" alt="Baja Life Realty" />You found the perfect La Paz area home to buy. Now what?
After a successful La Paz area house hunting trip, you found the place you want to buy. Now it’s time to make an offer that will secure the property. While the process is similar to that in the US and Canada, there are some differences that you will want to be aware of as you take the next step.
What is this property worth?
The art of making a successful offer requires both local knowledge about the La Paz real estate market, information about the specific property’s history, the neighborhood and location of the property, and many other factors. A good real estate professional can help you with this research, but ultimately you must decide what the property is worth to you and how much you are willing to offer.
If the real estate market is slow and there are plenty of homes for sale, you may be able to make an aggressive offer. But, in a hot market with a lower available inventory of homes for sale, you may need to make an offer that is closer to full price to secure the property you want. A good realtor can research the history of the property and give you a better understanding of its value. For example, your realtor can determine whether the price has been reduced, or whether the same property has been listed over time with multiple agencies. Your realtor should also be well acquainted with the neighborhood, and aware of any issues or advantages that can affect the market value of the property.
Once you have decided on your offer price, a cash offer with no contingencies is always the strongest offer, and more likely to be accepted or at least negotiated. However, you may want to add some contingencies to your offer to protect your interests.
Which Contingencies Should I Consider?
Though a “clean” offer is always the strongest, there are some normal contingencies that you may want to put in place to protect your future investment in your new La Paz home. Here are some of the most popular ones to consider:
Inspection: An inspection is always recommended if you are buying an existing property, especially if during your initial viewing you saw some things that looked like they may need maintenance. Your realtor should have at least one good inspector they can recommend. The cost for a standard inspection is typically around $400 USD and is used to verify whether all of the homes systems are working correctly, and that there are no issues with the structure. The inspector will issue a written report with pictures and recommendations for any structural or system issues that are identified. This inspection report gives you the ability to negotiate any needed repairs. That decision is up to you. You may decide you want the property anyway, and that it’s worth making the repairs yourself. You will also have the option to cancel your offer and get your deposit back if the seller isn’t willing to make the repairs and you decide not to proceed. If you are making an offer on a new construction home, you can ask the builder what type of warranty will be provided. Mexican law states that the builder must provide some kind of warranty.
Property Survey: It’s always a good idea to get a survey to verify that the property boundaries are known, and that any structures are within those boundaries. Sometimes the seller will have a survey that was done when the house was built. If not, you can order a survey for less than $200 USD. Even if it’s an empty lot, it’s good to know where the official lot boundaries are so you can avoid accidentally building a house that is on or outside the lot line. (Yes, this has happened before!)
Inventory List: Many homes and condos in La Paz are sold partially or fully furnished. However, the details of exactly which furniture stays and which goes is an important detail that often gets overlooked when writing an offer. It’s always best to get a written list of what is included with the sale before you close, to avoid taking possession of your new property only to find that half the items you thought were included are missing.
Choosing a Closing Agent and Notary
As the buyer, it is your choice which closing agent and notary you want to use to close the purchase. However, if you are new to La Paz, you may have no idea which ones to choose. Your real estate professional should have a few trusted closing agents that they can recommend and have worked with on several closings. That closing agent typically works with one or two trusted notaries that they recommend. There are times when the seller will request a specific closing agent because that agent is helping them with their capital gains taxes. That is okay as long as your realtor approves of the closing agent. If not, you may be able to negotiate additional terms in your offer in return for using the seller’s closing agent.
The closing agent should give you a detailed summary of the closing costs, explain the closing process clearly, and communicate directly with you in your preferred language (many of them are bilingual) throughout the process. They should also review the title document thoroughly. When it’s time to sign, they will review the key details with you to verify that the paperwork will be recorded correctly.
What Deposits are Required with My Offer?
Making an offer requires that you send a qualified deposit within 5-7 business days of the offer being accepted (the moment when all parties have signed). You should expect to send the following deposit amounts shortly after your offer is accepted:
- Earnest money: This is typically 10% of the purchase price, and is typically sent to an escrow company. If you are building a new home, the builder may ask for a higher initial deposit, especially if they are customizing the house and finishes for you.
- Escrow fee: Every escrow company charges a fee to manage your deposits through the purchase process. Local escrow companies (managed by the closing attorney) may charge as little as $350 USD, but in general it’s a good idea to choose a third party escrow company not associated with the closing agent. These entities are sometimes located in the US, which offers some level of protection for your deposits, but they charge more, typically around $650 USD. A US-based escrow company will generally be easier to wire funds to if your own bank is in the US, since the transaction is then a simple domestic wire transfer.
- Closing costs deposit. The closing attorney will manage the transfer of the property to your name. In so doing, the attorney will incur expenses to pay for the 50-year government permit, bank fees for initiating or transferring the fideicomiso, as well as the appraisal and other certificates. The closing agent will usually ask you to send half of the estimated closing costs to get started on your closing transaction, and the balance when the sale is ready to close. These funds will be held in a separate account from the escrow service, usually in a Mexican bank account (but still in USD). That means the wire transfer will require a bit more time and care, since it’s an international wire transaction, so be sure to plan accordingly.
Do I Need to Attend the Closing in Person?
Mexican law requires all parties to sign in person when the final transfer of ownership occurs. If possible, it’s a good idea to be prepared to attend the closing in person so you can verify that your paperwork is correct before signing. However, traveling back to La Paz for your closing may not be feasible depending on your schedule. In this case, you can opt to assign a Power of Attorney (POA) to your agent, or to the closing attorney, so that they can sign on your behalf at the closing. If you choose this option, you must sign the POA in advance of the transaction in person, so if you intend to assign a POA be sure to get this done while you are in Mexico. If the POA is signed outside of Mexico, you will also need to get your signature(s) notarized and certify it at a government office (any Mexican legal document signed outside of Mexico requires a government certification), then courier the physical signed and notarized documents to the closing agent’s office in La Paz. This process can take several weeks to complete, and can delay your closing. Speak with your realtor while you are in La Paz and, if you don’t plan to attend the closing in person, arrange to get a POA and sign it at the notary while you are here. Doing so will save you weeks of time and additional courier fees.
How Much Time Does it Take to Close?
The time required to close a purchase depends on multiple factors. In general, the closing process should take 4-8 weeks from the time when the closing agent has all of the necessary documents. The actual time depends a lot on which bank you will use to hold the fideicomiso. There are several reasons why the time may be longer than normal, including:
- If the existing fideicomiso is held with a bank that will not transfer it to the new owner. In this case, you should expect to add another 2-4 weeks to cancel the existing fideicomiso (which is required prior to getting a new one at a different bank).
- If you are buying an existing home, but the existing fideicomiso shows only the land and not the structure (this happens when the seller bought the lot first and then had a home built afterward.) In this case, the closing attorney will need to add the house to the existing fideicomiso, which could add another few weeks to the overall time.
Your realtor should be able to assess the situation and give you a realistic estimate of the total time needed to close.
Questions? For more information about making an offer on a La Paz area home, contact us at info@bajaliferealty.com.