So you find yourselves in sunny Ajijic, Mexico, loving the sense of peace you find here. You’ve seen a few ads for homes, and you’ve looked at some. And then you found something you could buy and you wanted to buy, and the sun felt so warm and delicious. Should you make an Offer?

At this point your real estate agent is encouraging you to do that before someone else does. But you’ve heard that line before. Then again, the price is right, the location suits you. So…let’s get down to the real issue here. If somehow you want to back out, do you lose your deposit? You bet. This is what every purchaser struggles with. Deposits must be big enough to show you have already looked around and you’re ready to go through with the deal.

Having admitted to the worst part of an Offer, let’s consider a lawyer. You could, but that’s not the way to go in Mexico. Consider a Notario Público. He is a lawyer, a specialist trained and licensed to handle the legal documents that constitute sale and transfer of ownership of real property in Mexico. In fact at a later stage, you must use a Notary, so selecting him upfront before even making an Offer is a good idea.

Throughout, he is a neutral 3^rd party to transactions required in purchasing or selling property. He should advise you on the closing costs involved, estimated at 3% - 5%. And if he’s worth his salt, when closing, he’ll have the Deed in English as well as the required Spanish f
or a small fee. Insist on it.

A reasonable down payment of 5% – 10% of the purchase price is considered “earnest money” and demonstrates your sincerity in wanting to complete the sale. Well, I guess so. Bargain property in the Lake Chapala area can be found, but generally speaking, what you will like will cost more than $100,000 USD, maybe double, triple that, or more if you are so lucky. So we’re talking minimum $5,000 USD and more likely $10,000 - $20,000 USD, plus. The average private home runs in that range. And they are nice homes, often far more than we could afford up north.

What happens to my deposit? It is normally deposited into the account of your real estate agents broker or a third party escrow company is used. There are cases where the notary here in Lake Chapala will hold on to checks.

If the Offer is rejected, there may be a second round including a counter-offer by the seller, and several rounds can ensue. But once there is acceptance, the Notary Public initiates the process of closing, usually about 14 days.

When the purchase is for a pre-construction property, most developers will ask for investors in condos, for example, to reserve their property with $10,000 - $20,000. The contract may specify 10 – 30 days for review prior to beginning construction. At the end of the contracted time, 20% - 50% might be requested as down payment. During the construction process, 90% is collected and the final 10% wraps up at the actual title transfer.  It’s all worth it when you come through the door and toss your hat onto the sofa, look through the windows into a garden full of color and across the lake to the south shore mountains with islands of cloud dotting an azure sky. Put your feet up and enjoy your dream home. You’ve earned it.

There are always so many doubts and questions about Indigenous land.

What is it?

Can you buy it?

Is it safe? Is it legal?

How does it work?

Let me shed some light on the mysteries of ejido land.

EJIDO HISTORY:
After the Mexican Revolution, large tracts of land, mostly located at the outskirts of towns and cities, were taken from wealthy landowners and divided up into ejidos for the peasants to grow their crops. These ejidos were then passed down from generation to generation and could not be sold to ensure that the local farmers would never be stripped of their land again.

Members of an ejido can farm the land, live on it, enjoy it, pass it to their children, and rent parts of it to third parties.

"The ejido is defined as a community that has joint ownership of a piece of land, lives on the land, and practices joint agriculture on it."

EJIDO NOW:

While this was the original intention, and was once an accurate description of ejido activity, more and more ejidos today exist as land where no one lives and no agriculture takes place.

As the protection of local farmers is regarded less of an issue and the ejido system has limited development in many areas, ejido land can now be sold.

BUYING EJIDO:
To buy an ejido property, you need the agreement of the whole community that 'owns' the land, not just the supposed 'owners', as it is often unclear who the owners (or their ancestors) actually are.

If an ejido is sold without the agreement of ALL (potential) owners, the buyer can risk a legal battle after the purchase which can lead to a loss of the land...

YES, EJIDO IS A WAY OF OWNING PROPERTY IN MEXICO,

... BUT this statement must be read with a realization that "ownership" may not mean the same thing to an ejidatario as it does to your average gringo.

To an American, ownership means having what is known in real estate circles as "the bundle of rights" (possession, enjoyment, control, exclusion, and disposition). When we own a property, we can possess it, enjoy it, control it, exclude anyone we don't want from it, and dispose of it by selling it, giving it, exchanging it, or willing it to our heirs.

To a Mexican, ownership appears to be largely a matter of possession.

Trying to buy ejidal land (communal land holding) can be a risky investment if the investor is uninformed as to the legal pitfalls or unwilling to follow the prescribed procedure.

If you are considering buying ejido land, be sure to work with a real estate agent who is knowledgeable about the process.

It is VERY important to know the coefficients of a property, because it dictates what can be built on a property.

CUS - Coeficiente de Utilización del Suelo CUS - Land Use Coefficient

The CUS indicates the maximum square meters that can be built in a lot. It is expressed in number of times, in relation to the total size, of the property.

Example - If a land of 100 M2 has a CUS of 4.0 it means that you can build (vertically) up to 400 m2 of construction (for example, upward).

COS - Coeficiente de Ocupación del Suelo COS - Land Occupancy Coefficient

This coefficient indicates the area of land where you can build on (occupy) the building, the rest must be left free of construction.

Example - If the 100 M2 property has a COS of 80.00, it means that I should leave 20 M2 free of construction.

CAS - Coeficiente de Absorción del Suelo CAS - Soil Absorption Coefficient

Point out the part of a property that should be left free, that is, without constructions (like roofs, pavements, basements or any other material waterproof).

Example - If you have a land of 100 M2 with a CAS of 10 means that 10 should be left percent free area for absorption (10m2).

Getting a deed in Lake Chapala Mexico is, in some ways, similar to North of the Border real estate 

transactions. But Mexico is different. ALL real estate transactions require a Notary for your protection. In Mexico notaries must be lawyers, plus they must meet rigid exam requirements. There are a limited number of notaries, rigidly controlled by government to one per 30,000 population. That said, some are more reliable than others, so do your research before you start looking at property.

One thing you need to know is that the notary represents the process and needs to assure that both parties’ needs are covered. He is there to assure that all requirements are met. In particular is the requirement for the originals of all documents provided by the seller in order for the sale to proceed. Since escrow accounts do not exist in Mexico, per se, one of the key issues for a buyer is to make sure how and when funds would be transferred in order to protect his own interests. That particularly includes properties for sale by owner. Since there are many variations, it is important to consult your realtor or a notary in whom you have confidence before disbursing funds.

Having told you that escrow does not exist in Mexico, it is also important for you to know that US Title and Escrow companies are becoming more common in “restricted zones” where the closing process is more complicated, e.g. beaches or ejido (indigenous) land. If you are considering escrow, reputable agents are First American, Stewart Title, and Fidelity. Be aware that there are no offices in central Mexico. They are based in the US.

Since the vast majority of properties are found through real estate agents, you need to know commission rates. In the Lake Chapala areas commissions start at 7% of the sale cost for a house and start at 10% on bare land. These commissions are negotiable depending upon the particular circumstance. Who pays? The seller pays these commissions.

Other fees to be paid by the seller include all utilities, fracc or colonia fees and employees up to the date of transfer, including aguinaldo (vacation and separation pay, plus IMSS – that’s social security plus medical). Fraccionamientos (called fraccs, these are gated communities and may have any combination of condos, separate homes or connected structures) also have fees to settle. The big fraccs may have wells for their water supply and wells require maintenance. Large or small, they all have colonia fees for services to the general area, e.g. roof tops and exterior of the buildings, gardening and pool care; often these people do household maintenance, and there may be women who clean for an extra cost. When buying into a fracc or colonia, you will need to attain an official letter to guarantee there is no debt pending.

If applicable, the seller must also pay any generated capital gains tax. However, if the seller proves that the property has been his/her primary home for a period of three years, 100% exemption from capital gains tax could be applied for. This right to be totally exempt from capital gains tax is applicable once every three years. A “Residente Temporal” or “Residente Perminente” provides exemption since it provides residency status, and provides exemption from capital gains tax, as well. Utility bills are needed to prove continuous residency.

Meanwhile the notary performs a title search to guarantee the seller has the right to sell and that there are no liens and no limitations nor ejido or other indigenous rights being violated. He/she needs to attain a No Lien Certificate from the Private Property Registry in Chapala where all properties are required to be recorded. When a No Lien Certificate is received, the notary freezes the record for 45 days to allow for transfer of title, monies and closing documents.

The deed you receive is called a Direct Deed and will, of course, be in Spanish. But some notaries offer translation into English for a small additional fee, highly recommended. You and the real estate agent, along with the seller, will attend the transfer in the Notary’s office; the notary should go through the entire set of documentation to be certain that you understand.

The deed must then be recorded in Chapala, requiring payment of the Municipal Tax which is based on the “fiscal” value of the property (official tax value). A fraccionamiento unit could be 2/3 the value of commercial property whereas downtown Ajijic could be ½ fiscal value.

Closing costs could represent 3-5% of the purchase price, notary fees included. Percentage would vary depending on appraisal as given by the municipality.

Although notary fees are set by law, they still vary within the legal guidelines, so check into that when you make your choice of notary, keeping in mind that the first consideration has to be the notary’s integrity. The initial cost of acquisition is offset by the low annual tax on your property.

The early legalities out of the way, you will revel in the climate as well as the industriousness and joy of the Mexican people, along with their love for music, shared fun and good food. Mexico is a good place to live.

Many chose the Ribera of Chapala to visit, retire or relocate permanently for a quiet, close to nature, rich and entertaining environment and new way of life. The mountain, the lake, the perfect climate, the quality and availability of produce, to name a few of the characteristics that make the area a special one.

Habla Espanol? No. Not at all, especially if you are visiting a popular tourist area. English is a required subject in Mexican schools, and many people are eager to practice their English with tourists. But they will be delighted if you attempt to communicate in Spanish, even just a word or two within a jumble of English.

For example, “I would like huevos y tocino, scrambled, por favor.” You just ordered bacon and eggs. Now, revueltos is scrambled, but that’s harder to say unless you know how. If you maintain a sense of humor, together you build a friendly relationship. And notice that, in resort areas, menus are usually in both English and Spanish. Try ordering from the Spanish side from time to time. It’s good practice and good manners. If you start traveling around Mexico, you’ll need to read some Spanish.     Another good idea is to buy a phrase book, or better, an electronic translator ($40 – $50) before making the trip. There is one at $550, but that’s not necessary unless you plan to become a globe trotter. That pricey little unit is multi-lingual.

Whether you prefer the simple phrase book or something digital, practice some simple phrases in Spanish. Buenos Dias. (Good morning.) Gracias. (Thank you.) Que tenga un buen dia. (Have a good day.) Carry the phrase book or pocket translator with you. Language can be a challenge or an adventure, but if you find ways to communicate, you’ll also have a few laughs with your hosts as well.

You can travel the entire country on English even though Mexico recognizes 68 indigenous languages besides Spanish. Having said “no, you don’t need Spanish” (and that’s true), the longer you choose to stay, the closer you come to the answer, “yes, you need to go beyond pocket conveniences”. You will need to speak Spanish better because life anywhere requires more than basic greetings.

I know a lady whose decision to live in Mexico was based on an old-fashioned pioneer spirit. She came alone, and she didn’t speak a word of Spanish when she arrived. When I met her, she had a thriving business she had built on her own and she was fully bilingual. All it took was exposure and a desire to learn. Remember, Mexicans are very polite. It’s part of their culture to try to help.

Since I live on the north shore of Lake Chapala, one of the popular tourist areas, I can testify to the ease of communication. When I first arrived, knowledge of Spanish was a strong recommendation, but now there are retirees who never learn more than a few words of Spanish.

Lakeside we have many conveniences, like Wal-Mart and other supermarkets. There are many restaurants offering the foods North Americans prefer along with traditional Mexican foods. But try a few of their foods. You might find some real treasures.

Doctors speak English. Car mechanics speak it too. You’ll also find that shopping here is wonderful for those items that catch your eye, and the clerks speak English. Art and music abound, and there are delightful functions to attend, including Lakeside Little Theater, where performances are in, you guessed it, English.

You also don’t have to know Spanish to recognize some of the Mexican love songs because they were translated into English for our enjoyment, so when we visit Mexico, we ask the troubadour musicians for our favorite songs and enjoy them in the outdoor setting with sunsets over the lake and a cool breeze wafting through the palm trees. Some means of communication are universal – smiles, music, body language, humor. C’mon down. See for yourself.