additional training who works on behalf of the Mexican Government. The Notario authenticates the seller’s right to sell the property, scrutinizes the history of the property for any irregularities, and investigates the deed through appropriate government offices to ensure it is clear and free of liens. Both parties need to present themselves at the Notario’s office for the closing. The buyers also need to sign paperwork prior to the closing to allow the Notario to collect the tax on their behalf and send it to the Government. A lot of paperwork is necessary for a successful closing! The most service oriented Real Estate Agencies process it all on your behalf and present to the Notario.
Q) Who selects the notary (or Notario)?
A) Since the buyer pays the property transfer tax and other closing costs, plus the Notario’s fee, it is the buyer’s privilege to select the notary.
Q) Which is best for me? A Deed or Trust?
A) Based on personal circumstances and chosen Beneficiary, the Notario – or your knowledgeable Real Estate Agent - will advise the buyer whether a Deed or Trust is the best option for them. The Trust is always an option, even in areas of Mexico where it is possible to purchase with a Deed.
Q) What happens on closing day?
A) The Notario will file with the Mexican government the application for the transfer of ownership from the seller to the buyer. His official signature on all documents finalizes the purchase and makes it a legal transaction under Mexican law. Once everything is recorded on paper the signing happens right in front of the Notario. The buyer receives a draft Deed at the time of closing, the official, original Deed is made available 2-3 months later. The seller receives payment immediately after the closing.
Q) How long does it take to close from the time when the offer is accepted?
A) From purchasing to closing the norm is 30 to 60 days. This allows time for an inspection to be performed, and the inspection report to be reviewed and accepted. Shorter closing times are possible without an inspection, and on occasion, longer closings are selected for specific reasons.
Q) I hear that capital gains tax can be steep for sellers. How much is it, and can I avoid it?
A) Upon selling, to avoid paying the 35% capital gains tax, a seller must have a Permanente Visa (be considered a “Tax Resident”) and must not have sold another dwelling home in the past 3 years. The exemption has a ceiling of 700,000 UDIS (Investment Units, updated daily). For example, at a rate of exchange of 18 pesos/dollar – 5,409 pesos per UDI – the exemption limit is 3,786,300 pesos or approximately $210,350 dollars. It is of utmost importance for the seller to inform themselves of how much capital gains tax he/she would pay off the selling price prior to selling, by contacting a Notario to request the calculation.
Q) If the inspection report presents major needed repairs, can you re-negotiate the agreed upon price?
Yes, in circumstances where major structural, plumbing, or electrical deficiencies are encountered, the buyer and seller can re-negotiate the original price.
In summary, the current buying process at Lakeside involves …
find the property you like and negotiate a purchase price
set a closing date - minimum 4 weeks after the Contract To Purchase is signed
get a home inspection - it takes approximately 10 working days to schedule an inspection and get the report
after the buyer signs off the report as "satisfactory", he/she has 3 days to wire the 10% initial payment to place the property “under contract”
your Real Estate office staff and the Notario’s get all the documents in order for the sale
2-3 working days before the closing, the buyer signs off tax documents at the Notario's office
on closing date, the buyer and seller present themselves at the Notario’s office to sign the purchase documents and finalize the transaction
approximately 2-3 months later, the buyer gets the original copy of the Deed
So there you have it. If you have any further questions, please contact me through this site or Facebook and I will be happy to answer all your questions. Thank you for reading and look forward to hearing from you.