Closing Process and Costs
The Mexican closing and title registration process, inherited from Spain, is much more complicated than a typical US or Canadian process. All title transfers are made before a notary, and a notary in Mexico has a huge role compared to that of an American notary. The notary, supplied with information by the parties, drafts the title transfer document – a fideicomiso trust in the case of foreign buyers, and the parties execute the document in the notary’s office or by power of attorney. The notary keeps the original document, and copies of it are circulated to the tax department (catastro) and public registry, and afterward copies are furnished to the parties. The notary is also responsible for calculating all of the taxes and fees required (typically including a 2% acquisition tax (ISABI) charged to buyer, capital gains tax (ISR) if applicable, charged to seller, and the fees of Catastro and Public Registry), and paying them to the various tax and service offices involved.
The process culminates in a very long instrument – typically 25 to as much as 40 pages or more in length), reciting the identities of the parties and proofs of those identities, the foreign affairs permit authorizing issuance of the fideicomiso, the most recent title history of the property, the certificates of freedom from lien and from tax debt, and the parties’ actual bargain – purchase price stated in the currency specified in the bargain, but in every case converted to pesos at the date of closing, and terms of payment. If the instrument is a fideicomiso, the trust itself including all its terms will be included in the same document.
It takes a long time – usually weeks, even with all parties providing their information immediately – for the notary to gather together all the information and create a draft. That draft is then reviewed by all the parties (buyer, seller, new trustee, outgoing trustee if there is one, lender if there is one, and outgoing paid-off lender if there is one – and sometimes others), their suggestions and corrections incorporated, then re-approved, and then a date is set for the signing. There is typically also some delay before the signing can take place, so that all participants’ schedules can be coordinated or powers of attorney prepared, executed and gotten to the notary (to be recited in the text of the document as well). A typical closing takes on the order of 90 days. Some offices can accomplish a closing in as little as 60 days, or even less time, but 90 days is a good estimate and average.
Costs of closing are also much higher than most non-Mexicans are used to seeing, due to the complexity of the process. They can run from a low of 3.5 or 4% of the purchase price for very expensive properties, to 10% or more for less expensive ones – because some of the costs are fixed, and represent a bigger percentage of price for smaller transaction. In addition, the buyer must usually deposit about 50% of the money with the closing agent to start the process, and the agent will actually spend most of that deposit prior to closing on fees and costs charged by various participating entities. It’s a good idea to get a detailed estimate of these costs from your agent before actually making an offer, so that the closing costs can be considered and planned for along with other elements of the cash flow involved in the transaction.