|Baja Real Estate www.MLSbaja.com EXPERIENCE the DIFFERENCE today
Baja California's Leading Independent Real Estate Marketing Service
We pre-screen all of the properties you will find here for eligibility for title insurance and financing, and encourage all buyers to
always retain carefully chosen independent legal counsel, as well as make title insurance eligibility a condition of any offer.
As such we neither advocate nor make available for sale campo and lease properties, nor Ejido, which are plentiful elsewhere,
but cannot be owned safely and securely by foreigners.
|MAJOR ERROR #1:
USING THE SELLING AGENT'S RECOMMENDED ATTORNEY, ESCROW AND/OR CLOSING SERVICES
NOTE: THIS APPLIES EQUALLY TO DEVELOPERS, WELL-KNOWN FRANCHISE NAMES AND ALL OTHERS AS WELL
Retain a Mexican Attorney OF YOUR OWN CHOOSING , Experienced in Real Estate Transactions
If the selling agent, developer or broker "Recommend" any specific lawyer, or worse yet, suggest they
have an "In-house" closing service,or will just "handle all that for you", consider looking elsewhere,
and certainly do not sign anything, including contracts or checks, other than perhaps a letter of intent or
offer to purchase with several conditions you should always include as contingencies of your offer.
These conditions should include a proper building inspection, at buyer's expense, an adequate due diligence period for your
own attorney to review all documents, and eligibility for title insurance.
Much of the function of a closing service is duplicated by a title insurance authorized attorney, and nothing is free,
so why not have the best independent professional perform the service, without any possibility of a conflict of interest?
QUESTION?? HOW TO CHOOSE AN ATTORNEY WHEN I DON'T KNOW ANY? WHO IS GOOD AND WHO IS NOT?
ANSWER: Simply choose only an attorney who has been screened and authorized by the Title Insurance company
of your choice to conduct title search and submit the same to the title company for INSURANCE approval.
For a list of those approved by First American Title in the USA, click here
MAJOR ERROR #2:
GIVING A DEVELOPER MONEY DIRECTLY INSTEAD OF USING CONTROLLED ESCROW and
YOUR OWN ATTORNEY TO REVIEW ALL DOCS BEFORE SIGNING ANYTHING
In the case of buying from a developer, or purchasing under contract for pre-construction "discounts" always
insist on a proper escrow account, with staged "voucher control" release of funds, or a performance bond, and only make deposit
checks payable to the escrow company, NOT the developer directly.
Have yourown attorney review both the contract and the escrow instructions prior to proceeding with anything other than the offer and a
refundable, minimal earnest money check, generally $5,000 PAYABLE TO AN ESCROW ACCOUNT ONLY!
SEE ABOVE #1 FOR HOW TO CHOOSE THE ATTORNEY
QUESTION?? BUT THE DEVELOPER SAYS HE HAS A LETTER FROM A TITLE COMPANY STATING IT IS INSURED??
ANSWER: Maybe? Ask FOR A COPY, show it to your attorney, and call the title company yourself to see if they will give you a letter of intent
TODAY on the individual unit you are considering buying, or is it just an outdated letter? It is entirely possible that a property , when still raw
land, had a title insurance letter of intent, with of course, conditions. Example, a few months later, the developer needs cash, and takes a
PERSONAL loan out on the property, effecting a new lien on the property. Goodbye title insurance until that is paid off.
Where did the money go? Do yourself a favor and either you or
your attorney contact the title company directly and ask if the letter of intent is still valid today....in writing, please.
With luck, they will also be the ones handling the individual escrow accounts. Ask first, be safe, pay later!!
Another option some offer is to offer a bond protecting your investment, which is worth considering, but also please understand
that there are costs involved in doing so, and those will likely be passed on to the buyer, either openly as an option,
or hidden in the total purchase price, and not absorbed by the developer directly.
MAJOR ERROR #2 Part 2
TRUSTING THE DEVELOPER AND SIGNING PROMISSORY NOTES WITHOUT REVIEW TO SUPPORT YOUR CONTRACT
THE PROBLEM: Though not uncommon, this may be sound business practice if done properly, but most we have seen,
unfortunately are NOT! This is one we have even slip by many attorneys, especially American attorneys who think they know enough.
A promissory note is a powerful mercantile instrument in Mexico and can be easily negotiable or sold to a third party.
HOW THIS SCAM WORKS: Once the promissory contract between buyer and developer is signed, the developer produces a series of
promissory notes for the buyer to sign assuring future payments per the agreement, including the final large payment, for payment in full of
the property. Many times these notes make no reference back to the promissory contract itself and as such are stand-alone instruments
which the buyer is liable for whether the property is ever delivered or not, as that is an entirely separate private contract and any problems,
conflicts or disputes with the promissory contract have absolutely no legal bearing on the Notes. What this means quite literally, is the
developer may never complete nor deliver the home, but still retains the right to use the notes the buyer is defaulting on as negotiable and
enforceable instruments to place liens on other assets of the buyer. The solution?
Get a competent, experienced, Mexican attorney to review anything before you sign it!
MAJOR ERROR #3
TRUSTING FROM A "FOR SALE BY OWNER" WHO IS HELPFUL, A LONG TERM BAJA RESIDENT & "KNOWS IT ALL"
These "FSBO" (For Sale By Owner) transactions can be very good , but a very large number are also be very, very bad.
Do not be discouraged from working with FSBO's as it can be a plus, sometimes save both parties money,
irrespective of what some Realtors and brokers would like you to believe. We know there are buyers out there with the savvy to find good
homes and also understand the comparative market well enough to make intelligent decisions.
They have worked at it. Still, never release any earnest money you cannot afford to lose, and always have the seller produce all the
documentation your attorney needs to review before releasing penny number one,
or you may never see it again.
Internet sites and even many Brokers' sites are literally littered with "bargain" properties
which can cannot currently be owned, insured or financed for a variety of reasons.
We have even seen a "fideicomiso" for a property which was actually on lease land! Yes, this is true!
Most foreigners think having a fideicomiso is a bank trust and seeing the term in a contract indicates it is a bank trust. Not so.
The term "fideicomiso" literally translates to "trust" , not bank trust, and in this case the landlord wrote the lease contract out
as a ten year "trust" with his tenant, who decided to trust the landlord, a very prominent and well-known local businessman and
"saved money" on having his own attorney review the documents.
Caveat Emptor, and as always, follow all the recommendations under MAJOR ERROR #1:
Hire the right attorney and include all the contingencies, just as when working through an agent.
TO COMPLICATE THE ABOVE EVEN FURTHER, A LARGE NUMBER OF "FSBO" SALES ARE ACTUALLY ON LEASE LAND AND MANY
LONG-TERM CAMPO TENANTS ACTUALLY BELIEVE THEY OWN PROPERTY RIGHTS AND WILL SAY ANYTHING TO SELL THEIR TRAILERS,
AND IN MANY CASES, ACTUAL HOMES THEY HAVE BUILT ON SOMEONE ELSE'S LAND. THERE'S A TON OF THESE OUT THERE WITH A NEW
STORY FROM EACH AND EVERYONE OF THEM
THE MOST OUTRAGEOUS EXAMPLES OF PRICEY OFFERINGS WELL OVER $500,000 IN MANY CASES, ON SOMEONE ELSE'S PROPERTY ARE
"CASTILLOS DEL MAR" JUST SOUTH OF ROSARITO AND "MEDIO CAMINO" AT KM 54
SEE ABOVE #1 FOR HOW TO CHOOSE THE ATTORNEY and
NEVER PLACE ANY OFFER WITHOUT MAKING ELIGIBILITY FOR TITLE INSURANCE A REQUIRED CONDITION OF THE OFFER!!
WHETHER YOU BUY THE INSURANCE OR NOT IS A PERSONAL DECISION, BUT
IF A LEGITIMATE INSURER LIKE FIRST AMERICAN TITLE SAYS NO WAY, YOU MAY WANT TO REVIEW WHY?
MORE INFORMATION ON LEASE LAND PROS AND CONS HERE
MAJOR ERROR #4
PURCHASING YOUR RESIDENCE INTO A MEXICAN CORPORATION INSTEAD OF A BANK TRUST
Beware this "cute and clever" trick offered by some sellers, as well as some agents with their own "in-house" attorney.
This is often "sold" as a potential way of evading acquisition taxes, capital gains taxes when the time comes to sell,
as well as other closing costs. Nothing could be further from the truth for most buyers!
How it works: The buyer establishes a wholly foreign owned Mexican Corporation (S.A. de C.V.), which then purchases the
property and leases it back to the owner of the corporation as a private residence. Sometimes it gets even "trickier".
Instead of an individual starting a Mexican corp. there are those that suggest first getting a Delaware or Nevada LLC and using
that to buy the Mexican corp.!! Very cute!! The theory is that when it comes time to sell, the seller sells all the shares of the
Corporation to the new buyer, which is NOT a real estate transaction, thus avoiding most closing costs, including survey,
appraisal, acquisition tax, property registration, Notario Publico fees, etc., to the new buyer,
and capital gains taxes on the property to the seller. Sound Good? Maybe not!
When it comes time to sell, many prospective buyers would not consider buying the corporation, instead preferring to secure their
investment as well as future capital gains exposure by buying into Escritura or a bank trust instead,
which would expose the selling corporation to full capital gains tax of about 29%
Additionally, whereas the buyer acquiring the corporation could do so safely, and even get a title insurance policy on the
property if it qualifies, it is difficult to do a similar search on the corporation itself for any existing and future liabilities it may carry,
including outstanding debts and/or even an outstanding lawsuit for any of a number of claims, including injuries,
and perhaps even wrongful death by a worker on premises. One example of what can occur, and we have seen it, is the corporation
"borrows" money and issues notarized promissory notes to a third party. These notes are fully negotiable, and very powerful instruments
under Mexican Mercantile law, need not be registered as a lien against the property, but can be pursued at any time without notice against
the issuing individual or corporation freezing and attaching any and/or all assets by judicial order.
As such, even a prospective buyer intending to put title into a corporation, or multiple rental properties into a corporation,
is likely well advised to just buy the property into a newly formed corporation which can easily be done for less than $2,000
and avoid any potential unseen liabilities. If contemplating this method of buying, both buyer and seller should consult a competent attorney
to understand the full implications of any such transaction. As the hidden dangers are very real, MLSbaja stongly discourages the bulk
transfer of a corporation and all its assets and liabilities as a means to avoid taxes.
Once again, buyer beware of anyone suggesting this "cute trick" for tax evasion purposes.
It can prove costly, reduce future buying prospects, increase tax liabilities and may easily be considered an illegal
circumvention attempt of the foreign investments act for primary residential purposes.
NOTE:: the above is a work in progress and will continue to change and grow.
Your comments and suggestions are greatly appreciated
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|The information on the MLSbaja.com website is believed to be accurate ,however; any prospective Buyer should
as always, perform due diligence and consider competent legal advice from a Mexican Attorney to confirm the
validity of any documents or statements before committing to any contract.
|NOTE: For specific COMMUNITIES TO AVOID buying in if a title insured investment is important to
you, please scroll to bottom of this page. MLSbaja will not sell homes in these communities