Uncertain about investing in Mexico?
Uncertain about investing in Mexico?
We understand…and we’re here to help
Chief Operating Officer
Realty Executives Mexico
Real Estate is generally one of the safer investments you will make because it is scarce by nature: There is only so much land on this earth - no more can be generated. There are a number of reasons for wanting to own real estate; maybe a second home, a vacation get-away, a legacy to leave to your children, or just as an investment banking on the area’s growth potential. Buyers have safely purchased property in Puerto Peñasco, Sonora, Mexico for many years. They’re hooked once their toes hit the sandy beaches and they are gazing upon the blue Sea of Cortez. Whatever your reason, and wherever you buy, there are things you need to do to make sure your investment will be sound. The whole process becomes more complicated when you invest in a foreign country where you don’t know the laws or speak the language. Where do you go? Who do you trust? How do you know if you’re getting straight answers? These are a few of the things Realty Executives licensed agents would like to help you with. We want all buyers to be educated, ask the right questions, get the right answers and know that they are getting the right answers.
From year to year, or month to month, real estate goes through a natural cycle, which can favor the buyer or the seller. Obviously buyer’s fair better when buying in a “Buyers Market” and the sellers in a “Sellers Market”. Understanding the ups and downs of the real estate market, and the risk involved in your particular purchase, is only the beginning of understanding the risks involved in real estate transactions. First of all you have to know that all real estate purchases are not of equal risk – just like investing in the stock market – and that each of us have different tolerances for risk and different expectations. Do you take a chance on a start-up venture that has just gone public or do you stick with blue chip stocks that have a strong performance record? Do you purchase a condo in a development that has only laid the foundation or do you purchase in a project that has already been completed? Are you speculating that the area will see considerable growth? Do you want to be the first one to own something special? Or do you have other reasons for investing? How do you assess risk and decide if your investment will fall within your comfort level? These are just a few of the questions your licensed real estate agent should be asking you.
So, how do you ensure that your potential investment will be a sound one? How do you go about finding out if the answers you are given are indeed factual. Though some make purchases on their own, the majority put their trust in a real estate agent. Is your agent licensed? Are they providing you accurate answers? How do you know? How do you know what questions to ask? And how do you go about doing your own research? Again, these are a few of the questions we will be addressing in the next few months.
If you are considering purchasing land in Puerto Peñasco, here are a few questions you should be asking your real estate professional, wether the property is completed or in some stage of construction:
Is the property just an idea on a fancy brochure?
Does it have clear title?
Are there any liens or lawsuits against any part of the property?
Is there money owed on the property?
Are there rules that limit ownership?
Can the government take it away?
Is this property in the restricted zone and what does that mean?
Can I get a deed or title on this property?
When I get a Bank Trust, am I owning the property or leasing it?
Does Ejido land bring any special risks?
Is there a condo regime?
Are there HOA rules that impact your needs?
Is the real estate property under some stage of development?
Is the development clearly described so you know what you are getting?
Does the developer have all the permits in place including the permit to sell?
Is your deposit protected with an escrow account and is the escrow letter of instruction favorable to you?
Is the reservation, offer to purchase, and bank trust documents written to protect you? Are there warranties and consequences if the performance to deliver on time, and with the right quality, are not met?
Do you know how the project is financed? What percentage of the financing comes from the developer, a financial institute, investors or buyers? If your funds are needed for promotion or construction are they protected if commitments are not met? If the project fails to be adequately funded are the investors left with anything real?
Does the developer hold a performance bond and is it valid and payable? Are there performance clauses in the sales contract warranted against the bond or other real property?
Does the developer have a good history of building similar projects? What does the developer have to lose if then project fails?
These are just a few of the questions that will get you started on the right path for a safe and sound investment. If you get these questions answered, you lower your risk. If you are not getting good answers from your agent or the developer then you may want to switch to someone that can help you get these answers. Real estate investments are some of the safest and most exciting investments you will make in your lifetime. You can buy in a perceived “risky” market if you get full disclosure and the results match your tolerance to risk. While most of us want to make sure our investment is rock solid, others do not mind taking a chance where the potential return will be much greater. This is just one of the things that you and your licensed real estate agent need to address.
Next month we will start with the above questions and tell you how to be sure you are getting the proper answers, have been given the correct documentation and how best to protect yourself if you purchase real estate in Puerto Peñasco, Sonora, Mexico.
Wayne Corcoran MBA PMP, is the General Manager / Broker of Realty Executives in Puerto Peñasco and the Chief Operating Officer for the master franchise Realty Executives Mexico. He brings over 30 years of risk based business management to the firm and can be reached at (011-52-638-383-5856) or at their new office located in Plaza del Mision on Blvd. Fremont.