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Misconceptions of Property ownership in Ajijic, Lake Chapala, Mexico

An article describing the misconceptions of property ownership in Ajijic, Lake Chapala, Mexico


There are some misconceptions out there about purchasing Real Estate in Mexico that persist even though the laws changes decades ago.

The most common one is that you have to own properties in a trust here. This isn’t true if you are buying property in the interior of the country (60 miles or more from the ocean). You can have a direct deed with right of survivor-ship just like the rest of North America. If you only have one property here you can name a beneficiary right in the deed but only if they are your child or parent (if you want to leave the property to someone else in a direct deed you should do a Mexican will).

If you are a married couple, the beneficiary is only significant if something happens to both of you at the same time. Should your spouse pass away their 50% goes to you but this does not happen automatically and you must have their 50% put into your name by a notary. 

If you purchase in a direct deed you must sign what is called an “Application to Exterior Relations”. It is a document that states that you are buying the property in Mx. under the laws of this country and that the laws and rights of your home country are waived. This needs to be signed prior to closing and the current cost is around $550 pesos per person ($1,100 pesos for a couple).

I have also had people ask if you need an FM 3 visa ( one year renewable visa that allows you to come and go as you please) to purchase property here?

No, you can purchase property here with a passport and a tourist card.

You might want to get an FM 3 once you are here or at your closest Mexican consulate because it allows you to bring your personal possessions in to the country duty free.

You have 6 months to take advantage of this option.

If you get your FM3 outside of Mexico it must still be registered here once you arrive to be valid but the unregistered visa will work for the purpose of bringing your household goods in.

The other advantage to having an FM 3 is that when you sell your house you’ll need it to avoid capital gains tax. Capital gains is quite different here and the rules have changed several times since I have been here. Basically, if you own the property for 6 months and have 6 months of phone or electric bills in your name and have had an FM 3 for 6 months in most cases you will be exempt from capital gains because it is deemed to be your primary residence. I say in “most cases” because if your lot is more than three times the larger than the amount of construction you have then you are taxed on the remaining property. For example: your house is 200 square meters and your lot is 1000 square meters: You take three times the construction ( 600 sq meters) and subtract that from your lot size which leaves 400 sq. meters. You will pay capital gains tax on those 400 sq. meters.  

If you don’t meet the requirements for exemption, the most obvious difference here is that capital gains tax is based off of the municipal appraisal value that is done when you buy and the municipal appraisal value when you sell. What you pay for the property and it’s actual sales price don’t factor into the equation. For example, if you buy a house for $200,000 and the appraisal value is $120,000 and you sell the property for $320,000 and the appraisal is $180,000 the tax is based off of the difference between $120,000 and $180,000 (not the actual sales prices). I know this all sounds very complex and illogical but if you have questions in this area please contact me so I can take you through it in more detail.

I don’t want to confuse you further but you can only claim exemption on one house per year and raw land is never exempt ( because the exemption is only for primary residences).

There has been a trend lately to mention the actual sales price of the property in the deed ( unless you request otherwise only the appraisal value is mentioned). This will increase your closing costs from the notary a few hundred dollars and could increaser your property taxes ( small amount) but can help with capital gains down the road. This option is like an insurance policy against capital gains but it needs to be explained on an individual property basis. If you are silly enough to buy from someone else just make sure you ask about this as a possible option ( not all realtors will bring it up ).

There are also some ways to reduce your capital gains ( write-offs for various expenses and appraisal reductions) but there are too many factors to be specific here.

The important thing to know here is that Mexico is not the U.S. and you need someone to guide you through this process. 


You can set up a trust as well and some people choose this option if they want to leave themselves more options in terms of who they leave the property to and freedom to sell without their spouse ( couples both have to sign off on the sale of a property in a direct deed). A trust is set up with a bank and you are the sole director of the trust. The trust is not an asset of the bank and if the bank goes out of business the trust must be assumed by another bank. The downside to a trust is that they charge around $600u.s. per year and over the long haul that can add up. The best way to determine which options are best for you is to sit down with your realtor and a notary. In my experience most people have chosen to go with a direct deed but every case is different and I wouldn’t rule out a trust because the probate on a trust is quite simple and you can tailor a trust to meet specific needs.

Notarios ( Mexican Notaries)

In the U.S. and Canada it is quite simple to become a notary and isn’t a position of much respect or responsibility. Not so here. They must be a lawyer for 5 years then go to Notario College. There are only so many designated per capita and they are the only ones who can handle real estate transactions. They represent both the buyer and seller and are responsible to both.   

When you leave a closing (usually held in the notary’s office) you are given a copy of the deed. This document needs to be registered by the notario and that process takes 30 to 120 days. If you haven’t received your registered copy (with the registration page added at the back) in that time period call your realtor and yell at them. You need the registered copy to sell the property again.

Not all notarios are the same or interpret the laws the same way and it is important to choose one best suited for your purchase.

Purchase Agreements

Is a purchase agreement in English legal in Mexico?

Yes, however if you ever needed to submitted to a court or the government for what ever reason it would have to be translated by an official translator into Spanish. In my years of experience this situation has never come up but it could if the sale is mis-handled.

The MLS system here has a standard listing agreement. It is fairly straight forward because such a high percentage of transactions are “cash”. If you would like a copy of a standard two page contract. please contact me and I will forward it along to you and answer any questions you might have.

Is a U.S. power of attorney legal in Mexico?

No. If you can’t do one while you are here, it must be done by a Mexican consulate or sent to the Secretary of State of your state to have an “apostile” attached. Even then, some notaries require that to be sent to a Mexican consulate to be stamped and translated. Bottom line here is that if you are going to do a power of attorney get it done in Mexico

( by far the best option) or the Mexican consulate nearest you. Before you have it done at a consulate, have your realtor and or notary check the wording of it to make sure it meets the specific needs of what you are trying to accomplish. Believe me you don’t want to do it twice.

Closing Costs

Most of the closing costs are based off of the municipal evaluation that is done when you buy a property. The buyer is responsible for all closing costs incurred.

A typical closing statement from your notary will look something like this but some percentages and amounts change of course depending on the appraisal value.

Most of the fees are dictated on a fee schedule from the government so the prices between one notary and another don’t usually vary all that much.

( This house actually sold for $308,000.00 U.S. it is just an example and your house may appraise at a higher or lower percentage of the actual value so you won’t be able to use this as a guide to guess at your closing costs. It is just meant to show you the list of expenses that go into a closing.)

Based on a house that has a municipal appraisal of $1,203,500.00 pesos.

Municipal Transmition Tax $25,025.00 pesos

Registration Fees $2,025.00 pesos

No Liens and No Debt Certificates $500.00 pesos

Cost of Doing Municipal Appraisal (“Avaluo” in Spanish) $4,152.00 pesos

Notario ( notary/ lawyer) Fees $13,000.00 pesos

Goods and service tax ( I.V.A) on Notary fees $1,950.00 pesos

Government issued forms and foliated pages $575.00 pesos

One application to Exterior Relations ( add $550 if it is a couple buying) $550.00 pesos

Total $57,675.00 pesos

Note: Things like property taxes and home owner’s fees that have been paid for the year are pro-rated to the closing date.

If I haven’t covered a topic of interest to you please let me know and if you have any questions about the above I am happy to explain.

Article by:


Conner Collins

Director of Sales at Collins Real Estate

+52 (33) 2969 2068  /

Conner Collins is a 20 year resident and trusted realtor in the Lake Chapala area.

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