Understanding the Mexican Closing Process
The Mexican closing process is a very intricate set of steps that are performed from A to Z without exception. No one step can be performed before the other is completed. This outline is a standard time frame for a cash purchase transaction where both buyer and seller documents are all in order at the beginning of the closing timeline. There are many variables that can occur because we are dealing with buyers and sellers who are typically not in Mexico and we have many third parties who are involved in the process such as Public Notaries, Home Owners Associations, Buyer and Seller Closing Agents, Foreign Affairs Minister for the buyer Fideicomiso Permit, Fideicomiso Trust Banks, Property Tax office Officials, etc. Consider that your closing time frame includes a Mexican National Holiday and that can cause a delay.
You should also know that the closing timeline in Mexico is "ESTIMATED". It is not set in stone like in the USA or Canada where come hell or high water it gets closed on the closing date. The time frame you and your buyer or seller agree on is recommended as an estimated date. The real closing date will be determined by the Notary Public once all of the closing documentation has been completed and is ready for the final signature transferring the property to the buyer. It is typically in the last two weeks of the close that the final date can be determined. Often neither buyers or sellers travel to Mexico for the close date for this reason but instead close with a Limited Power Of Attorney for the purpose of signing the deed transfer only. All other documents will have been executed by all parties during the closing process.
We experience many different variables in closings that can extend the time frame mostly due to what status the seller's paperwork is in and dealing with the Fideicomiso Trust Bank departments. "Pushing" a closing through to an earlier close date typically does not happen in Mexico. Everybody is happy with Manana (tomorrow) until it comes time to do business.
While every effort will be made to close in a timely manner the process is ultimately subject to all the parties involved. The process has become easier over the years however it still is a process that does not allow short cuts to be taken. You can be certain that you and your investment will be protected throughout the entire process. Have a little patience, relax and it will all come to fruition.
Standard Cash Closing 60 days estimated
Closing with Mexican Financing involved 120 to 180 days estimated
Closing with Seller HSBC Fideicomiso 210 days estimated
YOUR OFFER IS ACCEPTED
Both buyer and seller agree to price and terms of the contract. Escrow documents are prepared along with ID from both parties involved. With the Anti Money Laundering Law in place KYC (know your client) and Privacy forms are completed by both parties.
DUE DILIGENCE PERIOD
The buyer makes the initial deposit and escrow fee per the contract. Confirmation of deposits is made with the escrow company. The Realtors work to complete Inventory, Home Inspections, etc and any other conditions or contingencies so as not to delay the Earnest money deposit time frame. Once completed and the buyer is moving forward then any letters of acceptance of due diligence items are prepared and signed and the buyer receives the wire transfer information for the Earnest money deposit. Should the buyer determine not to move forward based on the results of the due diligence reports then the initial deposit is refunded less escrow fee.
EARNEST MONEY DEPOSIT AND END OF DUE DILIGENCE
Escrow documents are executed and Earnest Money deposit is made and confirmed. Buyer retains a closing agency/attorney and funds the closing costs by making a partial deposit with the balance due at closing.
TRANSFER OF THE TITLE TO THE PROPERTY
Sellers Broker and Buyers Broker provide all necessary documentation to the closing agency/attorney. Once completed it will be forwarded to the Notary and the Fideicomiso Trust Bank department. The Capital Gains tax calculation is provided to the seller. (Often this is now done at the beginning of the process even at the offer acceptance stage since the calculation is done in Pesos not in US dollars to help the seller determine what his/her net will be on the accepted offer price). The Letter of Instruction to the Trust Bank is prepared and signed by the buyer and seller. This letter notifies the Trust Bank that the property is being sold. This letter needs to be authenticated per Mexican Law at a Secretary of State for US Citizens or at a Mexican Consulate for Canadian Citizens. When executed and returned the SRE Permit from the Minister of Foreign Affairs is requested. If there is an existing trust in place then its rights may be assigned to the buyer. If a Mexican is purchasing the property the trust will be canceled and documents for Mexican Escritura are prepared.
The notary prepares the Trust Deed / Fideicomiso for the Trust Banks review. Upon acceptance by the Trust Bank as well as any other additional information or closing documentation, the Notary is then advised to execute the Trust Deed with the buyer and seller or their Proxy's (POA power of attornies).
CLOSING DAY AND SETTLEMENT OF THE PROPERTY
The Notary receives the Letter of Instruction from the Trust Bank and authorization to close. The buyer is notified and receives 5 days to fund the escrow account with the balance of purchase price of the property. Settlement Statements are provided to the buyer and seller for signatures. Disbursement Instructions are prepared and authorized by the buyer and seller and forwarded to the escrow company. Wire transfers are made to the escrow and closing company. Confirmations of receipt of funds are provided.
The Notary completes all documentation and then obtains a signature from the Trust Bank, Buyer, Seller and or Proxys. The Notary submits the following documents to the Escrow company. Executed Trust Deed, Certificate of No Liens, Preventive Notice of the sale in favor of the buyer registered at the Public Registry office, a letter of confirmation that the Trust Deed / Title to the property has been duly executed according to Mexican Law. The escrow company verifies the documents received from the notary and the conditions of the escrow agreement and funds are typically released with 24 hours depending on what time of day the documents are received or if a weekend is involved in the time frame.
YOUR TRANSACTION HAS NOW BEED EXECUTED AND OFFICIALLY CLOSED!!
YOUR Los Cabos Real Estate Professional