Closing On Properties In Mexico
Video Transcript - (Speakers: Alex Koper & Anthony Young)
Anthony: It is Anthony Young over here at MoXi, and I'm taking a very special opportunity to talk with our CEO, Alex Koper, about some common questions that I'm getting from my clients concerning buying real estate in Mexico. Very happy to have Alex set some time aside today to answer some of those things.
Alex: Well, awesome. I'm really excited to be here. Thanks so much for setting this up, Anthony. This is going to be fun. I don't often get to hear every day what are common questions that clients and potential clients have about what we do. So pretty excited to hear about those.
Anthony: One common question I get is, what kind of timeframe can someone expect when closing a transaction in Mexico? In the US, someone can say, "Hey, I got a 30-day contract, 45-day contract", and you can almost set your watch to that. What differences do you see when related to financing a property in Mexico?
Alex: Okay, cool. Well, yeah, that is a great question, Anthony. And you're right. You could totally set your clock by it. I've even heard in some areas of the US, especially during the peak of the real estate boom post covid or in the middle of Covid, that there were transactions closing in 17 or 20 days, and that's definitely not the case in Mexico. I think it really depends on a number of different factors, many of which our clients or potential clients can't necessarily control. So this is where the expertise of the MoXi team comes into play and is really valuable for buyers and or potential re-financers of property in Mexico.
So our legal and closing team is looking at every aspect of the property, including the way that it's vested. So in a purchase transaction, the seller can either hold the property themselves in a fideicomiso because they're a foreigner or the seller may be a Mexican entity or a Mexican person or people. And so in that case, the property wouldn't be vested in a fideicomiso, right? So it really depends on the structure of the subject property and how it's currently held and that will dictate the timelines.
So in the example or in the instance where the subject property is owned in a fideicomiso already and the buyer is buying it and using MoXi financing also to be in a fideicomiso, then the MoXi team will look at either of two paths forward. One would be to transfer effectively that fideicomiso from the seller to the buyer, and that would involve what we call a substitution of beneficiary as well as a substitution of fiduciary in many cases, right, switching the bank that manages the fideicomiso to the one that's approved through MoXi, as well as switching the beneficiaries. So the seller is relinquishing their interest in the property in favor of the buyer.
So that could elongate the cycle time a little bit longer than, for example, a situation where the seller of the property is a Mexican corporation or a Mexican natural person. And there are a lot of different ways that you go about doing that, right, in the event that you are modifying or changing the fideicomiso in favor of the buyer, that could take, depending on the fiduciary bank that currently holds the fideicomiso, it could take as long as 90 days just to do that substitution. It doesn't mean that that substitution happens, 90 days passes and then we start the rest of the process. I think what many maybe don't know is that while the substitution or and or cancellation of the fideicomiso is in process, MoXi is working on all of the other items that are required in order to do a legal property transfer in Mexico.
So at a high level, regardless of whether you're paying cash or using MoXi financing, in order to do a legal close, I think it's probably important for folks to understand that those cycle times are going to be likely 45 to 90, maybe even longer days depending on various different aspects of the transaction. MoXi has in its past done transactions in a shorter period of time. Our record is 23 days and that was a property in a non-restricted zone. But it really just depends on so many different factors. So I think it's probably safe to assume 60 to 90 days. There are situations and or circumstances, transactions that can happen in a shorter period of time and even in a longer period of time. I think the other really important thing to mention here is MoXi will and our customers rely on us to ensure that properties are transferred legally and that the buyer actually owns what it is that they're buying and we're going to make sure of that.
So we're looking at everything from the title to ensuring that the construction is properly manifested with the right legal entities in Mexico. We're also looking to ensure that if the property is subject to a condo regime, that has been properly recorded with the public registry. So we're checking all of these various different aspects of the transaction to ensure it records legally and that the MoXi client actually has the asset that they're paying for. So I think that all goes into the time it takes to close a transaction.
It's interesting, for clients that are legally transferring the property, regardless of whether or not they use financing, it's the same amount of time. So MoXi has this process down pretty well, right? And a number of these areas are digitized to the extent that they can be to bring the cycle time down to as short as a timeframe as is possible legally, but it really is immaterial.
So whether you pay cash or whether you do financing, a legal closing is a legal closing in Mexico and the cycle time is no longer than it is when you're paying cash. If anything, I think the investment that MoXi has made in the process, the legal transfer process, results in a shorter cycle time. So I think we could all probably point to those situations or circumstances where MoXi's ready to fund the escrow and do the closing, but the buyer and seller maybe aren't, or the real estate agent or the notario isn't. So, I don't know. Hope that's helpful.
Anthony: It certainly is. Thank you. That was a very well-worded answer. I have noticed most success when I'm advising my clients in situations where they have a realtor before even getting a pre-qualification, that we have that conversation as soon as possible even before the contract is written. And I do advise those clients to write their contract for 90 days with a 30-day extension because legal property transfer is longer than we are used to as US citizens and US taxpayers.
Alex: I think that's a really good point, and I think the other cool thing that I've seen you do is really hone in with the real estate agents. So either the one representing your client, the buyer, or the one representing the seller of the property to get information about the property and get that ahead of time. So when I've seen you do it before, right, when you're getting all of the documentation that comes in, the signed, stamped public deed as an example, then we know right up front, is this property held in a fideicomiso, is that fideicomiso going to need to be canceled or can it be modified? Who is the bank that currently manages it? What are their cycle times? Some of those banks take 90 days to do this substitution or cancellation. Some of them only take 10 days.
So the MoXi team knows all of that. And the diligence that you do upfront is hugely important to reducing those cycle times and setting proper expectations so that folks can write their offer, and buyer and seller can be on the same page with respect to how long the transaction's going to take. So I think that's awesome. I love that you do that.
Did you know that MoXi funds & services loans in USD, is regulated and audited in the US & Mexico, and ensures compliance throughout the term of your loan?
Try our MoXi Mortgage Estimator