Who Do Ya Trust … When Purchasing Real Estate in Mexico?

by Enrique (Henry) Saldana  (July 2012)

Do you remember the original Batman movie starring Jack Nicholson as the "Joker?” In the movie there is a particular scene where the Joker is passing out money to Gotham City. A very memorable scene it was, with the Joker riding atop a massive float asking the people of Gotham, "Who do ya trust, me or the bat?"

My question to you is “In a real estate purchase transaction in Mexico, who do you trust: the seller, the closing agent, the notary, or ... ?”

You should trust NO ONE.

Why, you may think, or how, can you trust no one?

Well, after what I have seen occurring this last week, I can tell you with all certainty, that if what you are being offered in terms of closing costs, or a Mexican bank decides not to proceed with the closing (for whatever reason), or if as the old saying goes, "it looks like a duck, walks like a duck, and quacks like a duck, it must be a duck," the deal does appear a bit iffy, you should proceed with the utmost caution and obtain legal advice to prevent a financial loss you might later regret.

I am so appalled by what I have just seen happening and what I have seen and heard of for the last six years of being involved in the real estate and mortgage business in Mexico, that I could write a book on all of these experiences.

Here is a preview of some examples of common practice acts of real estate fraud in Mexico:

"The drop that spilled the cup," or as the Mexican saying goes, "the thread that made the sarape," was the case that was just presented to us. In this particular case the condo purchaser approached us after receiving our monthly newsletter wherein we described, in one of our various articles, closing costs and capital gains in Mexico.

The buyers, as is common in Mexico's new developments, were preparing to close on their new condo and after submitting payment for closing costs, and paying in full for the purchase of their property, suddenly received a document, a Cedula Catastral (a document that verifies that a property is registered and contains the elements that define the property. This definition is based on a Spanish-to-English Real Estate Terms translation on Google). In essence, the Cedula Catastral is a document that reflects the legal boundaries of your property and shows the amount of assessed taxes based on local tax assessment authorities.

Well, based on this document, which was obviously altered, and after reading the information in the enclosing email to which the document was attached, which requested the Buyer to pay an additional $50,000 US in closing costs on top of the funds already covered by Buyer by their Closing Agent, the buyers reacted with utter astonishment. The argument was, on the part of their "closing agent," that the tax-assessed value of the property had increased from approximately 3+ million pesos dated Nov. 2011 to just over 5+ million pesos dated January 2012, and therefore they would have to pay the "assessed amount differential" prior to closing, which he was referring to as Capital Gains.

After meeting with the purchasers it was explained first and foremost that capital gains apply only and solely on the sale of a property and therefore the seller is the only responsible party for such capital gains increase. In addition is the fact that a property in Mexico, just like in North America (Canada and/or the USA) does not get assessed at the beginning of the year, but at the end of every year. The buyers understood that this action simply proved that the document had been altered and an act of fraud was being committed against their personal interests. We recommended that the clients find a different closing agent and Notary to close on their property.

In another case one of our clients purchased a piece of land in the Tulum area and found himself out $280,000 US in cash after finding out that the land he was told could be found within walking distance from the beach in Tulum, and  which would have been valued a great deal more upon the Tulum market’s real estate boom, was actually found on the opposite side of the federal road and out in the jungle, and barely worth $10,000 US based on today's land and real estate market values, two years after the initial purchase of the land.

Our client had been referred to a "real estate salesperson in Mexico" and, of course, anybody and their mother can be a real estate salesperson in Mexico due to the lack of real estate legislation, and thus there are no real estate licensing requirements. This salesperson became a "drinking buddy" and was able to break into our client's confidence and thus talk him into purchasing this incredible investment and marvelous real estate opportunity in cash. We referred the client to a litigating attorney to try to recover his investment.

On a third case, a case or cases, still being litigated, 15 clients are trying to recover their down payment and, at this stage of the game, the contract's penalties for noncompliance of contract. These cases have been in court for the last 2+ years and are about to be concluded. The defendant, a local major developer, has resorted to all kind of skims and illicit acts, directed by their different attorneys, since they have already changed several attorney representation law firms to fight their case, to prolong, prevent and discourage the litigants from continuing their legal fight, to no avail. Most of the cases have already gone through all three stages of the federal courts and won at every instance and the more advanced cases are in the process of property adjudication by the plaintiffs.

The legal process of resolving a dispute. The formal giving or pronouncing of a judgment or decree in a court proceeding; also the judgment or decision given. The entry of a decree by a court in respect to the parties in a case. It implies a hearing by a court, after notice, of legal evidence on the factual issue(s) involved. The equivalent of a determination. It indicates that the claims of all the parties thereto have been considered and set at rest.

So imagine the impact of the adjudication of 15 properties will have on a development, and far worse an impact if the new owners (plaintiffs) decide to AUCTION the properties at a LESS THAN MARKET PRICE VALUE. All of the rest of the properties in that development will AUTOMATICALLY BE DEVALUATED; GOOD LUCK TO ALL!!!

These are only a handful of cases that we know of, not to mention the ones we have made aware of, that simply make the process of investing in Mexico a more serious and cautious process for those foreign investors wanting to purchase property in Mexico's beautiful resort areas.

If you would like to share your stories, send us an email to add your stories to our long list, and perhaps become a subscriber of a future, Our Experience in the Real Estate and Mortgage Business in Mexico book draft.

Obviously the names of the participants will change, but the content and veracity of the same will be supported by research and proper and pertinent documentation.

In the meantime, if you find yourself in a compromised situation regarding property acquisition or closing on your real estate purchase in Mexico and wish to find out how you can untangle your problem, do not hesitate to contact us. We will direct you to the proper entity or professional, in the event we cannot help you to resolve your issues, or problem, at hand.

So Who Do Ya Trust? You should trust no one.

You should approach a proven professional and request him/her to put together a team of professionals to assist you in your property purchase in Mexico. You are already doing that in your country of origin; why not do the same when purchasing a property in Mexico? 

Yes, Mexico is still a great real estate investment opportunity area, but planning and preparation may play a more important role that you may think when purchasing a property. And, if you are still looking for that great real estate investment opportunity, remember, "Luck is simply the point of intersection between Preparation and Opportunity."

This report courtesy of Enrique (Henry) Saldana
Mexico Realty Solutions
Tel: (984) 147-2388 - Cel: (984) 111-8743