Closing Expenses run from a minimum of about 4% to as much as 10%
Closing costs are a crucial aspect of any real estate transaction, and LaVenCabo is here to help you navigate them. If you’ve participated in a property transaction in Mexico, you may have been surprised by the closing costs. If you haven’t yet experienced it, be prepared for some unexpected expenses. Here’s a brief overview of what these costs entail and why they vary.
Total closing costs typically range from a minimum of about 4% of the purchase price for high-value properties to as much as 10% for more affordable ones, with an average somewhere in between. Some costs are fixed, while others depend on the property’s sale price.
The largest expense is usually the acquisition tax (ISABI), which is a flat 2% of the purchase price in pesos at the time of closing, payable by the buyer. Since most purchase agreements are in dollars, the exact amount won’t be known until closing, when the current exchange rate is applied to the dollar figure and then multiplied by 0.02.
Other variable costs, generally calculated as a percentage of the sale price in pesos, include:
- Notary fees
- Appraisal fees
- Registration fees at the tax office (Catastro) and public registry
Fixed fees may include:
- Foreign Affairs Ministry permit and registration
- Preventive notice
- Certificates confirming no liens and property taxes paid
- Trustee bank acceptance fee and first year’s fee
- Closing coordinator’s fee
- U.S. bank escrow fee for purchase money control
- Preliminary title report
The closing coordinator will provide the buyer with an estimate of closing costs as soon as the deal is reached. The buyer will then be asked to deposit 50% of these costs immediately into a special trust account maintained by the coordinator for closing expenses. This advance payment is essential because, unlike U.S. practices, substantial sums must be paid upfront to initiate the process and move toward closing.
The remaining costs are typically due a few days before the scheduled signing. The final total won’t usually be confirmed until several weeks after the signing, when the fideicomiso is presented to the public registry. All costs are meticulously detailed in the buyer’s final closing costs statement, with any necessary refunds provided.