(Part 2) 14 FREQUENTLY ASKED QUESTIONS for Buyers of Beachfront Property in Mexico!

May 5, 2010 - PRLog -- 11.  What is the price per square foot?
There is no price per square foot.  That is NOT the way to value beachfront property.  Beachfront property is valued according to the amount of beach frontage, the quality of the beach (rock or sand), the elevation above sea level, the quality of the trees and foliage, the shape of the lot, zoning, the nature of the neighborhood, the beaches susceptibility to erosion (avulsion) and flooding, stability of the sea floor, proximity to infrastructure, and last but not least the sellers motivation to sell.

12.  Can squatters take my property?
Yes it is possible, but it is a long and difficult process for them. It is actually easier in most states in the U.S. for a squatter to take your property, than it is in Mexico. In Mexico, to be granted title to land you do not own, but are living on, or ‘squatting on’, the squatter must prove to the court that he has been residing on the property for 5 continuous years in an obvious manner. This means that the squatter must make it known to everyone that he resides there.  He usually does this by building on the property, farming the property, fencing it, or baring others from entering the property.  The squatter cannot simply hide out on the land for 5 years, and then petition the court for the title.


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The court will then require the squatter to also present the court with evidentiary documentation that ownership has been assumed by and / or conveyed by the property owner to the squatter.  Such documentation for example, may include a promissory contract of sale between the property owner and the squatter and copies of paid tax receipts paid by the squatter.  Failing to meet the above criteria, the squatter’s petition will fail.

If the owner does not respond to such notices, the court has the authority but not the obligation to transfer the land to the squatter.  As you might imagine this type of thing does not happen very often, and has never happened to any of our clients.

13.  How are capital gains computed on the sale of real estate?  
Capital gains are computed based on ‘Stated Values’ that are provided by the Notarios at the time of sale.  The actual transaction price, therefore, is not a matter of record and is not recorded in the land registration office as it is in some other countries. In Mexico, the government does not depend on the revenues from real estate taxes nearly as much as in most other countries.  The ‘Stated Values’ are usually very nominal.  ‘Stated Values’ can vary widely depending upon location and may be anywhere from 4 % to 14 % of the actual transaction price.  Remember that the actual transaction price is known only to the buyer and to the seller – it is not a matter of record – and has nothing to do with the ‘Stated Values’.


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As an example, let us assume that we purchase property at an actual price of $100,000 USD and the ‘Stated Value’ provided by the Notario is $10,000 USD.  Let us further assume that we sell the property the following year for $200,000 USD.  and the ‘Stated Value provide by the Notario is $20,000 USD.  

The capital gain will be computed as the difference between the two ‘Stated Values’ ($20,000 - $10,000 = $10,000 capital gain).  Assuming a tax rate of 27%, the tax on the capital gain will be $2,700 USD.  Since the actual capital gain is $100,000 USD and the tax we pay is $2,700 USD, the effective tax rate on our actual gain is 2.7%.  It seems indisputable that this tax system is user friendly.

14.  Is there a conflict of interest for IHT to represent the seller and the buyer?
Not really. The sellers are familiar with Mexican procedures.  If the sellers wish to hire an attorney they can.  We do list the property for them and must respect their asking price for the property.  


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15.  What do I do about water when I build my house?  
The limestone substrata underlying the entire Yucatan Peninsula is honeycombed with a fresh water aquifer. This aquifer is running gradually toward the sea.  Well water can easily be obtained at depths starting from 15 to 25 feet.  Because the aquifer is not very deep, the water is not recommended for drinking purposes unless you have a water purification system installed in your home.  

16.  How much does it cost to build?  
Our customers have found that the average cost of building in the Yucatan Peninsula is between $75 and  $100 USD per square foot on average. At this price, you can expect to have the following amenities: Solid concrete construction footed into the bedrock, 10 foot ceilings, kitchens and baths, and standard fixtures.  

17.  What is included in closing costs?
Closing costs include EVERYTHING needed to place you in legal ownership of your property.  This includes, the formation of the Mexican corporation, registration with the Ministry of Foreign Investment, transfer taxes, Notario fees, and legal fees for your attorney.  

18.  Do I have to come back to close on my property?
You do not need to return for the closing if you don’t want to. In fact, if you would like to save the cost of the return visit, you may close in absentia.  The closing is handled via FedEx by your attorney.  You may, just as in the U.S., authorize your attorney to execute the final documents for you to close in absentia.  This is a common practice and about 70% of our clients chose to close this way.  
   
19.  Do I have to build within a certain time period?  
No. Unlike many places where you are required to build within a certain period of time, in Mexico, you may hold your land for generations if so desired.  

20.  What happens after I sign an offer to purchase?
The process is easy.  After you choose your lot and sign a contract to purchase the property, you will need to send a deposit to hold the lot.  If for any reason you are unable to close the purchase, your deposit is refundable.  Once your deposit is received, the property is taken off the market pending settlement and your attorney is notified that we have received your deposit in escrow.

Your offer and personal information is transmitted by IHT to your attorney who will then contact you to answer any questions you may have and confirm the arrangements for closing.  If you do decide to close in absentia, your attorney will provide you with the necessary documents for your signature and you then return them to his office.  IHT will continue to coordinate with you and your attorney and to assist with any questions or information during and after the closing process.

21.  What is the Federal Zone?  
The federal zone is exactly what it says it is.  It is an area on the beach which is owned by the federal government. The Federal Zone extends 66 feet (20 meters) back from the high tide mark.    

22.  Can the federal zone move?
Since the federal zone on the coast is always 66 feet (20 meters) wide, the federal zone is migratory.  That is, if the property sustains erosion and is partly washed away over time, because the federal zone never changes and is always 66 feet, the federal zone will move back with the shoreline and the beach lot will shrink.  

23.  What is a beach concession?
The beach concession is a permit which can be obtained by your attorney after closing.  This permit enables a property owner who owns property adjacent to the federal zone to use the zone, for example, for the construction of a boat dock, a patio, deck, or gazebo.  It does not permit the property owner to construct any part of his house in the federal zone.

24.  Who owns the property?
Generally speaking these properties have been owned by a variety of Mexican families some of whom have had them in their families for generations.

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Gary is the President of International Holdings & Trust Company located in Cancun, Mexico and has been selling beachfront property as investments in the Mexican Caribbean for the past 10 years.

info@yucatanviews.com
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