Retirement in Puerto Vallarta--why an Exclusive Buyers´ Agent in Mexico?
So, you’ve reached a point in your life where you think that you’ve learned a little about business, finance, contract negotiating, real estate, etc. and have at least a layman’s knowledge of law pertaining to each. Being that savvy, you might even be aware of the incredible retirement locations and values south of the border; furthermore, you might even be considering Mexico as your retirement destination. If so, you might as well forget everything you’ve learned and leave your law degree at home! Mexico, as beautiful as it is, has a somewhat different way of doing business and a completely different set of laws.
Additionally, all legal transactions, including real estate transactions, are done in Spanish. Therefore, for those of you that may be considering locations in Mexico as possible retirement destinations, the following information should give you some insight as to how the Mexican real estate industry works, list some of the possible pitfalls, and most importantly, give you the guidance required to assure a pleasant and safe experience.
Our introduction to the Mexican real estate industry was in 1997, when during one of our many trips to our condo in Puerto Vallarta, Mexico, we noticed an ad in one of the local papers. It was of a recently completed magnificent villa located in the “Beverly Hills” of Vallarta. We contacted a realtor friend here in PV and asked him to represent us and at the same time, give him an opportunity to earn the buyer’s side commission. He of course was pleased and anxious to show us the property. The following day he picked us up and took us to another neighborhood and showed us a half a dozen beautiful new houses. We liked what we saw but requested we go look at the villa in the ad. He then took us to another area in Vallarta and introduced us to a builder and showed us some beautiful lots where we could build the house of our dreams. We once again suggested we go visit the villa in the ad but he had just a couple more places that he wanted us to see first. Finally, around 4:00PM, we insisted he take us to the villa in the ad or we would just take a cab over to see it the next day. He reluctantly agreed, we instantly fell in love with it, and bought it. We have thoroughly enjoyed the beautiful villa for the past ten years.
Now, we ask, why was our friend the realtor so reluctant to show us the villa in the ad? The answer was that the villa was listed by another realtor and our friend was trying to sell us a home or lot listed by his company in order to earn the seller’s side commission as well as the buyer’s side commission. Not only did he miss out on the seller’s side commission, but the listing agent was only willing to pay 10% commission to any agent representing the buyer. The listing agent figured that with proper advertising, they didn’t need a buyers´ agent because in all probability, the buyer would contact them directly. So, instead of receiving 100% of the commission on one of his own listings or 50% of the commission as would occur in the States representing the buyer, he received a mere 10% commission because that is all the listing agent was willing to pay. This experience revealed the tip of the iceberg and after living here for ten years, we've finally been able to expose the entire iceberg and share some of the details below.
To begin with, there are no licensed real estate brokers or agents in Mexico! In fact, there is no mandatory licensing for real estate agents in Mexico because the Federal legislation process has yet to accomplish it and therefore it remains in limbo. So, exactly what are the qualifications for being a broker or agent in Mexico? They are essentially the same; one must know how to read and write, have free time and the ability to put a “For Sale” sign in the front yard or show a listed property, and should have access to a car and be able to drive.
In Mexico, the term “broker” refers to the boss or the owner of the agency and the term “agent” refers to the employee. With the booming real estate market and economy in PV that exists today and the qualifications listed above, it’s quite obvious why we have such a diverse group of agents and brokers in Vallarta. The off-the-cuff babbling by many of the agents is so often inaccurate or misleading that it can easily result in placing the buyer or seller in intolerable predicaments.
In order to have some degree of continuity from agent to agent, a voluntary association for real estate personnel has been formed in Mexico. The Associacion Mexicana de Profesionales Immobiliarios,A.C., known as AMPI, is quite active in Vallarta, although membership in AMPI is not compulsory and has no bearing on the capabilities of the agents representing the buyers or sellers. You’ll notice the “P” in AMPI stands for “Professionals”, however it would be an extreme stretch of the imagination to consider the majority of the real estate agents or associates in PV as “Professionals”. AMPI schedules periodic conferences, conducts educational programs, and holds various meetings where they attempt to keep their members and the public current on activities in the area as well as changes in the Mexican law as it pertains to real estate. AMPI does have a code of ethics and it does attempt to establish a uniform set of operating procedures, some of which are in writing, others understood but not documented. AMPI brings real estate personnel together in a private, non-governmental organization, where it’s members voluntarily agree to abide by the organization’s statutes and code of ethics. For sure, it’s better than nothing but still not to be confused with or even compared to associations such as the National Association of Realtors or NAR in the US. As an example, the NAR provides it’s member agencies with standard listing forms, pre-qualification forms, escrow account and earnest money forms, standard purchase agreement forms, letters of intent, etc. The NAR has written and enforceable guidelines regarding commissions and the sharing of commissions between the selling and buying agents.
In Vallarta, there are no such forms provided by AMPI. Each real estate agency has it’s own listing form, which clearly depicts the listing agent as receiving 100% of the commission upon sale of the property. Although there are guidelines for commissions, they are still to some degree negotiable with the seller. The listing agent can then negotiate commission sharing with the buyers´ agent. All other forms vary from agent to agent and are not necessarily written in the best interest of the buyer. Also, all forms and contracts for North Americans are in English; however the Spanish version is the only document that has any legal standing in Mexico. Therefore, regardless of what you read in English, a Spanish speaking attorney should always represent you along with your agent.
Another major difference between AMPI and NAR has to do with the Multiple Listing Service or MLS. In the States, the MLS is controlled and monitored by the NAR and is available to all NAR agents. In certain Mexican cities, including Vallarta, there is an MLS however it is not affiliated with AMPI. Instead, it is privately owned and operated by a local publisher and is available to the public at no charge. Of course, all realtors, AMPI or not, desire to list their properties on the Vallarta MLS.
Once you understand the inner workings of the real estate industry in PV, you need to learn a little about Mexican real estate law. It is very complex regarding trusts, escrows, mortgages, treatment of taxes, etc. and is often open to interpretation by a federally appointed attorney, known as a notario. A small percentage of the realtors in Vallarta have a fair understanding of Mexican law as it pertains to real estate transactions; however the vast majority of them are sorely lacking in this field. Even with little or no knowledge of the law, they will be anxious to advise you, right or wrong, thereby looking like “Professionals”. The best law for you to follow is caveat emptor, buyer beware!
Because of the many pitfalls that a buyer can encounter while purchasing real estate in PV, we learned a decade ago that it is wise to interview realtors with scrutiny, keeping in mind that most all will be promoting their own listings first and meeting your needs second. It’s just human nature and with virtually no control in Mexico, it’s pretty much assured. Also, because they have listing agreements with the sellers, they are legally bound to act in the best interest of the sellers, not in your best interest. Because the buyer usually has no contractual agreement with the realtor, he will in all probability get the “short end of the stick” in this conflict of interest. Of all places, in Mexico you should select an agent that is 100% dedicated to helping you find the property that meets your needs and satisfies your requirements; preferably, a contractual agreement with an agent with no listings, no axe to grind, no ulterior motive, and is exclusively representing buyers and their best interests.
A true buyers´ agent in PV should have no property listings, should have complete access to the Vallarta MLS, should know the areas and growth trends in and around Vallarta, should be able to professionally negotiate on the buyer’s behalf, should have a decent understanding of Mexican real estate law, should have a working relationship with the local notarios, real estate attorneys, escrow and title agents, mortgage agents, insurance agents, inspectors, appraisers, and lastly, your representative must have a thorough working knowledge of the local real estate industry and understand the idiosyncrasies associated with it.
Buying your dream home or condo in Vallarta should be one of your best experiences, however without due diligence, it can be a nightmare. Obtaining an exclusive buyers´ agent with 100% dedication to you is a prerequisite for assuring a pleasant beginning of your retirement in Paradise.
By: Jim Scherrer
Article Source: www.ArticlesBase.com
Jim Scherrer has owned property in Puerto Vallarta, Mexico for 24 years and resided there for the past ten years. The mission of his series of 20 articles pertaining to retirement in Puerto Vallarta is to reveal the recent changes that have occurred in Vallarta while dispelling the misconceptions about living conditions in Mexico. For the full series of articles regarding travel to and retirement in Vallarta as well as pertinent Puerto Vallarta links, please visit us at Puerto Vallarta Real Estate Buyers‘ Agents
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