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Baja real estate is hot – don’t let it burn you.

By Patrick Osio, Jr./HispanicVista.com

   November 24, 2006

 

  

 

Baja real estate is hot – don’t let it burn you.

By Patrick Osio

 

During the first weekend and Monday of last August, The Park at Malibu, a detached residence development along the Tijuana, Baja California coast opened sales and sold all 43 residences. The houses ranging in size from 1500 to 1900 square feet were priced from $190,000 to $230,000 but are ocean views not beach front property. According to the director of marketing, 80% of the buyers were from the Los Angeles, Orange and Inland Empire counties.

At present there are 57 developments with over 10,000 single residence/condos or lots ready to build on inventory with a sales value of over $3-billion. Reportedly sales along the Baja corridor are in excess of 100 per week over 90% to US citizens. Beach front properties range in price from the low $300,000s to the mid $600,000.

The two main attractions to buyers are the comparatively low prices of Baja coastal residences versus the immensely high costs of California coastal properties, and the proximity to the California border.

But, it wasn’t that long ago that California newspaper carried articles on the eviction of Americans who had purchased property in Baja. So the question begs what if anything has changed to make today’s buying frenzy safer than it was not so long ago?

Foreigners cannot take title to property within the “Forbidden Zone” 100 kilometers (62 miles) from an international border, or 50 kilometers (31 miles) from coastal waters. Property title is placed in a bank trust with the buyer as the beneficiary of the trust that for all intent and purposes provides the same rights as having title. But there is much more to it than that, there are considerations on beach property “Federal Zone” (50 meters from high tide) where no one can have ownership, and construction cannot infringe without a Federal right to use permit. Buyers and investors should become acquainted with such laws.

There is the topic of title search to avoid the very problem so many Americans faced in losing their property just a few years ago. Now there is the presence of US based Stewart Title and First American Title both active companies issuing title coverage, so knowing which developments have undergone intense title search is of importance. Also of importance when buying pre-construction or not completed housing is providing specific escrow instructions for releasing of funds to a developer based on progression of completion or as a better alternative, having the escrow company (US title companies doing business in Mexico provide the service) hold the funds until delivery of property, or having the developer post a completion bond in favor of the purchaser.

There is a Mexican immigration requirement for those buying or even leasing property, which requires an FM3-Rentista visa be obtained otherwise the buyer has no standing in Mexican court in the event of any dispute.

There is the topic of real estate professionals – or are they? Baja is quickly moving in the direction of licensing requirements for real estate sales as legislation is pending and expected to be approved in this year’s state assembly session. As of yet, licensing is not required so great care must be exercised in choosing one’s agent. The state of Sonora is at present the only state requiring real estate practitioners be licensed.

A newer service is the availability of mortgage or construction financing provided by GE Capital of Mexico to US citizes with a number of other US lenders to soon follow suit. Previously some lender would lend to US citizens based on the equity of their US home, this has changed as now mortgages are available based on creditworthiness not tied to home equity.

A 24 minute documentary video produced by TransBorder Communications containing aerial photography of the Baja coastal corridor showing the numerous developments in various stages of construction, and interviews with a number of experts titled, “The Baja Real Estate Boom: Opportunities & Pitfalls,” was premiered at a one day conference at UCLA Extension University last September 14th.

Now comes the news that Donald Trump in association with Irongate, a real estate development firm based in Los Angeles, will be constructing three 25 story buildings as a condo-hotel. This news has increased the interest and sales activity in the Baja corridor.

US buyers need to remind themselves that entering into real estate transactions in Mexico is not the same as in the US, and that because the coastal (or other property) is a bargain compared to US prices, does not mean one should abandon precautions or not seek professional advise.

Precisely because this is far too often forgotten, many Americans are then sorry later when they find that possibly the deal was to good to be true and lose the property they thought they had bought.

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Patrick Osio is the Editor of HispanicVista (www.hispanicvista.com). Contact at Posiojr@aol.com

 

(The opinions expressed by Patrick Osio, Jr. are solely his and do not necessarily reflect those of HispanicVista.com, editorial board of advisors or it’s contributing writers.)

Patrick Osio, Jr. has written a short but intensive manual on the Mexican perspective on numerous issues between our two countries. The manual is an in depth primer on the culture and protocol for better understanding Mexicans that in turn allows establishing personal and business relationships, and how to avoid the most common faux pas that can ruin relationships and business deals.

The manual is available through Electronic delivery for $9.95 making it possible to download the manual for save on your hard drive, printing its entirety or particular sections while reaping considerable savings over printed copies.