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What You Need to Know About Buying Real Estate in San Miguel de Allende

Buying San Miguel real estate can be easier and more affordable than you might have imagined. There are properties to suit most tastes and budgets.

Still, there are a couple of things you should keep in mind if you’re considering buying in San Miguel.

The Buying Process

The first step is making an offer on the property. Always do your research, so you have a very good idea of the fair market value of the property. Never go in at full list price. If you don’t like haggling, ask your real estate agent – me, I hope! – to do this on your behalf.

I’ll recommend the best notario who will confirm the property you’re buying has good, clean title (fee simple), without any liens, mortgages or restrictions. The notario will also check that the seller is indeed the registered legal owner of the property.

Once you’ve agreed a price, your attorney will draw up a Promesa de Compraventa, or promissory purchase agreement. This outlines the terms and conditions of the sale, including any penalties. It should have a clear close date when the title transfers to you.

At this stage it is typical to pay a deposit to the seller. Normally, the agreement calls for a penalty if either party backs out. This means forfeiting your deposit and any additional stage payments you’ve made if you back out—so ask that the seller faces an equal penalty if they back out.

No matter how you plan to buy property in Mexico, you’ll need to get an approval from the Ministry of Foreign Affairs for the purchase. Your attorney or the notary will apply for the permit on your behalf before the closing. This is more a matter of formality than anything else and usually doesn’t take much time or carry a high cost.

You will need the services of a notario (notary) to help with the closing. The notary will check that everything is in order with the transaction and present all the relevant documents to the public registry. Do follow up though and ensure that all steps have been taken to register the title in your name—don’t assume that this will happen without you pushing to get it done.

It’s important to talk with your attorney in Mexico and your tax advisor back home to figure out the best way to hold the property. This can either be through a direct deed, a local corporation or a fideicomiso bank trust.

You may already know that in Mexico, all residential property purchased by foreigners that is located within 100 kilometers from any international border, or 50 kilometers from any coastline, will need to be acquired through either a Mexican corporation or a bank trust called a fideicomiso. This does not apply in San Miguel…so foreigners can purchase property and hold it directly.

One thing you do need to watch for is water. Getting a water supply (whether through a public water company or a private well) can be complicated in some areas in and around San Miguel, so make sure before you buy that the property has an existing, legal, water supply.

Additionally, in Mexico, if land was formerly ejido (indigenous-owned) land, tread carefully. This can be a potential landmine, as someone may be able to lay claim to your property in the future. Ejido land can be titled but it’s a complicated process and your attorney will have to do extra checks to make sure that the title is clear, and the privatization was done correctly.

Once you have these issues checked out, you can start enjoying your San Miguel real estate…and your holding costs will be low. Though property taxes (called predial) vary by municipalities, on a $300,000 home, you can expect to pay about $500 per year in property taxes. There are usually discounts (of 15% in 2020) if you pay the full annual fee upfront in January.

If you are looking for a real estate representative to help you purchase a home in San Miguel de Allende, I’d love to help! Please contact me here.