Congratulations! The next steps in your home purchase

I have created this template to better explain the process of your purchase and I wanted to share it with you.

Congratulations on your home purchase, you’re on your way to owning a wonderful new home in this magical city. I will be coordinating with you all the next steps and paperwork as we move toward a successful and efficient closing of your home.

I’d like to help walk you through the next steps as we move forward toward your closing date. I’m addressing the steps below roughly in the order in which they occur, sometimes some paperwork may occur sooner or later than the order shown below. It looks like a lot of information and you may want to store this email somewhere for easy reference throughout the process, but you’re also always welcome to ask me questions anytime!

  • Obtaining copies of your passport, Tourist Visa & Driver’s License: likely we will have already requested this, if not, we need this immediately because all legal documentation must duplicate your name as it is in your passport. As you read more below, you’ll see why we need these other documents.
  • Determine if you need a Power of Attorney: again, we will likely have addressed this with you by now. If the duration of your stay in San Miguel is long enough, we encourage our clients to consider a Power of Attorney or POA (called a “Poder” in Spanish) as a sort of insurance policy in the event you may not be able to travel back or be present in San Miguel on the date of closing. Even retirees with few commitments can occasionally find their ability to travel on an exact date compromised by unexpected health or family issues, so this simple process—which costs roughly $200 USD—can guarantee that you can fulfill your contractual obligation to meet your closing date because property-transfer closings in Mexico must be attended by a physical person, whether it be the new Buyers of the home or their POA. Filing a POA in person here in San Miguel is much easier than doing it long-distance once you’re back home, but it entails an appointment with the Notario and a translator (all legally-recorded documents are written in Spanish only), so it requires about 24 hours’ advance notice. And if you have not had time to create a POA in person here in San Miguel, we can still do the process long-distance, it simply requires an Apostille from your Secretary of State, which then must be shipped back to us via DHL—this process is more expensive and time consuming than just creating a POA here in San Miguel.
  • Ordering your property inspection: Please reply back as soon as possible and confirm that you wish for us to order a property inspection for you—as per your contract, we only have seven calendar days in which to remove your inspection contingency so we will need to request an inspection date with the professional inspector as quickly as possible. The cost is generally $300 USD, sometimes it can run $50 more if there are numerous fountains or similar water features or is an extraordinarily large home, and sometime it can run $100 more if there is a swimming pool and/or hot tub. If you confirm your wish for the inspection within this first 24 hours, we can generally get the report back within four days, allowing you roughly two days to review the report. As a reminder, homes in Mexico are generally sold on an “as-is” basis, excepting issues that would affect the habitability of the house, so the goal of the report is to learn what issues might affect your ability to safely inhabit the home, then ask the seller to address or credit you the cost of any potential repairs necessary to inhabit the home. Inspectors here are fairly comprehensive in their reports, so they will also list such minor maintenance issues as doors that might stick, a missing cabinet pull, a poorly built window that might allow water seepage, etc…, but these are not issues that are considered ammunition to try and further negotiate on the price. If you recall, I wrote into your contract that the Sellers will address or credit repairs up to a $500 limit (generally), so we know that the Seller, at worst case, will provide a $500 credit toward habitability repairs. Whether they will address habitability repairs more expensive than that limit then becomes a negotiation point, and if they refuse to address or credit those repairs above that limit, you can refuse to remove the inspection contingency and be recused from the purchase contract before you have deposited any funds. I will review the report before I send it to you and advise you on any issues that I feel are noteworthy.  Once you then provide us written authorization in an email to remove the inspection contingency, any funds deposited into Escrow thereafter will then be considered nonrefundable.
  • Applying for your SRE permits: all non-Mexican foreigners are required to apply for a property- specific permit to purchase property as a foreigner—it is a “rubber-stamp” process that requires no qualification, but can take a minimum of five business days (in non-pandemic times) to process and the Notario managing your closing must receive this SRE permit prior to the closing date. Applying for this permit requires a copy of the Tourist Visa you received when you flew into Mexico from the airlines, that is why I would request a scan of your Tourist Visa before your departure. If you do not anticipate returning to San Miguel for the closing at least five business days prior to the closing, we encourage applying for this SRE permit as soon as possible, preferably when you are still in San Miguel. It is an appointment that must be made with the Notario in order to receive your signatures on the application, but is a quick appointment at a cost of only roughly $150 USD per person named on the deed. If you have created a POA, your POA can sign this application process for you.
  • Refining the Offer to Purchase with a “Promesa de Compraventa:” Simultaneously with the inspection, we will request that the Notario who will conduct your closing (the Notario is like the title company and closing company, rolled into one entity) prepare a more formalized version of the offer contract—which is already legally binding in court because it is bilingual—with a Mexican document called a Promesa de Compraventa. This Promesa includes a legal metes & bounds description of the property (because sometimes in San Miguel street numbers are duplicated) and also identifies all parties to the contract with legal identification. As per our standard offer contract, we have a maximum of seven business days in which to complete this document and receive the signatures from all parties, although we try to complete it sooner.
  • Opening and signing the Escrow Agreement: Simultaneous with the above steps, I will create an escrow agreement that must be signed by both parties to the purchase contract, although scanned copies are sufficient. We need your signatures on the Escrow Agreement in order for it to be opened and ready to accept your Earnest Money deposit, which will be due a maximum of ten business days after the initial Offer to Purchase contract was finalized with dual signatures from all parties.
  • Removal of your inspection contingency: we will forward the inspector’s report as soon as we receive it with any notes applicable from myself. If there are issues affecting your ability to inhabit the home, I will work with you to negotiate the Seller’s repair or a dollar repair-credit toward the purchase price, if necessary. Once you are satisfied that the home is fully habitable or that the seller will address a credit or repairs to make it so, then we will need an email back from you authorizing the removal of the inspection contingency.
  • Funding the Earnest Money deposit: Having removed the inspection contingency, this means that you are ready and willing to move forward on the purchase of your new home and will show good faith in doing so by depositing the contractually stated Earnest Money amount, most often ten percent of the purchase price. You may fund this amount as early as eight days after the date of the dual-signed offer (i.e.. after you have removed the inspection contingency), but must fund this amount no later than ten business days after the dual-signed offer contract. In order to ensure funds are received and confirmed in the escrow bank account located in Citibank in New York, I advise you to make this wire transfer two days prior to the date it is due in Escrow. I will remind you of the details needed to send this wire transfer as soon as your inspection contingency is lifted by re-sending you the signed Escrow Agreement which contains all the information needed for sending the wire transfer (i.e.. account and routing numbers, etc…) for your Earnest Money deposit—it is contained in Box 5 of the Escrow Agreement. Please email us a confirmation of the wire transfer once you have sent it, we will then send you back a confirmation of receipt of those funds once the Escrow company sends us that confirmation. These funds, once sent, are nonrefundable even if you do not move forward with the purchase of the home.  PLEASE NOTE: we always recommend that you use personal funds for this escrow deposit, i.e., funds from the personal bank account of the buyers to be named in the deed. The next step below details paperwork that must be completed for all sources of funds coming into escrow, and if money is received into Escrow from a business account or person not named in the deed, then there is a substantial amount of additional paperwork that must be provided on that corporate entity (i..e, Spanish-translated and Apostilled Articles of Incorporation). Historically in cases of emergency, the Escrow company has allowed the initial Earnest Money deposit to be sent from a corporate entity, but then the actual Buyer then fully funds the 100% purchase price later with personal funds and the corporate funds are simply returned to the corporate entity, thus eliminating the need for the translated Articles of Incorporation.
  • Choosing a Property Manager: Although there is no rush for a final decision on this, I always encourage that our clients engage a property manager well before closing so that the property manager can plan to attend the closing and receive all the keys, utility statements, and any instructions to be handed down from the Seller’s property manager for the operations and staff for the house. I will recommend our valued property management team, although I am happy to provide a half-dozen alternatives, if you wish to comparison shop (rates are nearly identical, it is reputation that varies). I advise, if possible, that you meet or talk with them in advance of closing, and if there are potentially complicated issues with your new home (i.e., pool or hot tub maintenance, etc…), then your new property manager can schedule an on-site appointment with the prior property manager for a better, smoother transition. The property manager’s role is invaluable for having a bilingual contact to be able to call at 3:00 a.m. should a pipe burst or a similar emergency, but they also manage payment of your utilities, property taxes, and, if you like, the house staff. They also are excellent advisors on the periodic maintenance needed on both the home as well as water filtration systems, pool equipment, and similar equipment requiring regularly-scheduled maintenance. And if you will be renting your home when it is not occupied, they are equally invaluable at ensuring the success of your rental income stream, from which they typically charge a 20% rental management fee.
  • Completing the “Know Your Client” paperwork as required by the Escrow company: Mexican money laundering laws require that all parties sending funds to escrow and named as owners in the new deed to complete—with our assistance guiding you—a form called the KYC, or “Know Your Client” which requires personal data from all parties to the offer contract. I will help you complete this form but it must have an original signature from each buyer or their POA.  There is no time-frame for completion of this document, it simply must be completed before funds are finally disbursed from the Escrow account after closing. This document also requires a scan of either your driver’s license or a utility bill showing your U.S. residence address.
  • Receiving the estimate of closing costs: Closing costs in San Miguel de Allende can run roughly 5.1% to 5.3% of the contractually stated purchase price of the actual real estate. From the beginning, you should earmark roughly that amount to be sent with your final 90% purchase price balance, but roughly a week from the closing date we will send up updated estimate of these actual costs. There is a 4% acquisition tax that is based upon the price of only the real estate, not any value that may have been placed on furniture included in the sales price, and the balance of 1.1% are the Notario’s fees and city-required fees (the recording fee, the new city appraisal, etc…). The Notario will provide a breakdown of these expenses for you, which are required to be paid in Mexican pesos. The Escrow company must transfer your deposited U.S. dollars to pesos for these closing costs, and therefore we will quote the Compra Rate from Banamex bank, the institution-based quote used by the Escrow company, when I give you this estimate of closing costs. Because of potential exchange rate fluctuations between the day you receive this estimate and the actual day of closing, our Closing Transaction Coordinator will add generally $100 USD to the closing costs to cover that potential exchange rate fluctuation, and any unused funds in escrow will be refunded back to you.
  • Review of the Settlement Statement: roughly a week before closing, our Closing Transaction Coordinator will send you—along with the above-stated Closing Costs—a Settlement Statement that will show the credits and debits to each party to the transaction. This will include such fees that might have been incurred by you earlier but not yet paid (inspection fees, SRE permit fees, etc…) and will also include any prorations that need to be accounted, such as if the Seller had prepaid property tax for the entire year. You will have the opportunity to preview this document prior to the closing.
  • Sending in your final escrow deposit: As stated above, roughly a week before the closing date, you will have received the above two documents and often at the same time, our Closing Transaction Coordinator will have sent you the “Total Amount of Funds to Transfer” to escrow for your final payment. This will include the 90% balance of the purchase price, and also the total of those closing costs, which are then disbursed from the escrow account to all the various parties involved in this process.  We will remind you again of the wire transfer information from Box 5 of the Escrow Agreement, and you should plan to send these funds as soon as you receive this figure from us, but no later than three business days prior to the closing date.  Once sent, please send us a confirmation of that wire transfer, we will then send you back a confirmation of receipt of those funds from the Escrow company as we did before.
  • Attending the closing: substantially prior to the actual closing date, I will have advised you of the actual time for the closing, and I will send you a reminder again the day prior of the time and address location, as well as a reminder to once again bring your actual ID documents (passport and, if applicable, residency visa) which must be presented in person to the Notario. If you have ever read Francis Mayes’ book “Under the Tuscan Sun” where she describes her experience of closing on a home in Italy, the experience is somewhat similar here—the process is held squeezed into a tiny room often also occupied by other people working on computers and phones, with people coming in and out during the process, and it can seem a bit of a distracting process to Americans accustomed to the somber solitude of a closing room in the U.S. In Mexico, closings are typically attended by both the Buyers and the Sellers, although in about perhaps 30% of our transactions, one or both of the parties will instead be represented by their POA. In this closing process, the deed by law is required to be drafted only in Spanish (it is a legally-recorded document, thus the Spanish requirement), therefore the Notario is obligated by law to have a translator present who will read the deed aloud to all parties, answering any questions you may have throughout the reading. There is no English-translated version of the deed document offered, and although we have never had a client request one, you may order an English-translated version of one after the closing for an additional fee. Once the draft of the deed is read aloud, potential corrections will be made (misspellings, etc…), then a formal, folio- number document will be printed for wet signatures by all parties. Simultaneously, all parties will also sign the Fund Disbursement Instructions (often called an Exhibit B to the Escrow Agreement), which authorizes all the funds deposited in escrow to be released to the various entities involved in the closing process The Notario will then send a scan of both documents to the escrow company, which authorizes the escrow company to disburse those funds. Upon completion, the Seller will hand over keys, their “termination of rights” to the utility accounts (which remain open and still operable, but with a zero balance since the Sellers will have paid them to-date), their termination paperwork of the existing house staff—which you can then immediately re-hire—keys, and any paperwork related to the house for your property manager. And at that point, congratulations are in order for everyone!
  • Any referrals you may need, anytime: this is an open-ended offer, I am here to provide any referrals you may need at any point in this process to help you with the transition to your new home in San Miguel, from a residency visa expediter, moving company, contractors, architects/general contractors, even lists of good restaurants, or resources for finding out what is happening in town. Please don’t hesitate to ask us!

Again, I realize this seems a lot to absorb at once, but I will be here in constant communication to guide you through the process, Berkshire Hathaway Home Services has managed hundreds of these transactions with clients exactly like you, buying a home in Mexico for the very first time. I am available for any questions whether by email (preferable) or WhatsApp in an emergency (my contact info is below), but please remember to always copy me, as I am the one who will most be in contact with you through this process. We look forward to guiding you through a smooth closing and welcoming you to your new home in San Miguel!
Warm Regards

Tracy Moss
MX 415 1245607