Guidelines for Foreigners Buying Property in Guadalajara & other Non Restricted Areas of Mexico

First and foremost, it is very important to note that Mexico has two (2) very different types of property purchasing laws concerning foreigners. They are regulated by completely different laws and will require different purchasing procedures.

1.Real Estate Purchases Made Within Mexico's "Restricted Zone"
2.Real Estate Purchases Made Outside of Mexico's "Restricted Zone"

What is the Restricted Zone?
The Mexican Constitution forbids non-Mexican citizens (foreigners) from owning any type of property within 50 kilometers of any part of the country's coastline nor within 100 kilometers of the Mexican border with any country, including the US, Guatemala and Belize.

You can bypass these restrictions by using a legal loophole known as the Fideicomiso, which basically allows a Mexican Corporation or financial institution to own the property on your behalf. However, this process requires you to jump through several legal obstacles and while you basically have full control over the property you are never truly considered the "Real" owner.

The 3 Parties involved in a Fideicomiso:
1.The Fideicominte - Basically the seller or settlor.
2.The Fiduciario - This is the trustee who will own the property on your behalf.
3.The Fideicomisario - The person buying the property or the beneficiary.

This is a bit different than in the non restricted zone where you would only have a seller and a buyer.

Buying Property Outside of the Restricted Zone
Foreigners can legally hold the title to any property that is not located within the restricted zone. Keep in mind that there are several guidelines that a foreigner has to abide by prior to making the purchase. However, once those guidelines are met he/she is basically bound by the same real estate laws that govern Mexican citizens.

The Guidelines
The Mexican Ministry of Foreign Affairs published a guide titled "The Acquisition of Properties by Foreigners Outside of the Restricted Areas: http://www.sre.gob.mx/tramites/sociedades/tema2e.htm. The document, was written in Spanish but we will outline its main points in English as well as give you the links to the official forms that must be filled out:

---You are required to fill out form S1, using a typewriter. Form S1 can be downloaded from the Mexican Ministry of Foreign Affairs here:
http://www.sre.gob.mx/tramites/juridico/doctos/s1.doc

Form S1 basically asks you for your name, nationality, your immigration status, your immigration number, the description and location of the property being purchased, your signature and a few other details required by Article 27 of the Mexican constitution.

---You are required to specify the form of acquisition (or how you are acquiring the property) and what percentage of it will be yours.

---You have to certify what your immigration status is as this will enable them to perform the legal act in question.

---In the event that you are purchasing the property as a foreign corporation instead of as an individual, you will need to provide all the necessary paperwork for your company which must have an official Apostille and be translated by a duly authorized translator.

---You must also fill out form S2 which you can download here:
http://www.sre.gob.mx/tramites/juridico/doctos/s2.doc

---Your S2 application must also include an attachment stating what the property's measurements are, where its boundaries start and end, what buildings or property surround it and it must include your handwritten signature.

---If you decide to have an attorney or someone else represent you and file the S2 on your behalf you must attach a power of attorney that meets the requirements laid forth in paragraph I of Article 27 of the Mexican constitution or a general power of attorney giving your representative general authority to act on your behalf in these types of cases in compliance with Article 2554 of the Mexican Federal Civil Code.

---You must pay the associated fees found here:
http://www.sre.gob.mx/tramites/juridico/costos_27.htm

---You must file the original applications along with 2 photocopies of each.

Once you file the mentioned paperwork and get approval you can legally buy and own the property without any problems. You will have the same rights and responsibilities that Mexican citizens have and you will have to go through the same purchasing process that they do. You are still required to practice due diligence in order to avoid getting ripped off at the end.

Before You Buy
There are several things that need to be verified before making any payment. Keep in mind that just because a seller has control over a property doesn't mean he/she holds the legal title or are otherwise legally entitled to sell It.

Note that many Mexican properties have been built without the adequate permission or permits and can therefore not be legally sold. This is especially true for beach front lots in the Restricted Zone which are considered "ejido" parcels instead of private property and cannot be legally transferred.

This article however focuses on non-restricted zone property but there are many risks that you must prepare for during the buying process.

Confirm that the Seller is Legally Authorized to Sell the Property
The first thing you need to verify before buying a home in Mexico is that the seller has the legal "escritura" which is the actual title. So ask for a copy and then go and do some homework.
1.Ask the seller for a copy of the Escritura.
2.Get a copy of the "Certificado de Libertad de Gravamen". This will give you the legal description of the property, who the owner of record is, information on current liens, what the surface area of the property is, etc.
3.Go to the local tax office and request the "Certificado de No Adeudo" to see if they owe any back taxes.
4.Have a notary (Notario Publico) run a title search for you.
5.Get a specialized title company to also run the title search as the ones done through Notaries are sometimes incomplete.

Making the Offer and Signing the Agreements and Contracts
In Mexico, it is normal to have to sign more than one agreement during the purchasing process.
---The Offer (Oferta). Many times buyers write out a formal offer which the seller can either sign and accept or simply reject it or modify it.
---The "Contrato de Promesa" which would translate to promisory agreement. Here the parties agree to the transaction that is to take place.
---The actual Contrato de Compraventa or sales agreement. It needs to be notarized. This is the most important document as it transfers the legal title to the buyer.

There are several types of contratos de compraventa, depending on whether or not you are buying within the restricted zone or outside of it. In our particular case where we are buying outside of the restricted zone the form that we will most likely use is called a "contrato de compraventa con reserva de dominio" which will give us full ownership.

Closing the Deal
Once both you and the seller have signed the "contrato de compraventa" you must take it to the notary which will legalize it. The notary will perform the following actions:
---Check for any discrepancies and make sure the transaction is legitimate.
---Verify and check the title to see if it has any liens against it or if it owes any back taxes.
---Charge you or the seller any taxes that are due, including capital gains taxes, property taxes, transfer taxes, etc.
---Formalize the transfer and authorize the signatures upon the execution of the title (escritura). ---Document the transaction on the public registry which will record it on the escritura.

Please note that even though it is the notary's responsibility to carry out these tasks, Mexican laws protect him/her in the event he/she fails to find a title defect and the transaction is carried out regardless. So as stated earlier, it is in your best interest to have a title company study the paperwork beforehand.

Where to Find Out More 
Requirements for Foreigners Acquiring Property in Mexico
http://www.sre.gob.mx/english/services/acquiring_proper.htm

Information on Mexico Property from the U.S. Consulate in Guadalajara
http://guadalajara.usconsulate.gov/information/property-regulations-in-mexico.html

Counselor Information Sheet for Mexico
http://guadalajara.usconsulate.gov/information/property-regulations-in-mexico.html

Foreign Investment Regulations including Foreign ownership of Mexican real estate
http://promexico.gob.mx/work/sites/Promexico/resources/LocalContent /463/3/3ForeignInvestmentRegulations.pdf

Basic Guide for Foreign Investors
http://portal.sre.gob.mx/singapur/pdf/BasicGuideForForeignInvestors.pdf

About the VivaReal Network VivaRealis an international property listings network focusing on Latin America and the Caribbean. Their current mission is to connect expats, investors and retirees with local agents and sellers in Mexico.  With a large inventory of Guadalajara real estate listings, as well as property listings throughout Latin America. They also perform market research and publish many reports on real estate trends throughout the Western Hemisphere.