Making an Offer
Determining Proptery Value
The sale price of a property is not public information, only the listing price is. It is unethical for the realtor to reveal this information, making it difficult to value property using the usual practice of comparing the sales price of similar properties.
Factors to consider in determining proptery value include:
- Comparing list prices of similar properties
- Use replacement cost
- The annual income from rentals
- The intended usage of property
- The amount of space
Factors that increase proptery value are:
- Airport
- Roads
- View
- Waterfront location
- Security
- Furnishings
- Swimming pool
- Landscaping
- Surrounding development
Factors the decrease proptery value include:
- Lack of infrastructure
- Lack of water
- Lack of roads
- Inaccessibility
- No right of way
Presenting an Offer (Ofrecimiento)
The ofrecimiento is an initial document that outlines the general terms of the transaction and the offering price. Subsequently, the Notario drafts the formal deed in Spanish. If the property is located near the borders or on the coast, a restricted zone, a trust (fideicomiso) must be formed resulting in a Contrato de fideicomiso. If the property is located in the interior, a non-restricted zone, a purchase/sale fee simple deed (contrato de compraventa) will be executed. All deeds must contain:
- Appraisal amount
- Value declared by the buyer and seller
- Full legal description of the property
If property is financed by a mortgage loan, clauses reserving the rights to the property or title until payment is received in full will be included in the deed.
Promissory Contract (Promesa de compraventa)
Considering there is likely to be a delay, it is highly advisable to adopt a promissory contract (Promesa de compraventa) outlining all the terms of the sale including possession dates. The promesa de compraventa must accurately reflect all the deals of the transaction because it serves as a model for the escritura, deed of fideicomiso, or deed of compraventa and also guides the transfer of property.
Escrow
An offer to the seller is expected to include an earnest money deposit of five to ten percent. Because the deposit is not legally required to be placed in an escrow account, one is not always used. In the worst scenario, be prepared to loose your entire deposit. Customarily, the deposit check is immediately cashed by the broker, seller, or developer. Sellers want instant access to their money, brokers want to be in control of the money, and developers lacking liquidity use the money to cover construction costs. Additionally banks are not equipped to handle escrow accounts and thus, may commingle funds.
Escrow services are quickly developing. AMPI encourages the use of escrow services. Stewart Title offers escrow services
Real Estate Buyers
If you are considering purchasing land in Mexico it’s very important to get proper representation.
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