Understanding the Mexican Closing Process

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The Mexican closing process is a very intricate set of steps that are performed from A to Z without exception. Not 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 Fideicomiso Permit, Fideicomiso Trust Banks, Property Tax office Officials, etc..

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 that 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 you will close with a Limited Power Of Attorney for the purpose of signing the deed transfer only or a General Power of Attorney with it’s powers limited to signing documents only for the sale a particular purchaser. 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. 

 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. And the document list need for the file has grown over the years also. 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 is approximately 90 days, financing with a bank on a 2nd home approximately 120 days.

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, Review of HOA/Strata docs and financials, 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 or even earlier when the seller listed the property so the fee’s are known ahead of a sale and 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 cancelled and documents for Mexican Escritura are prepared. This all sounds quite simple but it is a very intricate A to Z process with many 3rd parties involved.

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 Proxys (POA power of attorney).

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 within 24 hours depending on what time of day the documents are received or if a weekend is involved in the time frame. Escrow companies also may have protocol to speak with the seller to verify documents as well as signatures in order to release funds from the sale.  The sale has now officially closed and the purchaser is authorized  to take possession.

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