Articles to help you make a better and informed decission when considering purchusing property in Mexico.

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Buying Real Estate in Mexico

It is a common misconception that foreigners cannot own real estate in Mexico, but the reality is that they can. It is perfectly legal for a foreigner or foreign corporation to acquire any type of real estate, holding the property as a direct owner, with the exception of properties located in the Restricted Zone.

The Mexican Constitution regulates the ownership of land and establishes that “… in a zone of 100 kilometers along the border or 50 kilometers along the coast, a foreigner cannot acquire direct ownership of the land”. These areas are known as the “Restricted Zones” or “Prohibited Zones”.

Nevertheless, the latest Mexican Foreign Investment Law, enacted December 28, 1993, provides a solution. Within the Restricted Zone, a foreigner or foreign corporation can obtain all the rights of ownership with a bank trust, known as a Fideicomiso.

Any foreigner or Mexican National can establish a Fideicomiso (the equivalent of an American beneficial trust) through a Mexican bank to purchase real estate anywhere in Mexico, including the Restricted Zone. For practical reasons, even in unrestricted zones, many foreigners and Mexican nationals prefer to hold their property under a Fideicomiso.

To do so, the buyer requests a Mexican bank of his choice to act as a trustee on his behalf. The bank, as a matter of normal course, obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust.

The Fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50-year period. During these periods you have the right to transfer the title to any other party, including a member of your family.The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary, who has all the benefits of a direct owner, including the possibility of leasing or transferring his rights to the property to a third party.

The trustee is responsible to the buyer/beneficiary to ensure precise fulfillment of the trust, according to Mexican law, assuming full technical, legal and administrative supervision in order to protect the interests of the buyer/beneficiary. Fideicomisos are not held by the trustee as an asset of the bank.

Another alternative is to purchase non-residential property through a Mexican corporation, which under certain conditions can be 100% foreign-owned, with a provision in its by-laws that the foreigners accept being subject to Mexican laws and agree not to invoke the laws of their own country. Also, they agree that the real estate acquired be registered with the Foreign Affairs Ministry and be used for non-residential activities. In other words, under these conditions foreigners can directly acquire properties destined for tourist, commercial and industrial use.

The Real Estate Industry
The real estate industry in Mexico is similar in many ways to that of the United States, which is probably the most advanced in the world. It is developing quickly, taking advantage of today’s technology; however, it seems to be paralleling the system as it exists in the US.

Licensing
The Associación Mexicana de Profesionales Inmobiliarios (Mexican Association of Real Estate Professionals), or AMPI, is a reputable national professional real estate organization with many chapters throughout Mexico. This organization is similar to the National Association of Realtors (NAR) in the US, and in fact has a joint venture with the NAR, such that AMPI membership automatically confers membership in the NAR, as well.  In the Vallarta area, there are three AMPI chapters, AMPI Vallarta, AMPI Riviera Nayarita and AMPI Compostela. At this time, there are no government license laws regulating real estate brokerage and sales in Mexico. Anybody can, in effect, offer properties for sale. Therefore, caution should be taken to select an established and reputable real estate company. A potential buyer may want to have a look at:
www.virtualvallarta.com/puertovallarta/realestate/multi-list/index.shtml, which is updated to show AMPI-member agencies in the area with access to the Multiple Listing Service.

Financing
Historically, due to lack of capital markets and high Mexican interest rates, most transactions were made in cash. That is changing rapidly, however, and many local and foreign banks are now offering financing options.  Loan terms can vary significantly, so it pays to shop around a bit.

Multiple Listing Service
Producciones Viva, the company that publishes the Real Estate Guide, also operates the Multiple Listing Service that serves all of Costa Vallarta, and has been doing so since 1989.  These MLS properties are available to real estate professionals in a monthly catalog and as well to the public in general at www.mlsvallarta.com.  There is another site that offers both MLS searches plus searches for development properties at:
www.vallartarealestateguide.com/puertovallarta/mls-search/index.shtml. 

Escrow, Title Insurance and Home Insurance
It is recommended to use an escrow account for real estate transactions.  There are a few companies available, one of them being Stewart Title, with offices in Puerto Vallarta.  They also offer title insurance, which is relatively new to Mexico.  Many insurance companies provide full home coverage. Your broker can recommend some good options.

Purchase-Sale
Most real estate transactions are “opened” after a written purchase offer is accepted by the seller and when a purchase-sale agreement (promissory contract) is signed by both parties. A deposit is required by the broker to transmit the offer to the seller. (If the transaction is being conducted directly with the seller, it is highly recommended that a real estate broker or lawyer be consulted before signing any papers or handing over any money.) It is common practice to deliver to the seller, as an advance payment, the equivalent of 10-30% (including the initial deposit) of the total price upon signing the purchase-sale agreement, which should contain a penalty clause applicable in case there is a breach of contract by any of the parties. Normally, when signing the escritura (the official deed, which needs to be certified by a Public Notary) the balance is paid and the property is delivered. This should not take more than 45 days. It is recommended that an escrow account be used for all real estate transactions.

The Notary Public
A Public Notary is a government-appointed lawyer who processes and certifies all real estate transactions, including the drawing and review of all real estate closing documents, thus ensuring their proper transfer.

Furthermore, all powers of attorney, the formation of corporations, wills, official witnessing, etc. are handled and duly registered through the office of the Public Notary, who is responsible to the government for the collection of all taxes involved.
In connection with real estate transactions, the Public Notary, upon request, receives the following official documents, which are required by law for any transfer:

Closing Costs
It is common practice that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary’s fees and expenses, while the seller pays his capital gains tax and the broker’s commission.

Previously, the real estate transfer tax was 2% nationally.  But in 1996, the law changed, giving individual states the right to set this tax level. The range now varies from 1-4% of the tax appraisal value, which is generally less than the sales value.

The rest of the closing costs, which exclude the transfer cost mentioned above, vary from 3-5% or more of the appraised tax value, depending on the particular state. These percentages are applied to the highest value of the following:

Cost of the Fideicomiso
Based on the present tariff, the bank charges the person desiring the Fideicomiso an initial fee ($400-500 USD) for drawing up the agreement and establishing the trust, plus a percentage based on the value of the property. In addition, the bank charges an annual fee to cover its services as a trustee.

Real Estate Broker’s Commision
AMPI/MLS real estate companies charge 8% commission (plus tax) for an exclusive listing, calculated on the actual sale price of the property.

Capital Gains Tax
In Mexico, the concept of capital gains tax does not apply in the same way it is determined in the United States. Here, the gain from the sale of property is treated as normal income. To determine the gain, the following costs and expenses are deducted from the amount for which the property is officially sold:

The Notary will retain the calculated gain after deductions, forwarding it to the Mexican tax authorities. The seller will then deduct this amount against his annual tax return, which can become an adjustable tax credit in the U.S.A.

On the other hand, there is no capital gains tax in Mexico if there is conclusive proof the seller has used the property as his primary residence.  Restrictions apply, and it is strongly advised to consult a tax lawyer and/or a professional real estate broker.  In coordination with a Public Notary, these professionals can calculate the taxes due on any real estate transaction.

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Vacation Home Option

If you are reading this, chances are that you have a vested interest in real estate in the Vallarta region. You are most likely a buyer or a seller (or both) or a professional involved in the industry, and you need sources of clear and current information about the state of the market.

Redefine Leisure Travel.

With today’s evolving vacation home market, consumers are faced with an increasingly diverse marketplace and options in leisure travel, according to the American Resort Development Association (ARDA). To select the vacation home best suited to their lifestyle needs and vacation dreams, consumers must educate themselves about the market terminology and ownership options, and assess their vacation preferences, travel goals and budget.

"Terms such as 'deeded,' 'fractional ownership residences,' 'destination clubs' and 'timeshares' are frequently heard because of a surging interest in vacation properties that move beyond the traditional vacation accommodations or second home,” said Howard Nusbaum, president and chief executive officer of ARDA. “Sorting through exactly what these products offer and for whom they are best suited can puzzle even the most sophisticated consumer."

Four out of every 10 purchases are a second home, being used for either an investment or vacation property, according to the National Association of Realtors, and this trend is expected to grow as Baby Boomers enter their peak earning years. The growing variety of vacation home options is redefining leisure travel, with the following product categories.

Timeshare / Vacation Ownership
Overview: Vacation ownership may be purchased through deeded property ownership, right-to-use, or a points-based program. Owners purchase a vacation villa for one or more weeks within a fixed or "floating time" system, which allows scheduling each year's vacation during the most convenient week within a specified season. With timeshare, consumers have the opportunity to purchase time at resorts offering a wide range of amenities at different destinations. While many vacation ownership villas have two bedrooms and two baths, floor plans range from studios to three or more bedrooms.

Pricing: With vacation ownership, consumers buy in increments of one week. It is a one-time purchase, and owners also pay an annual maintenance fee, depending on the unit size, location and amenities of the resort. Timeshare is not intended to be an investment opportunity, rather an alternative to traditional vacation accommodations and a way to hedge against "vacation inflation". According to a recently released Ernst & Young study, the weighted average price of a timeshare interval, or week, sold during 2005 was $17,797 USD.

Fractional Ownership / Private Residence Clubs
Overview: Fractional ownership buyers typically have a recorded deed and title. Fractional ownership has the benefits of second home ownership, but for a fraction of the cost and without the maintenance responsibilities. Considering the average vacation home buyer uses the property just three to four weeks a year, fractional ownership tends to be commensurate with actual use of a vacation home. Additionally, fractional properties are generally affiliated with high-end hotel companies or high-end boutique operators, so owners have the benefits of personalized services and amenities.

Pricing: According to the 2006 Fractional Interests Leisure Real Estate Market Report, fractional pricing ranges from $60,750 to $649,564 USD per interest, based on floor plan, location and size of the fraction. In addition to the purchase price, there are annual maintenance fees, which in 2005 averaged $5,575 USD.

Destination Clubs
Overview: Members of a destination club are not buying a specific property, but rather the right to use any of a portfolio of homes owned or operated by the club company. With few exceptions, they offer a non-equity-based membership emphasizing a broad selection of vacation home experiences. Most destination clubs also offer members concierge services.

Pricing: The Fractional Interests study also states that the average length of stay at destination clubs ranges from one to nine weeks, with costs including a one-time fee of $20,000 to $1.5 million USD, which is typically between 80 and 100 percent refundable if they choose to exit the program. Annual dues range from $1,500 to $30,000 USD. The club may also charge a nightly fee while guests are in residence.

Condo Hotels
Overview: Condo hotels offer a portion of their hotel room inventory for sale to the public. The owner may use it for vacation or corporate housing needs, or place it in a rental program, typically managed by the hotel. Owners then receive proceeds from the rentals. Buyers enjoy the benefits of owning real estate in a desirable location coupled with hotel amenities and services. Annual dues also apply.

Pricing: Condo hotel pricing varies by real estate market trends; currently there are a few options available for condo hotels in Vallarta.

Traditional Second Home Ownership
Overview: Viewed as a lucrative financial investment, traditional second home ownership appeals to those seeking a vacation setting to share with family and friends and/or use for business whenever they choose. Owners have full responsibility for maintaining the property, which can include hiring a management company. Homes purchased in popular tourist regions can generate revenue for the owner because of the willingness of tourists to pay high rental rates.

Pricing: In Vallarta, condominiums can range from $100,000 to over $1 million USD and homes commonly from $250,000 to over $2 million.

Vacation Assessment Questionnaire
“There are several key factors to consider when evaluating vacation home options,” explained Nusbaum. “ARDA recommends asking lifestyle assessment questions to help consumers match the best vacation home to meet their needs and budget.”

Adapted from an article supplied by the American Resort Development Association, a Washington D.C.-based professional association representing the vacation ownership and resort development industries.

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Best Place to Retire?

During the past 15 years, International Living magazine has calculated its Annual Global Retirement Index; a resource intended to assist retirees and future retirees in evaluating and comparing the world’s most popular retirement destinations. It is based on a number of criteria, giving various weights to each, depending on its importance to retirees. Listed below are those criteria considered with their individual weighting:

Cost of Living—20%
Health Care—20%
Special Benefits—20%
Real Estate—15%
Ent., Recr. and Culture—10%
Climate—5%
Safety and Stability—5%
Infrastructure—5%

Believe it or not, until this year, Panama had topped the list for the past six years. It still has plenty to offer retirees, however this year, with 30 countries being analyzed and ranked, it fell to fourth position. Ahead of Panama in third position, was Italy with its beautiful cities, its fine weather, and of course, its historic sites. In second position was, of all countries, Ecuador, which moved all the way up from the tenth position last year. Ecuador offers an extremely low cost of living, great weather, beautiful land, a growing economy tied to the US dollar, and a stable political environment. It might be a well kept secret, but Ecuador is becoming a land of opportunity and retirees are taking advantage of it.

Now, for the number one ranked country in the world for retirement; MEXICO! Aside from the fact that Mexico is extremely convenient to the US and Canada, that Mexico’s Senior Citizens´ Benefits Program offers up to 50% discounts on many services to retirees over the age of 60, that the Mexican government has enacted many new laws encouraging foreign investment, Mexico has become an incredible place to enjoy retirement, offering the quality of life that North Americans are accustomed to with numerous extra benefits.

(As a side note, a few years ago when the Canadian dollar was at its weakest, Canada ranked in the top ten. However as the loonie has strengthened, Canada has slipped well out of the top ten this year. For reference sake only, the US ranked 19th this year!)

The major Mexican inland retirement communities are located in San Miguel de Allende, Guanajuato, and the Lake Chapala / Ajijic area. For the most part, these inland retirement communities are located in beautiful colonial cities with moderate temperatures year round. Most of the modern amenities and activities are available to retirees in these retirement cities with a very attractive cost of living. Being located inland, these retirees can purchase and own real estate with title as they would in the US or Canada.

For those desiring magnificent ocean views, the Pacific coastline offers many advantages over the Gulf of Mexico coastline; the major one being protection from storms. The entire Yucatan Peninsula area, including the Cancun and Cozumel areas are great for vacations; but due to its exposure to hurricanes, it is not considered by many to be ideal for retirement. On the other hand, the Pacific Ocean coastline seldom sees troublesome storms and offers more than a thousand miles of incredible Pebble Beach like views with a climate similar to that of Hawaii.

Pacific Ocean coastal cities such as Mazatlan, Manzanillo, and Acapulco are somewhat popular for tourists, but have become quite industrialized and commercialized and therefore not really considered as ideal retirement cities. The most desirable retirement locations from north to south along the Pacific Ocean are La Paz and Todos Santos in Baja, Puerto Vallarta, Ixtapa / Zihuatanejo, and Puerto Escondido.

La Paz and Todos Santos in Baja, Ixtapa / Zihuatanejo, and Puerto Escondido are more exposed to the elements than Puerto Vallarta, which is tucked behind the Sierra Madre Mountains next to Banderas Bay, safely protected from Pacific storms coming out of the south. Also, because Ixtapa / Zihuatanejo is approximately 500 miles south of Vallarta and Puerto Escondido is 300 miles even further south, the “high season”, or the  time during the year with perfect weather conditions, is reduced from 7-8 months to perhaps 6-7 months. A month extra per year in Paradise is often considered to be substantial to retirees!

Using the above logic, it’s no wonder why so many retirees have migrated to Puerto Vallarta. This beautiful tourist resort area has become home to thousands of North Americans that have traveled the world, could afford to live anywhere on the planet, and have chosen Vallarta as their winter, if not full time, retirement destination.

Located at the same latitude as Hawaii, Puerto Vallarta has a perfect climate with an average daily temperature of 73°F from November through May with virtually no chance of rain. With a population of approximately 350,000 inhabitants, Vallarta now has a new and growing infrastructure including roads, water treatment plants and distribution systems, power plants and distribution grid, airport, maritime terminal, hospitals, university, etc.

High speed internet, satellite TV, VOIP telecommunications, and US newspapers and magazines are all available in Vallarta. Most of the mega-stores found in the US and Canada have come to Vallarta including Sam’s Club, Wal-Mart, Costco, Home Depot, Office Depot, Staples, and of course, every fast food chain restaurant imaginable! Vallarta now has seven world class golf courses with three more either in the planning stage or currently under construction. There are hundreds of tennis courts, world class deep sea fishing, and every other activity available that you would expect in a city of this size. There are numerous new cinemas, theaters, and hundreds of fine restaurants.

Due to the explosive growth of Vallarta and the influx of North Americans, it is safe to say that its entire economy is based on tourism and the retirement of North Americans, thus creating thousands of new construction and service related jobs for the locals. It has also created an atmosphere where speaking English has become a prerequisite for a decent paying job. Therefore, most of the younger Vallartenses are now becoming quite fluent in English. The inability to speak Spanish is certainly not an obstacle to retiring in Vallarta! Also, because the economy is based on the North American dollar, safety is of prime concern to the locals. You will not find a safer, more hospitable city of this size anywhere. In fact, this was clearly revealed in a survey taken by Conde Nast magazine, where Puerto Vallarta was ranked the friendliest resort destination in the world.

Now, let’s return to our quest for the top retirement haven in the world. If we can accept what the latest surveys, polls, and indices suggest, Mexico is the country and Puerto Vallarta is the city.

We’ve owned property in Vallarta for almost 25 years and have lived here as permanent residents for over ten years and can attest to its magical characteristics resulting in a quality of life that can’t be surpassed anywhere in the world. The growth that we’ve witnessed since 2000, when the PAN administration took power, has been truly amazing; so much so, that the head of the local Chamber of Commerce has projected the population of Vallarta will reach 600,000 by the year 2015. There are currently more than 7,000 new condos currently under construction with well over 20,000 more planned in the future by Fonatur, the Mexican Tourism Board. Because real estate sales in Mexico are generally done on a cash basis, this economy has not been affected by the mortgage related problems seen in the US. Real estate values have tripled since 2000 and continue to appreciate daily. Owning property here has surely been an investment of a lifetime for us.

If you’re a baby boomer, either recently retired or about to retire, you owe it to yourself; make PV your next vacation destination and consider all the qualities it has to offer. You’ll definitely be impressed with this glorious Paradise along the Mexican Riviera and will probably agree, Puerto Vallarta is the best place in the world to retire.

Jim Scherrer has owned property in Puerto Vallarta, Mexico for 24 years and resided in PV for the past ten years. The mission of his series of  24 articles pertaining to retirement in Puerto Vallarta is to reveal the recent changes that have occurred in Vallarta while dispelling the misconceptions about living conditions in Mexico. For the full series of articles regarding travel to and retirement in Vallarta as well as pertinent Puerto Vallarta links, you can contact Jim and visit his website at www.pvreba.com.

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Puerto Vallarta: A Real Estate Success Story

What we can establish as being “a success”? Well, in 2000 Puerto Vallarta had roughly $50 million in resort real estate sales (“resort real estate” is defined as real estate purchased primarily by retirees or second-home purchasers). There were rarely homes selling for more than $1 million and few large real estate developments. In 2007, there was more than $500 million in resort real estate sales, with condos selling for over $2 million and homes in excess of $5 million. There were more than 100 developments spread out around Banderas Bay, allowing Puerto Vallarta to lead in sales volume for resort real estate in Mexico, ahead of major markets such as Los Cabos, Acapulco and Cancun.

So what happened? How did Vallarta become so successful?

Actually, it wasn’t planned that way. Puerto Vallarta was more of an accidental success story. While Cancun and Los Cabos were planned as resort destinations from the beginning, with FONATUR, the tourism resort development arm of the Department of Tourism, actually building planned resort developments, FONATUR was not involved in Puerto Vallarta. There was no plan; it was more of a mosaic of different thoughts, ideas and inspirations of some unique individuals, people who came not just from Mexico but from all over the world for a little bit of paradise.

Real estate development in Puerto Vallarta began simply enough in the ‘50s and ‘60s, with small-time Mexican builders putting up homes for Americans on the hillside behind Vallarta. There were enough Americans living there that the area became known as “Gringo Gulch.” The most popular builders of this time were Freddy Romero and Guillermo Wulff. Romero was known for planning the layout of the homes with a stick, drawing out the rooms in the dirt of the property. The style they incorporated, including the introduction of the cupola, would become what is known today as Puerto Vallarta’s architectural style. At this time, there were a couple of three-star hotels but no condominiums. It was a simple market built on the desire of Gringos to have a home here.

In the ‘70s, as Puerto Vallarta became more popular, largely because of two of its most famous residents — Richard Burton and Elizabeth Taylor, demand was created for four- and five-star hotels, primarily in the Hotel Zone. Gringo Gulch was filling up, so builders such as Wulff, now joined by others such as Bernardo Applegate, started building farther south, on the hillside of Conchas Chinas. Homes became larger and more stylish as homeowners and Wulff tried to outdo one another with each home built. Small condominium projects were introduced, but they were just that — quite small, with less than 20 units.

As the demand for real estate in Vallarta increased and Vallarta entered the ‘80s, larger condominiums developments were built. Los Muertos beach became popular for both hotels and condominiums, Rosalinda Perez building one of the first large condo projects along this beach. Guillermo Wulff expanded his construction business by moving into hotel and condominium development. Because financing was difficult to obtain and Wulff always seemed to be short on cash, he built by granting units to those involved in the project. The electrician, plumber, window supplier, etc. would all end up with condominiums — an easy way for Wulff to finance his ever larger real estate developments.

It was in the ‘80s that the Martinez Guitron brothers came from Guadalajara and developed a piece of land between the Hotel Zone and the airport that, at the time, locals thought was too far from town to ever be popular, called Marina Vallarta. This was the beginning of Grupo Situr, which would have similar developments and hotels throughout Mexico by the mid ‘90s. One of the first to build in Marina Vallarta, really helping get the development going, was Guillermo Wulff. This time, he got old friend Liz Taylor to help with the marketing of his latest and largest development to date, Club de Tenis, Puesta del Sol. He had built homes for both Burton and Taylor over the years and informed her if she bought one of the units, he’d give her a second one free. Liz arrived in town with George Hamilton, and a picture was taken with Liz, George and Guillermo. It was a brilliant marketing move, and after that, everyone wanted a condo in the same place as Liz Taylor. Marina Vallarta offered larger sites for developers along the oceanfront and inside the marina. Soon, five-star and Gran Turismo hotels were built, moving Vallarta in a new direction. Nuevo Vallarta, a similar development in the neighboring state of Nayarit, was also developed around this time, but it was having difficulty getting going; it was just too far out of town. Vallarta’s first gated community, Sierra del Mar, also was introduced at this time by the Osuna family, situated just south of Vallarta on the hillside of the Sierra Madre foothills.

As Vallarta moved into the ‘90s, development continued in Marina Vallarta and Nuevo Vallarta, primarily condominiums and large hotels. As Vallarta continued to grow, people started looking at smaller communities to the north, such as Bucerias, La Cruz de Huanacaxtle, Sayulita and San Pancho, to build their homes. Oceanfront property in Vallarta was becoming expensive and limited, so they moved farther north.

In 1994, however, Mexico began to run into problems. Interest rates shot up, credit was impossible to come by, and many large developers, such as Grupo Situr, did not survive. These were tough years for real estate development in both Mexico and Puerto Vallarta. Development slowed down and did not really recover until the beginning of the next century, in the 2000s.

And did it ever recover! The existing mega-developments of Nuevo and Marina Vallarta finally began to fill up, with sub-developers picking up whatever remaining lots were still available. In Nuevo Vallarta, where Canadian Graciano Sovernigo had moved to develop Paradise Village, this sleeping development was now in hot demand for home, condo and hotel development. Two golf courses were added, as well as a marina. To the north, another major mega-development, Punta Mita, was created, along with Flamingos next to Nuevo Vallarta. These projects were in development at the end of the ‘90s or beginning of the 2000s, but were having difficulty finding investors. However, what they did do was offer choice development properties with all the infrastructure in place, so when the market really kicked off in 2003, they were ready.

So, what happened to start the incredible growth the region saw begin at this time? It was a combination of the 9/11 disaster in the United States and its economic recession after the tech bubble burst. Hardworking Americans had a wake-up call and started rethinking their lives, how much they were working and if they were really enjoying themselves with their families, as they should be. They had been burned by the stock market and thought that real estate would be a good place to have their money this time. And it was when Baby Boomers were just starting to retire. Mexico was temperately warm, friendly and very close by. The Mexican economy was doing well, and the country and government were stable. But most importantly, with mega-developments already offering prime real estate ready for building, the region was ready.

Condominium projects and expensive home developments took off around the bay. Today, there are five mega-developments, with more than 100 projects under construction. There are seven golf courses, with three more in the planning or development stage. There are three marinas, with more boat slips than anywhere else in Mexico. And Vallarta, or Costa Vallarta as the region is now known, continues to offer myriad real estate options and price points. Although there are now million-dollar homes and condos available up and down the coast, there are still properties available for around $100,000 USD — you just won’t be on the beach.

Puerto Vallarta has a number of advantages over other resort destinations in Mexico. An important advantage is the hills of the Sierra Madres that surround the bay. This has allowed for homes on the hillside to be nearly as valuable as beachfront because of the spectacular views they can offer. This is something that Cancun, and Los Cabos to a certain extent, can’t provide. Puerto Vallarta also has the downtown central area, which has retained its charm and character. There is the Malecon boardwalk, unique to the town, along with a river running through the middle of town, creating the Cuale island — the town’s “Central Park.” To the south, it is rich in tropical foliage, whereas to the north it becomes semi-arid. There are numerous rivers flowing into beautiful Banderas Bay, a bay perfect for boating, offering wind for sailors nearly every day of the year. Vallarta is close to major markets in the USA and has excellent airlift from major airlines servicing the region. Although there was no major plan established for the destination, all the pieces necessary to create a successful resort real estate destination were in place when the demand built up in 2003.

When you lay it all out like that, it’s actually quite easy to see how Puerto Vallarta became a successful resort real estate destination.

(As recently published in the Vallarta Opina Newspaper)

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Mexican Banks Healthy

AFTER the 1994 peso crash, the risk of Mexico’s difficulties spilling over into America was considered so great that the Clinton administration helped bail out its southern neighbour. In the first quarter of 2008, the boot was on the other foot, though the scale was entirely different. Now it was the turn of Banamex, one of Mexico’s two largest banks, to help out Citigroup, its crisis-stricken parent. Banamex provided $453m of the $1.1 billion Citi earned in net income from its overseas operations between January and March (Citi lost $5.1 billion overall). You could almost hear Vikram Pandit, Citi’s new chief, mutter “Gracias, compadre.”

Yet Banamex was not even the best-performing of the Mexican banks. Of Mexico’s five largest financial institutions (which control three-quarters of the market and also include Bancomer, Santander, HSBC and Banorte), it was the only one that did not show a big rise in year-on-year profits in the first quarter. The performance of the banks was impressive for two reasons. Firstly, Mexico has one of the most open banking systems in the world; two of its top five banks are Spanish-owned, one is American, one British, and only one is Mexican. Yet the crisis in global banking has barely ruffled it. Also, Mexico’s economy is usually more exposed than almost any other to a slowdown in America. As Alejandro Valenzuela, boss of Banorte, delicately puts it: “Decoupling is the wrong word, but there is now a certain shield.”

That shield, however brittle, has been forged both from financial reform in recent years and from macroeconomic stability. On the financial front, lending has ballooned. According to the central bank, credit to the private sector has nearly tripled since 2001, while consumer credit has increased by around seven times. The banks have also feathered their nests with relatively high consumer-banking fees.

Meanwhile, the market has grown more sophisticated, thanks to some shrewd moves by regulators. Chief among these, according to an IMF working paper released this week, were reforms to bank-secrecy laws which allowed the creation of a successful credit-reporting system, as well as reforms to bankruptcy laws. These have given birth to a thriving mortgage-backed securities industry. If that sets off alarm bells, Alejandro Werner, the deputy finance minister, notes that over the past seven years, the accumulated increase in house prices in Mexico has been less than inflation: there is no bubble yet.

There are also economic reforms to thank. Marcos Martínez, the head of Santander in Mexico, says that infrastructure investment as well as a huge public-sector mortgage programme have boosted demand. It helps that Mexican GDP closely correlates with America’s industrial production, rather than its overall economy. The brunt of the slowdown in America has been borne by the services sector.

Although Mexican economic growth is likely to remain sluggish, at something under 3%, the health of the banking industry is a salutary sign. For once, Mexicans can look northward with a sense of sympathy rather than envy.

Featured in The Economist -
May, 2008.

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A.M.P.I.

Currently in Mexico there is no licensing required for real estate sales professionals. In order to assure that realtors are performing in a professional and ethical manner, the Mexican real estate association, A.M.P.I., (Asociación Mexicana de Profesionales Inmobiliarios), has taken on this responsibility on behalf of buyers, sellers and the general public.

A.M.P.I. has published ethical and fiduciary standards that its members are required to maintain. Those standards provide some assurance that the often complex process of a real estate transaction is less likely to go awry through a lack of due diligence on the part of the real estate professionals.

In addition, A.M.P.I. standards require that their associates be involved in the community they are servicing. Among the requirements for membership in A.M.P.I., there is a need for 100 hours of continuing education and testing, and foreigners working in real estate must be approved to do so by immigration. In a real estate market as active as the Puerto Vallarta area, it is important to know that your realty agent will still be around the day after the ink has dried on the sales agreement.

Another key advantage that A.M.P.I. brokers have over their non-AMPI colleagues in this market is access to the Multi-List Vallarta service. This multiple listing service was developed and is managed by Producciones Viva, the company that publishes this magazine. With more than 650 qualified properties currently in the database, it is the most advanced multiple listing service in the country. Through the MLS, area brokers have access to a much wider range of properties than would otherwise be the case.

Why AMPI?

When you're ready to think about buying or selling your property, you need to ask yourself the following questions: Do you have the time, energy, sources of information, and contacts to buy or sell a property in Mexico? If you were one of the 'do-it-yourself' people, would the results be as good or better than they would be if you had professional assistance? Would it have gone smoother? Would it have given you more personal time? Would you have purchased for less, or sold for more, if a real estate agent was involved?

Read the following information and learn how a real estate agent can help you understand everything you need to know about a real estate transaction.

The Buying Process
The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity. If you give a real estate agent some basic information about your available savings, income and current debt, they can refer you to lenders best qualified to help you.

Finding
Once you know how much you can and want to invest, the next step is to find the properties that most nearly fit your needs. This is the time to choose a real estate agent one who is also an AMPI/Multi-List Member. A Member of the Mexican Association of Real Estate Professionals [AMPI] and Multi-List Vallarta agrees to abide by a strict Code of Ethics. Our members have many resources to assist you in that search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

Selecting
Your job is to make the final selection of the right property for you. This is when excitement and emotion run high. Your real estate agent can assist you in the selection process by providing objective information about each property. Agents who are members have access to a variety of informational resources. Members can provide local community information on utilities, zoning, schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

Negotiating
There are a myriad of negotiating factors, including, but not limited to price, financing, terms, date of possession, and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should also provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

Financing
As soon as you are reasonably sure the property is right for you, the process of obtaining financing, if necessary, begins. Your agent can help you in understanding different financing options and in identifying qualified lenders. This is something relatively new in Mexico, but financing is available.

Closing or Settlement
Finally, there is the closing, or settlement, as it is known in different parts of the world. Every area has its own unique customs. Your agent can be the best source of information regarding a swift and secure transaction. Again, your real estate agent can guide you through this process and make sure everything flows together smoothly. This can actually be the most important part of the whole process, and ensuring that your title is transferred properly.

It also involves establishing a trust account (or Fidiecomiso, as it is known in Mexico) with a Mexican bank, which foreigners need to use in order to own real estate along the coast of Mexico. The trust system has been used for over 25 years in Mexico, offering a manner in which foreigners can actually obtain property in the country. Your broker can help explain this in more detail.

Property Management and Maintenance
If you purchased a property for investment purposes, your agent can be instrumental in the realization of your financial goals through a continued representation of your interests. All member agencies have 'in-house' property rental programs featuring marketing, tenant screening, collections, automated payment services, maintenance programs, etc, that can be tailored to your specific needs.

Selling Your Real Estate

Pricing
This process generally begins with a determination of a reasonable asking price. Your real estate agent can give you up-to-date information on what is happening in the marketplace and the price, financing, terms, and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

Marketing
The next step is a marketing plan. Often, your agent can recommend repairs or cosmetic work that will significantly enhance the salability of the property. Marketing includes the exposure of your property to other real estate agents and the public. In many markets across the country, a large percentage of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer.

Your agent acts as the marketing coordinator, disbursing information about your property to other real estate agents through Multi-List/AMPI associations or other cooperative marketing networks, open houses for agents, etc. The Multi-List/AMPI Code of Ethics requires Members to utilize these cooperative relationships when they benefit their clients.

There is a misconception that advertising sells real estate. Studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends and family, and personal contacts.

Requirements to become an A.M.P.I. Vallarta member.

Associates (Brokers):

• Fill out application for membership (Solicitud de Ingreso).
• Complete the form of personal data (Hoja de datos personales).
• Written statement about the significance of belonging to AMPI.
• Four photos for the ID that can be color or black or white.
• Copy of current pictured ID, passport.
• Copy of Current FM3 or FM2 immigration authorization to work.
• Copy of the RFC and the registration with Hacienda.
• Copy of the Acta Constitutiva.
• Copy or a rental factura in case you pay a rent for the local or your office.
• Copy of the document that accredits the individual as legal representative for the corporation.
• Two letters of recommendation by two active AMPI members.
• One year experience working in real estate within the Puerto Vallarta or Banderas Bay area prior to the AMPI application date.  In the case that the applicant represents a corporation the applicant has to demonstrate that the municipal permit was issued a minimum of one year prior to their application to AMPI.
• Demonstrate that you are duly registered and established (copy of the municipal permit, water, electricity and phone receipts in your name).
• Copy of one of your facturas (that your company issues when you receive a commission).
• Diploma or a real estate course approved by AMPI – 100 hours min.
• Diploma of Spanish course.
• Letter of no criminal record.
• Two commercial references.
• One or two bank references.
• The logo of your company.
• Take the AMPI Test and Orientation
• Pay the national and local dues.
• When working with a developer make sure the agent’s commission is 4% plus iva
• Do not bring pre-existing problems to the AMPI board
• Agent’s affiliation to AMPI  is  Broker’s responsibility
• Send a Complete resume by email in a PDF or word document.
• Attendance to at least 50% of the General Assembly monthly meetings during the year.

Affiliates (Agents):

• You must be an agent working for an AMPI Associate (Broker).
• Fill out application for membership.
• Complete the form of personal data.
• Four photos for the ID that can be color or black and white.
• Copy of pictured ID, passport.
• Copy of current FM3 or FM2 immigration authorization to work.
• Reference letter from the Broker.
• Pay the national and local dues; please see “affiliates” section.
• Take the AMPI test and Orientation
• Written statement about the significance of belonging to AMPI.

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