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How to Use Mexico Real Estate Contracts: Differences, Necessity and Content
Thomas Lloyd - nuwireinvestor.com
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August 23, 2011
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How to Use Mexico Real Estate Contracts: Differences, Necessity and Content
At a first glance, there seems to be complexity surrounding Mexico real estate contracts, since there are no set rules for which ones are necessary and what should be included. However, with a brief introduction to each of the possible contracts, where there is flexibility, and where there is not, a buyer can be fairly confident in working with this system.

As a general guideline, if the buyer is non-Mexican, and buying within the restricted zone, the normal flow of contracts to be prepared are as follows; the “Offer to Purchase”, the “Promissory Contract”, and the third and final instrument, the “purchase-sales contract”(the title), which will be drawn up and legalized by the notary public, and subsequently registered and filed at the public registry. If buying outside of Mexico’s “Restricted Zone,” (i.e. the property is not within 50 km of the coast or 100 km of any international border) and the protocol can be executed immediately, the Offer to Purchase and the Promissory Contract might be avoided.

Different regions or different brokers have their own routines and practices, adapted to suit the needs of different property and client situations. Is there one single correct or best answer? No. Various methods used by qualified, experienced brokers can be correct in the path to a safe and efficient legal transfer of properties. Some brokers have strong legal backgrounds and experience and are able to protect their buyers with their existing contracts while others prefer to use a legal team for coordination.

The Offer to Purchase Contract
The Offer to Purchase is basically the first document utilized to begin the process of transferring a property from seller to buyer. The offer to Purchase can also be prepared as a Reservation Agreement or an Earnest Money Deposit, and lists the main points of a future transaction.

Many experts also have varying suggestions as to what to include on an offer. The Offer to Purchase and/or the “Reservation Agreement” at the end of the day, can be as complex or as simple as the buyer feels is necessary; it is the preliminary agreement containing the basic information to execute the transaction. A fairly exhaustive list is given here. As already mentioned, the contract will not necessarily include all points:
•Names and personal info of the parties
•Description & location of the subject property
•Property condition
•Price and payment terms
•Provisions for escrow
•Closing date
•The expiration date
•Indispensable conditions
•Terms and conditions of the offer
•Term of effect
•Jurisdiction
•Name of person responsible for closing costs (typically buyer), real estate fees and capital gain tax (typically seller)
•Conditions to be met prior to purchase including as applicable, home inspections, title investigation and commitment
•All other Responsibilities of the parties
•A clause indicating that the title shall be passed free and clear of liens or encumbrances
•Penalty clause in case of non-compliance
•Name of Notary
•Space for signature of both parties
Any money released at this time such as “earnest money”, should be refundable during this phase, and a reasonable amount of time should be allowed so that buyer and/or legal counsel can research the property documents.

The Promissory Contract
The Promissory Contract is one of the most important documents to be elaborated and reviewed during the real estate acquisition process. Many people know this document as the “hard copy” and will hold the details such as legal description of the property, agreed price, penalties, etc.; while the Offer to Purchase contract is fairly flexible, this one is not. Of the contracts you complete, you will need to depend on this one the most, because it is the first document to outline the terms and details for the future execution of the real estate transaction.

Again, if the buyer and seller are able to execute the sale immediately, the parties can bypass the promissory contract and go straight to the purchase sales document. The rule of thumb I use is if the closing cannot occur within 14 days, I recommend a promissory contract. A specific example of when there will be a longer delay in property transfer is pre-construction. Each experienced broker has their own guideline and variables from their region that must be taken into consideration.

The Purchas Sales Contract
The Purchase Sales Contract is in essence the last contractual document required to transfer the rights of the property into the new buyer’s possession. This contract may be structured in various models such as a real estate trust agreement, an assignment of real estate trust or a reserve title contract; the model depends on the details and method of how the property will be transferred. It is important to note that the Offer to Purchase and Promissory Contract are intended to give the details and preparation for the transfer of the property whereas this final contract is the instrument exercising the actual, legal transfer. The Purchase Sales Contract is the document which the notary public will use in following the protocol to transfer the property legally. It becomes the new deed for the property.

The best resources for managing contracts during a real estate transaction are an experienced and qualified broker, and a qualified lawyer; however, it is helpful for buyers to realize what contracts might be involved, where there is flexibility and where there is not.



+ Wexico http://news.wexico.com/real-estate/23aug2011/how-to-use-mexico-real-estate-contracts-differences-necessity-and-content.htm

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments, and also holds a degree in Mexico real estate. He has 15 years of experience in Mexico's business culture, and as a Mexico agent, has guided many investors through real estate transactions, safely.

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