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How can a U.S. citizen purchase property in San Miguel de Allende, Mexico

Welcome to our guide on how U.S. citizens can purchase property in Mexico, focusing specifically on the enchanting city of San Miguel de Allende. In this blog, we navigate you through the process, legalities, and key considerations when buying a home in this beautiful part of Mexico.

Welcome to our comprehensive guide on how U.S. citizens can purchase property in Mexico, focusing specifically on the enchanting city of San Miguel de Allende. In this video, we navigate you through the process, legalities, and key considerations when buying a home in this beautiful part of Mexico.

We begin by exploring why San Miguel de Allende has become a hotspot for U.S. citizens looking to buy property abroad. From its rich cultural and historical allure to its thriving real estate market, we delve into what makes this city so attractive. Next, we discuss the legal framework for foreign property ownership in Mexico, including the concept of the "Restricted Zone" and the Fideicomiso (Bank Trust) system that allows foreigners to legally own property within this zone.

We then provide a detailed step-by-step walkthrough of the property buying process in Mexico, from hiring a reputable real estate agent and finding your dream property, to making an offer, setting up a Fideicomiso, and finally closing the sale. Additionally, we shed light on the various costs involved in buying property in Mexico, such as notary fees, bank trust setup and annual fees, property taxes, and closing costs.

To wrap up, we share valuable tips for U.S. citizens considering buying property in Mexico, emphasizing the importance of thorough research, seeking local expert advice, and considering lifestyle factors and long-term property values. Whether you're seriously considering purchasing a property in San Miguel de Allende or simply exploring the idea, this video is packed with useful insights.

We'd love to hear your thoughts or questions in the comments section below. Thanks for reading!

Ready to start your adventure in San Miguel de Allende? Contact Greg Today!

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[TRANSCRIPTION]

Greg:

Yes, it's very easy for U.S. Citizens to buy a property in San Miguel de Allende. It's actually just like in the United States, you own your home in San Miguel de Allende at least, fee simple title, just like in the United States, that means your name is on the deed. The process is the same. We'll use Escrow. The whole thing is just like in the United States. Very simple.

Maya:

All viewers, welcome back to another video. I am Maya your interview host for Berkshire Hathaway Home Services here in San Miguel de Allende in Central Mexico. Today we're interviewing Greg Gunter. Hi, Greg. Good to have you here with us.

Greg:

Good afternoon, Maya, and Happy New Year. For those of you viewers that don't keep track of the time, because sometimes you're seeing this halfway through the year. This is a new year. So we're starting a new 2024 blog series. Welcome to the series.

Maya:

Welcome to the series. Today's video is a very exciting one. It's about how can US citizens purchase property here in Mexico. So it'll be a fun one, Greg. So well, San Miguel has proven a popular destination for second homeowners and retirees since the 1940s but has really boomed since 1980. So we'll explain why this happened in a moment. First, let's talk about why Americans and Canadians tried to move to San Miguel de Allende and why they find it a popular place to buy a home here in Mexico.

Greg:

Sure, let's talk about that. Proximity is a really easy thing to talk about. The appeal for San Miguel, for U.S. citizens. We're in Mexico, we're in Central Mexico, so we're only a two-hour flight away from Houston and Dallas. Proximity is one of the key components for us, for those of us that live here now, and for those people that are looking to move here. Proximity to the United States is always a big deal. If you have family, you have business, you have an emergency, you need to get back up to the United States, it's only a two-hour flight. So proximity is a really big draw for U.S. citizens. Other people might be looking at Spain, or Portugal, or Italy, or who knows, somewhere over in Europe, and it's a whole day trip to get back and forth. So if you have family or medical issues, great from a destination and location perspective, because our airport is only seventy-five minutes away, we have two of them actually that are only seventy-five minutes away.

Our local airport is actually slated to get improved, and it'll have direct service to Dallas and Houston probably within about three years. So proximity is one of the big deals. The cultural, historical, and geographical attractions, or what attract a lot of people also. Culturally, this is a 483-year-old city. So us gringos, us Americans, we love that history. We love that. The old history and it's a bit like a European sort of background and having a good history, the architecture, the old Spanish colonial architecture is very appealing to a lot of us. The traditions that have been carried out and continue to be carried out here. There's 75 festivals a year, for instance, official festivals a year and another 75 unofficial festivals every year. So lots of that historical and cultural background that those of us that have been living in sort of the bland United States love to see down here in San Miguel.

Geographically, we're at 6,400 feet in altitude, so we're a high, dry climate, very comfortable, no humidity, no bugs. It's not like Florida where you have to have a screened in Lanai. You sit outside here year-round, 12 months a year. It's January, the first week of January, and I do have a blazer on this morning because I was out at showing a few minutes ago, but we've got the door open over here because it's 76 degrees in January. So wonderful climate here. It was in the forties last night. That's the difference. We get about a 30 to 40-degree diurnal swing in the wintertime in San Miguel, much less so in the summertime.

We seldom ever break 90 degrees in the summertime. So weather is perfect here because of our location. And if we were to talk a little bit about the real estate market here, we kind of follow the United States, so our real estate market is a bit slower. This has been for last year. We're beginning 2024. We think that's going to pick up a bit, but it's really an ideal time to come and look at real estate because the market has been slow. The negotiating range is a little higher. You're getting better value for your dollar now. So it's a really good time for Americans to come down and take a look at homes for sale in San Miguel de Allende.

Maya:

Yeah, it totally is. And Greg, many of our listeners may not know the huge advantage San Miguel de Allende offers for homeownership over Mexican coastal resort areas. So let's discuss the legal framework for foreign property ownership here in Mexico.

Greg:

You bet, there are about two and a half million Americans according to a report that came out last week that live south of the border, outside of the United States, south of the border, so that includes Mexico and the South America market. Two and a half million people, we know that a million and a quarter people own homes, own homes in Mexico. There's probably about 2 million people that live in Mexico, but a million and a quarter of them that own homes. The overwhelming majority of those people typically own a condo on the coast. So they love to have a condo down on the beach. They only go down there for a couple of weeks a year. So they don't mind the fact that it's intolerable. The weather's so intolerable for five months of the year, five or six months of the year, it's too hot to live down there. The ownership property on the coast and on the border, for instance, along Texas border and New Mexico borders, those areas are completely different. You don't actually own the property. You have what's called a fideicomiso, which is a bank trust.

It is a 99-year trust that you can deed or that your kids can inherit and that you can sell, but you don't technically own the property. It's a bank trust. San Miguel de Allende is in the middle of the country, so we have different federal regulations here. You can actually own the property. An American, or Canadian, or anyone for that matter can own the property with the deed in their name. So it's full fee simple ownership of the deed just like in the United States. So that's a big advantage that we offer over any of the rest of Mexico is that you own the property here, no one's going to take it away. Doesn't matter what happens to the government, you're going to always own possession of your own home in San Miguel de Allende. Big difference.

Maya:

Yeah. And purchasing process is very similar to that of the U.S. So why don't you walk us through the steps to buying property here in Mexico as a U.S. citizen. I think San Miguel de Allende has this advantage that it replicates some of the real estate models from the U.S., right?

Greg:

Yes, definitely. Again, because you're owning fee simple here in San Miguel de Allende, the purchase process is almost identical to the United States. Unlike on the coast where it's a whole different process, it's quicker here. Most people don't buy with a loan. So typically our closing period is about 30 days because there's no financing to deal with. But to kind of walk a buyer, or a potential client through the process, we make our website as exhaustively informative as possible because we encourage our clients to start doing the education process before they even come to town. So study our websites. You'll see our neighborhoods. We talk about all the different neighborhoods. We have lots of articles about towns, so you can see what the cost of living is like. We send out a Q&A information booklet. So we have lots of information to educate clients before they even come visit.

That's what helps them decide that San Miguel is the location they want to be at. And then in many cases, they'll connect with a real estate agent. So it's important because Mexico is still in parts of it, at least, it's still a little bit of the Wild Wild West. It's a little bit like real estate was maybe back in the fifties, before my era, at least in the United States, it's important to work with a licensed real estate agent, and that's a relatively new requirement in Mexico, at least in San Miguel de Allende. Other parts of Mexico don't even have licensing requirements, but in San Miguel de Allende, we do have licensing requirements. However, there are people that will claim to be a real estate agent who are not licensed. So make sure that you work with a reputable licensed real estate agent. One that will also be a member of the National Association of Realtors, or AMPI down here is the local association.

That's the important thing. Work with someone that has lots of good history in the market down here, that knows the properties because our MLS system here is very, very rudimentary. It does not track history. Does not tell you what the home sold for 12 years ago. It doesn't have any of that kind of information. So it's important to work with a very knowledgeable realtor and especially someone with a knowledgeable franchise that very well. The next thing is to start looking for properties, of course, and again, we make our website fully exhaustible for that. You can take a look at the MLS. The entire MLS is viewable on our website. You'll see that, you can do a full home search for the regular homes as far as the ... And the MLS as well, we have both on there.

Take a look at the neighborhoods so you know which areas you might want to be in. That'll give you a good feel. And then you can search properties by that neighborhood on our website. We have them broken out by neighborhoods, so if you want to just look in Centro, you can look at only Centro listings. But that's a good thing to start with, is connect and get to know the neighborhoods and learn the properties there. Now, once you've made a connection with an agent, they will put together a list of property options for you in those neighborhoods that you've chosen that you think are best for you, that best fit your lifestyle parameters, whether you want to be walking distance to everything, or you'd rather have a large yard because you have three Great Danes. Whatever your requirements are, we will make sure that we're putting you in a property, or at least showing you options that fit those requirements.

Now, once you've come down and taken a look at a property, then you very much like the United States, you submit an offer, you might go back and forth one or two times to negotiate a bid on the price. Then we submit, we get a dual signed offer contract, and from there, the one thing that changes just a little bit from the United States is we then do a secondary offer contract that's called a Promesa de Compravent in Spanish, a little bit different. It's the exact same thing. It's the exact same promise to purchase offer, but it has more legal information in it. It's got a full meets and bounds description of the property, everyone's passport number. So it's just a little bit more of a technical contract.

We do escrows down here, so we will be setting up an escrow as soon as we go under contract as well. One of the important differences down here is that you have, with our agency, the way our contracts work, you've got 10 working days before you have to fund escrow. So you have the opportunity to do a full property inspection and remove that property inspection before money even goes in the bank. So that's the good thing about property purchases down here is that you ensure that you're getting a very viable structure-worthy, habitable home. You can negotiate any things that might need to be negotiated before you're putting money into escrow. Because once you do put money into escrow, just like in the United States, of course, it's not refundable. Now, one of the other differences down here is that typically we put down 10% as an earnest money deposit, so it's a little bit higher down here.

The rest of the process is very easy. You do have to apply for a permit to purchase as a foreigner. That's a rubber stamp process that everyone gets within about two weeks, and then you move to closing. It's a very, very quick and easy process. The closing is conducted at a notario's office. Now, the notario is a federally appointed position. The guy has to be a real estate attorney in the first place, and then it's a federally appointed position. So the notario is like a closing company and a title company all rolled into one entity, and they manage the closing for us. So it's a very easy process. We close the closing or the property, the sale in about an hour's time at the notario's office. You'll get a city-recorded copy of your deed back about a month later, and that's it. It's a very simple process, very much like in the United States. So happy to walk any of the buyers, any of the clients that would like to know more about it through. But that's it in a nutshell. It's a very easy one.

Maya:

Yeah, it seems like it. And well, let's now talk about the costs involved in buying property in Mexico, sort of to connect the whole process.

Greg:

Sure. So there's the notary that I just talked about, the notario. And the notario's fees and city fees altogether will run about 1.1% of the purchase price. So that's your city recordation fees, the city appraisal that comes out, all of those city-associated fees, and the notario fees, which is the same as the title company doing a title search, all of that is included for 1.1%. We then have a acquisition tax in San Miguel de Allende, that's 4%. So your total closing costs will run about 5.1% of your purchase price.

The only additional closing costs that you would have in addition to that would be if you did a power of attorney, which we always encourage to do in case you can't return for the closing. Your SRE permit, which is your permit to purchase as a foreigner, that is now 10,000 pesos. It's about a little over $500 per person for that. So those are the only all on the escrow fee. You split the escrow fee, just like in the United States, that's 2 to $300 depending on the escrow company. Our company is only $400, the one that we use. So very low. The easy way to think of it is just think of 5.1% of the closing, or the purchase price as your closing cost. And that's it.

Maya:

Yeah. Thank you for the very, very detailed explanation. I think our viewers will be very happy to know that it's a simple process and costs are lower down here. So that's also great to hear. And Greg, you've been a top realtor and now a broker here in San Miguel de Allende since 2012. Could you share some tips for our listeners in the U.S. who desire to buy property here in Mexico?

Greg:

Yeah, you know what, it's important to do your research. That's really the key. In the United States, everybody has to be licensed and down here they don't. The taxi driver will tell you that his uncle has a home for sale. So down here, it's very important to research who you're going to work with. Do a lot of online research, find out about their background, their knowledge, their history. How much history they have in the market, how much they know about the closings, the price history, especially because there is no Zillow or Redfin or Trulia down here. There's not even a accounting clerk in our court to go down and see who owns the property and what they paid for it. You can't tell that here. So it's extremely important to work with a very knowledgeable realtor that's licensed and with a very well-known franchise.

Berkshire Hathaway HomeServices for instance, is run by Warren Buffett. You can't get any more credible than that. It's also important to make sure that you're working with a set of local experts. Now, again, you won't know that because you're coming from the United States, or Canada. So that's where, again, that knowledgeable realtor comes into play because they are going to be working with the best notario in town, the best legal team. They'll be working with all of those different consultants, the best home inspector, for instance, because they're going to be able to guide you to a home inspector. They will even then guide you to the realtor, will then even guide you to the best property management options. So all of those will be references that come from your property manager. In the United States it's easy to find those on your own. In Mexico, it is not. It's critical that you have a very good realtor that can give you all those kinds of connections.

And then another thing for U.S. citizens that are potentially thinking of buying property in San Miguel de Allende, they need to consider their lifestyle factors and how that will affect the home that they're looking for. If they're more value-conscious, or they're looking at a better return on investment, they're going to want to think of that as well. Because that old United States rule about location, location, location is maybe even more triply important in Mexico. We have some neighborhoods that will appreciate 20% a year, year over year, and other neighborhoods that will barely appreciate at all.

What makes the difference, of course, is demand. Just like in the United States and the property, well, the properties and the neighborhoods, both that are most in demand are the ones that are walking distance to our town square. Everyone loves our European lifestyle here, being walking distance to the town square and the restaurants and the art galleries and the shops and all of that, the theaters and the live music venues. So think about those important factors for you and your lifestyle, that will help you guide your realtor into narrowing down the list of properties to show you. So those are the important factors to kind of think about when you're looking at buying a home in San Miguel de Allende.

Maya:

Of course. Of Course. And you also explained to us the legal framework for foreign property ownership here in Mexico and the steps to buying property in Mexico, specifically as a U.S. citizen. And also a little bit about the costs involved in buying property, some factors to take into account if that's something you wish to do. So I really appreciate all this information, Greg. And viewers, we also want to hear from you. Please comment below with your experiences or thoughts about buying property here. And don't forget to like, share, and subscribe for more valuable content like this. Thank you so much, Greg, for your time. Anything else you would like to tell our viewers?

Greg:

You bet. Thanks, viewers for joining us today. It's 2024, it's a fantastic year to come down and take a look at property in San Miguel. I've lived here for 15 years, so I've been here through a few ups and downs. This is a great time to come down and take a look at a property in San Miguel, a great lifestyle change for you. I love this place. I'm 89 years old. And look at me, I look pretty good for 89, right? Just kidding. I'm a little bit younger than that, but still, we love the lifestyle, it keeps us young. Please come down in 2024 and meet us. Give me a ring. Happy to show you the town. Thanks so much, Maya. We'll see you next week.

Maya:

Thank you, Greg. And thank you viewers for watching. Until next time, take care.

 

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