The Essential Guide to Buying Your Dream Property in San Miguel de Allende

Buying a property in Mexico can be a daunting task for many foreigners, especially if you’re unfamiliar with the legal and financial regulations in the country. This comprehensive guide to buying property in Mexico as a foreigner covers everything from visas and permits, to mortgages and taxes. Whether you’re looking to purchase a house in San Miguel de Allende or buy/invest in a piece of land in a remote part of Mexico, this essential guide will walk you through the entire process.

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1. Why buy property in San Miguel de Allende, Mexico?

2. Selecting an agent: How to find a reputable real estate agent – What to look for and what to avoid

3. Defining your budget: How much can you afford to spend on a property?

4. Find Your Dream Property: How to explore and narrow down your must-haves

5. Making an offer: How to make a competitive offer, and negotiating the price

6. Housing Inspection: What to look for during a housing inspection

7. Signing the contract: What to consider before signing a contract

8. SRE permit: In order to purchase property in Mexico, you must obtain an SRE permit

9. Escrow account and earnest money: Securing the purchase, what is an escrow account and how does it work?

10. Closing with the public notary: Making it official, what is the role of the public notary in Mexico?

11. Deeds: Transferring ownership

12. Final adjustments before you enjoy your new home

1. Why Buy Property in San Miguel de Allende, Mexico?

Mexico has long been a popular destination for foreign property buyers, and for good reason. The country has a diverse and vibrant culture, beautiful natural landscapes, and a low cost of living. Mexico is also home to some of the best beaches in the world, making it a desirable place to live or invest. In recent years, the country has seen an influx of foreign buyers due to the many things it has to offer.

The city of San Miguel de Allende, in particular, has become a hotspot for foreign buyers. Located in the state of Guanajuato, San Miguel de Allende has been listed by and Travel and Leisure link to crowned ‘best city in the world’ for 6 years in a row Forbes as one of the top places to buy property in Mexico. The city is known for its colonial architecture, vibrant cultural scene, and stunning natural beauty. It’s also an excellent place to invest due to its growing popularity and growing demand and popularity.

2. Selecting an agent: How to find a reputable real estate agent or broker, what to look for and what to avoid.

Selecting an agent is a pretty important step in the process. You should do this as early as possible. An agent or broker can be a an asset or a real threat to your investment and it’s very important to make sure you get the right one. Below is a short list of what to look for in a trustworthy and dedicated agent .

They should:

  1. They must be licensed to practice real estate in the state they are working in.
  2. They must be honest, transparent and have impeccable integrity.
  3. They should speak Spanish fluently, what’s more, they should have a broad knowledge of Mexican culture.
  4. They  should have experience in the market he represents.
  5. They  should be able to negotiate on behalf of their clients with other parties in the market, including other realtors, public notaries or inspectors.
  6. They should have knowledge of each step of the buying process, including taxes and legalities.
  7. Finally, it’s important to make sure the agent or broker is familiar with the San Miguel de Allende area. Hiring a professional real estate agent, from a renown local agency, is a great way to ensure that you have the best experience possible when buying a property in Mexico.

Agents who do not possess these attributes may not represent you well.

3. Defining your budget: How much can you afford to spend on a property?

Before beginning your  property search, it’s crucial to establish a budget.

People ask me all the time, “How much can I spend on a property?” When I hear this, I always think “How much can you afford to spend?”

I think it’s important for people to understand this before they start shopping around. If you are looking to buy a home in San Miguel de Allende, there are several considerations that you need to take into account:

  • The closer you are to the Center and its iconic Parroquia, you will have to pay the price. Even if you’re living further away, sometimes just  views of the Church will increase the price.
  • As mentioned before, terraces and rooftops with views (mountains or downtown), and flat walking distance to Centro, are the main extras that will exponentially raise a property’s price.
  • You can buy a fixer upper, or what we call, a “tearer downer”, and actually build your dream home in the perfect location, but that comes at a price. Moving walls or breaking them has a cost that must be considered. Sometimes just buying the land is cheaper, but there is less and less available, and this can also be very expensive.
  • Areas like San Antonio, Guadiana, Ojo de Agua, Guadalupe, or Atascadero, this is the next radius around the center and it is growing and becoming more popular for people that just can’t afford Centro, or just don’t want to be in the middle of too much movement and people. You can find some really good properties from 300k- to 2M depending on the size and extras that we mentioned before. Great for living or as an investment or both.
  • If you are looking for something more accessible, there are great areas like La Lejona, Cieneguita, Los Frailes, Luminaria, Balcones, andtowards Alcocer, where you get more for your money, or  more affordable properties, often inside a condominium. At this radius there can be a lot of offers, so as an investment to rent, you might be competing with 20 others that had the same idea as you.
  • If you prefer country living, there are also excellent choices that can come at a high cost but are worth the price. How about  living on top of your own vineyard, owning your very own stable, or simply  enjoying living on a golf course? What is certain is that you’ll get more space and freedom for your buck.

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4. Exploring and narrowing down to the one: What are your must-haves in a property?

Once you have selected an agent and defined your budget, you can begin exploring properties. The first step (and preferably the only step) is to decide what you want in a property.. Here are some helpful tips to  help you select the one that will best suit your needs 

  • Set your budget as mentioned previously.
  • Define  the amount of rooms/bathrooms that’s suitable for your family and guests.. Consider that the more you have, the more guests are going to come and stay, which is something you may or may not want.
  • Check the condition of the property. Are you looking to buy a move-in ready home, or maybe you have the patience and would prefer a project?
  • Decide on furnished or unfurnished. Many houses have amazing qualities, but the furniture just doesn’t help, and choosing the right furniture can boost living quality.. On the other hand the previous owner may have  hired an interior decorator, so they have done the work for you 
  • Choose an architectural style. Do you want something more contemporary, or you are looking for a colonial home as you already have a modern house back home?
  • Pick your area, not only if it’s trending but having local schools, parks or hospitals nearby, traffic patterns, amongst other things, are also extremely important depending on your preferences.

Once you’ve identified the type of property you want, the agent or broker will help you find suitable properties in the area. It’s important to take your time and look at as many properties as possible to better understand the different areas in town, and ensure you find the best one to suit your needs. 

5. Making an offer: How to make a competitive offer, and negotiating the price

Once you’ve identified a property you’d like to purchase, the agent or broker will help you negotiate the purchase price and terms. This includes arranging a payment schedule, if applicable, and a closing date.

In it you’ll  include the list of furniture that you would like to be part of the agreement, as well as what is not included, as for the artwork in most cases.

Both parties have to sign the final agreement, and the agents or brokers are the ones going back and forward until everyone is in agreement.  Signing this or any documents that are not Notarized, are perfectly legal and valid to be signed using a service like Docusign.com, as long as it goes straight to each party’s personal email address, making it easier and quicker to finalize.

6. Housing Inspection: What to look for during a housing inspection.

After agreeing to the terms of the current contract, the buyer has five working days to send a trained inspector to the property to check the roof, structural, mechanical, electrical, and gas delivery installations, plumbing, drainage, and any other systems that they feel necessary. 

The inspector will note if anything needs to be replaced or fixed. The written inspection report is delivered within 3 to 5 days to all Parties—Buyer, Seller, and Brokers. 

The buyer may choose to terminate the contract by giving written notice to the seller and the agents engaged in the transaction if the inspection reveals serious problems, and all, if any, initial payment will be refunded to the buyer minus the Escrow cancellation fee charged.

Choosing the right inspector is crucial. He should be unbiased and give his professional opinion on the property. Choosing an inspector that could have personal issues with an agent or a seller can result in misinformation, or elevated unnecessary repair costs that could damage the agreement and final transaction.

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7. Signing the contract: What to consider before signing a contract.

Once the inspection is complete and you’re satisfied with the condition of the property, you will sign the contract.

For most people, buying a property is a simple process but can feel overwhelming. After all, it’s one of the most important purchases you will make in your life.

The type of property that you purchase can and does influence which one is the best for you and your goals. However, there are plenty of factors that you must consider before deciding on your property purchase. Consider the following before signing a contract with an agent:

  • The contract should be written in as many languages as necessary to be understood and clear for everyone.
  • Make sure that the property described is the one in question – double check the size of construction and land.
  • Ensure that your basic information is correct.
  • Is the payment structure as agreed on the offer?
  • What are the penalties for defaulting on payments?
  • Your agent or broker has to make sure that all the legal papers on the house are met for closing.

8. SRE permit: In order to purchase property in Mexico, you must obtain an SRE permit.

Once the contract has been signed based on all the agreements previously stated in the offer, it is safe to ask for the SRE permit.

In San Miguel de Allende and anywhere in Mexico except the Restricted Zones (100-km wide along land borders or 50-km wide along coastlines), you can buy real estate even if your immigration status is that of a tourist. Regardless of your immigration status, all expats must obtain a permit issued by the Mexican’s Ministry of Foreign Affairs (SRE permit) before the property’s deeds can be put in your name.

As a foreign buyer of property, you must agree to be treated as if you were a Mexican citizen with respect to your ownership of the property. In doing this, you agree not to revoke the protection of your government. On the other hand, your government will not be able to touch or appraise the property in case you have any issues in your home country. 

Pro Tip: Power of Attorneys

If for some reason you know you won’t be able to be in Mexico to sign the request for the SRE Permit, or in the case that you won’t be able to attend the closing with the notary, you can always opt for a Power of Attorney. It’s advisable to assign it to either the same notary that is going to sign the deeds, or someone you really trust. If you’re in Mexico at the time, it’s best to do it before leaving. 

If you have to leave in a rush and want to get things moving, you can get the POA drafted by a lawyer or the same notary that you’ll have to sign before a public notary in the US or Canada. Once signed, you will have to get the Apostille from the Secretary of State where you live. This can be easier with Apostille Pros or Apostille.net as suggestions. Once you have done that you have to send back the original document via DHL shipping or FedEx to the notary’s offices.

9. Escrow account and earnest money: Securing the purchase, what is an escrow account and how does it work?

Escrow is a service that helps buyers and sellers to split the cost of an account. It’s also a third party who monitors the transaction until it has been completed, at which point they release payment from one side to the other.

Opening an account is usually split between the two parties, and it’s a minimum of $300 USD for each side, depending on what escrow company you choose to use.

Note that sometimes one of the parties might not want to use Escrow in the transaction as it is not a custom in Mexico. This can complicate things but it is up to the agents or brokers to mediate as much as possible, and come to a compromise. The usual amount for any transaction is 10% of the agreed purchase price, the amount is deposited in the escrow account, and is what is supposed to be paid if something goes wrong with the transaction of property. The downside is that the buyer will not be able to negotiate the price based on the amount of down payment, as regardless of the amount, the seller will not be able to touch it as long as the transaction is not finalized.On the other hand, the money will be safely kept in the account and can easily be transferred back to the buyer minus the Escrow cancellation fee charges.

10. Closing with the public notary: Making it official, what is the role of the public notary in Mexico?

The public notary is a person who has been approved by the government to conduct the formalities of registering one’s title to a property. Unlike US Notaries, becoming a public notary in Mexico is more difficult due to the extent of their designated legal powers. The public notary is an experienced lawyer who is required by law to give legal advice and authenticate documents to ensure they are legally binding.

Notaries are responsible for making sure that all the paperwork and payments regarding the property are in order, verifying that there are no existing liens or other title problems delivering a clear title, registering it with the public registry, and ensuring the payment of the capital gains for the seller. 

At least 3-5 days before the closing, the buyer will have to ensure to deposit the remaining purchase price balance and the closing costs in the Escrow account. Closing costs are about 5% of the sales price, 4% of which is an acquisition tax that goes to the city and the notary fee is normally 1%. The notaries’ fees and closing costs are compensated by the buyer, while the seller is responsible for the transaction commission and the capital gains.

Note: If the property was purchased 3 years before the resell happens, the seller can transfer some of the acquisition tax to the new buyer, resulting in having to pay a little bit more than half of the usual closing costs.

IMPORTANT UPDATE: New Requirements for Property Buyers in Mexico

On Friday, May 12, 2023, the presidency made an announcement requesting that all Mexican citizens and residents provide their RFC (Cedula Fiscal) when submitting the transfer of ownership for properties.

To ensure a smooth process, it is crucial that both Mexican citizens and temporary/permanent residents are registered with SAT (Servicio de Administración Tributaria), the tax authority in Mexico.

We kindly urge you to verify that if you fall into either of these categories you are properly registered with SAT. This step will help facilitate the transfer of ownership and ensure compliance with the new requirements.

Church of the Immaculate Conception, Centro, San Miguel de Allende 

11. Deeds: Transferring ownership.

The deed is a legal document that transfers ownership of a property from the previous owner to a new one. It is written in Spanish, but an official translator will read the draft to you in English in real time, which is quite impressive if I might add. Once both parties have signed the deed in front of the notary, he will inscribe it into the Public Registry, (Registro Público de la Propiedad). This usually takes between 1 to 3 months, depending on the amount of work they have.

12. Final adjustments so you can enjoy your new home

Now you’ve signed the deeds and the seller hands you the keys to your dream home, there are still a couple of things to take care of before settling down in the lounge chair on your brand-new rooftop. 

Electricity

With a simple copy of the deed that the notary will provide, you need to go to the electric company’s (CFE) offices downtown and make a new contract.

Phone number: 415 150 7400 or just dial 071
https://goo.gl/maps/feMZbsiqXJuyRfrc9

Water

Same thing with the water company, SAPASMA. On some occasions the water in a condominium can be included in the HOA, so no need to make a new contract, just ensure you ask exactly who you need to pay it to. In any case, water is your right, so either the company or the HOA can’t cut it.

Phone number: 415 152 4429
https://goo.gl/maps/x7TQ2HtLMh7VZgSf8

Gas

Most of the properties have gas tanks so ask where the tank is and how to fill it up. Usually, the previous owner had a preferred gas company, so they’ll definitely know how to fill it.

There are several trustworthy gas companies that come to your house, here is the contact of some of them:
Gas Nieto: 415 152 7777
Gas Noel: 415 155 8077
Gas Romo: 449 210 2564

Note: In the case of being part of an HOA, it’s important to ask about the condition of it, does it have any reserves, what are the costs, and what are they used for in the complex.

Last Thoughts:

Buying a property in Mexico can be a complex process, but it doesn’t have to be overwhelming. With the right preparation and guidance, you can make the process easier and ensure that you find the perfect property for your needs.