Blog  |  Tuesday, December 5, 2023

How Do Closing Costs Work When You Buy a Home in East Cape

First-time visitors to Mexico’s Baja California Sur are often taken aback by its perfect climate, rich culture, and pristine beauty. They don’t want to leave! And many end up researching home buying in East Cape before they’ve even wrapped up their trip.

Looking to make a permanent move to the region or invest in a vacation villa for future visits? Buying a property in the East Cape has its own unique set of rules and procedures. And when it comes to closing on a property there are a few things to know about the process.

• Before you buy

  It’s helpful to understand the process of home buying in East Cape before you get your heart set on a property.

  To get started, you’ll need to apply for either temporary or permanent residence in Mexico. This process can take some time, so it’s best to initiate the process immediately. You can learn more about Mexican visas by contacting the Mexican embassy in Washington, DC.

  Once you’re granted your Mexican visa, you’ll receive a Clave Unica de Registro de Poblacion (CURP). This unique, alphanumeric, 18-character string code for citizens and residents of Mexico is similar to an American social security number.

  After both the visa and CURP are issued, you can apply for a Registro Federal de Contribuyentes (RFC). This will allow you to make transactions in Mexico.

  Next, hire an experienced realtor who can provide references from foreigners who have used their services to purchase a property in the area.

  You can provide them with a list of priorities and “nice-to-have” features that include:

  • Location (beachfront, marina, desert, city, mountain)
  • Price range (including HOA and resort fees)
  • Number of bedrooms and bathrooms
  • Amenities (infinity pool, outdoor kitchen, private berths, garage)
  • Benefits (beach club, yacht club, on-site dining, concierge services)

  Once you find a property you like, the realtor will make an offer on the home and have you sign an initial sales agreement. Although the contract will likely be in Spanish, you’ll be provided with a translation.

  It’s worth noting that your real estate agent will recommend a notary (an experienced lawyer in Mexico) to draw up and review the closing documents. Although you can choose a notary on your own.

• The buying process

  Now that you’ve signed the initial sales agreement, it’s time to pay for the property.

  Unlike other countries like the United States, financing is a bit of a rarity in Mexico. Among the few options for home buying in East Cape, you’ll find high-interest rates and short-term mortgages. Although some developers do offer financing, you’ll soon discover that most require close to 50% down. Because of these limited loan options, most real estate sales in Mexico are paid in cash.

  Mexico has restricted zones that limit foreigners purchasing land within 100 kilometers (62 miles) of an international border or 50 kilometers (31 miles) of the coast. This requires that you form a fideicomiso. The Mexican Ministry of Foreign Affairs issues this bank trust permit in 50-year renewable terms and allows the bank to hold the property in trust for you. As the beneficiary, you’ll still retain all ownership rights and responsibilities. And you can still lease, sell, and improve on the property or leave it to your heirs.

• Closing costs

  Now it’s time to pay closing costs, taxes, and other fees.

  As the buyer, you’ll be responsible for paying the closing costs on your transaction. These fees typically range between 4% and 10% of the purchase price and are in addition to earnest money deposits. The fees are added to the total amount of funds required to close. There may be some fluctuation on the day you close, depending on factors like the exchange rate.

  Some of the fees you may see
  included in your closing costs itemization include:

  • Trust Acceptance Fee: A one-time fee paid to set up your bank trust
  • Trust First-Year Fee: An advance payment to cover the first year’s fee to maintain the fideicomiso
  • Foreign Affairs Permit: Processed by the notary or trustee bank through the closing agent to allow you to buy the property
  • National Foreign Investments Registration: Paid to the trustee bank for registration of the deed within 30 days
  • Notary Fees
  • Property Acquisition Tax: A fee equal to 2% of the purchase price paid to the municipality
  • Public Registry Rights: Based on the price of your property, this fee is required so the notary can process the registration
  • No Liens Certificate: Paid to ensure that the property has no lines on water, property tax, or HOA fees

  Other fees include an appraisal (for tax assessment purposes), a property survey (identifying boundaries and features like easements and roadways), and Mexican sales taxes.

  In Mexico, the seller pays sales commissions and capital gains tax.

  Once all the closing costs have been paid, the Public Registry will issue the deed, known as an escritura.

  Most property buyers find that a typical transaction takes anywhere from 45 to 60 days in Mexico, barring any obstacles. But closing dates will be affected by various factors, such as the type of property (e.g., presale construction or individual seller-to-buyer transaction).

• A few considerations

  If you plan to spend a considerable amount of time in the East Cape, it may be worth forgoing a standard residence. Instead, you might consider investing in a luxury resort property. These resort communities are built on some of the best beaches in the region, with unmatched amenities to complement your seaside lifestyle

  And they are designed for wealthy travelers and adventure-seekers. From high-end boutiques and private yacht and beach clubs to restaurants helmed by some of the best chefs in the world.

  Spend your days lounging by your bespoke villa’s private infinity pool, just a step from the beach. Or enlist the help of a team of water sports experts so you and your family can learn to kite sail.

  Bring in a personal chef to perfectly prepare the catch from your chartered fishing excursion. Or play a round of golf at one of the most exclusive courses in the world, right in your own backyard.

  Bringing your own sailboat or yacht? Some luxury resorts in the East Cape offer properties with residences with private docks. Costa Palmas’ Marina Village for example, can accommodate vessels up to 250 feet long.

Regardless of the type of property you choose to purchase, living in the East Cape will no doubt be one of the best decisions you’ve ever made.

Ready to start your search for a home in the East Cape of Baja? Start by viewing some of the current options available at Costa Palmas.