If you bought property in Mexico and now you’re thinking about selling it, this article will help you understand what you need to know to help you make that decision. It will provide you with insight specifically to the Riviera Maya, a market where there is No MLS.
No MLS Makes Your Property Practically Invisible
The Riviera Maya has not centralized database with all the properties listed for sale. This makes finding your property like looking for a needle in a haystack. Another disadvantage to having no MLS is that consumers don’t have the data to know what the prices should.
Multiple Markets within the Market
The Riviera Maya has many locations such as Playa del Carmen, Tulum, Akumal, Puerto Aventuras, Puerto Morelos, etc. Within each market there are areas and neighborhoods, which can be like submarkets. Lastly, within each market or submarket there are two markets, resales from private sellers and developer direct inventory both of which can be ready for delivery or not built yet.
The safest investment that will ensure the consumer have the most positive customer experience is to buy a ready for delivery resale where the owner has already fixed any defects during the 1 year warranty period. Fully furnished and turnkey can also save buyers tons of time from having to furnish and decorate themselves.
Be Competitive with Price and Commission
Private sellers have to compete with developers and sellers with price and how much commission they pay unless they have a very unique property. Developers pay double commission, the buyer’s side and seller’s side to the buyer’s agent. With resales the typical commissions are 6%, but split between 2 agents. Many agents avoid selling resales because they get paid half of what they would make if they sold directly with a developer.
Pay a Bonus to Make Your Property Visible
Because there is no MLS, the consumer is most likely never going to find this property unless the buyer’s agent shares it with him. Therefore, a 2 or higher percent bonus is necessary to level the playing field and make sure your property gets the exposure it needs.
Advertise Directly to the Top Agents at the Best Companies
We advertise directly to the top agents and brokers so they will promote our listings to their clients. We have broker open houses so these agents can get to know the property and then they can more effectively sell your property to their buyers.
Best Time to Sell is After Delivery
Ideally, a real estate agent would have the keys to your actual unit to be able to get it sold. This way the buyer gets to see the space and view in person. Unless you’re willing to give a huge discount for buying presale, it’s going to be challenging to sell your property site unseen.
Another reason to wait is that the longer you wait to sell, the better potential there is for a profit. Developers steadily increase their prices during construction until delivery. If you wait, there is also a better chance that there will be less developer inventory to compete with.
One challenge of selling presale is that developers will not allow access to your unit prior to delivery and even if there is a model unit it could be a different lay out and view of the actual unit.
Selling before delivery puts you at greater risk of losing money because there are often distressed sellers fireselling their units just to get their money out of the investment.
Easy To Show/Rental Management Incentives
In general, a property needs to be easy to show in order to get it sold in a reasonable amount of time.
If you’re going to rent it out, make sure you work with a property manager that will try to facilitate showings when it’s rented out. You will want to offer incentives to the renters to get access, also. Avoid working with property managers that won’t allow showings when the property is rented.
I advise against renting the property out if you are under a time restriction.
Sometimes renters won’t allow access. The income you make for the rentals is very small compared to what you’ll get from the sale and should not be a priority.
If your place is already furnished and it’s going to take a year or two to sell, then perhaps you want to get some income while it’s on the market.
It usually takes 2 to 3 years minimum for a property to appreciate enough for you to make the money back to cover furniture and decorations.
How Long Will It Take to Sell?
The time it takes to from listing a property to getting it sold usually takes at least 1 year in the Riviera Maya with some areas like Akumal and Tulum taking 2 or more years. The main reason for this is that it’s mostly a cash market here. Financing options aren’t as attractive as they are back home and the rental income isn’t usually sufficient to cover mortgage payments over the full 12 months.
Even with paying bonuses and being very competitive with price, you have to have a lot of patience especially in Tulum where there is an oversupply of inventory and in Akumal, which is a smaller town that has a lower demand than Playa del Carmen, Puerto Morelos, or Puerto Aventuras.
Timeframes for Closings
If a property is already titled, and you get an accepted offer the timeframes depend on what bank holds the trust and whether we need to transfer that trust to another foreign buyer or extinguish the trust to transfer the property into the name of a Mexican citizen. We could say 45 to 90 days would be the average timeframe.
Process takes can take longer if not Titled Yet
If the property is not titled yet, the process can take longer unless the developer allows for an assignment of rights, where the developer drafts a termination agreement for the original buyer and a new contract for the new buyer with the same terms and conditions.
If the developer doesn’t allow an assignment of rights, then you have to do two closings, which could take up to 6 months.
Some developers don’t allow the assignment of rights because they feel it puts them at risk with anti-money laundering and tax laws.
Capital Gains Taxes
Capital gains tax can be as high as 35% of the gain for foreigners in Mexico, but there are strategies that can help reduce this tax, such as writing off the real estate commissions and other closing costs. Usually, if you can get the tax down to about what you’d pay back home, then you can get a foreign tax credit and not have to pay taxes twice.
You should consult with tax advisors in both countries to analyze your individual tax situation.
Some Important Questions To Consider
- Do you have possession of the property?
- How urgent is it to sell?
- How often will I use the property?
- Should I furnish and decorate or just sell it unfurnished?
Everyone’s individual circumstances are different as well as their levels of motivation. If you’re thinking you might want to sell your property some day, it’s never too early to start planning. Book a call with us as soon as possible so we can help you achieve this goal.
