Real estate investments are certainly profitable, making it a good idea to get started in the market sooner rather than waiting in order to make the maximum profit. Real estate prices are so favorable right now that many people are tempted to get into the market and start investing. Of course real estate investing is a risky business, making it important for all aspects of the property, and the real estate agent selling it, to be checked out.
First, caution must be taken because there are real estate agents that are ignorant about the local market, are not bonded, not licensed as well as those who don't properly check out properties. There are phony real estate agents out there who operate only to take down payments under false pretenses with no intentions of ever returning them. Property buyers or sellers should use an escrow or third party services of similar nature. Stewart Title in Houston and Fidelity Title in New York offer escrow services. These escrow companies will keep the money in an account in the U.S. until the terms and conditions of your agreement have been met and the money can be disbursed.
Second, the property's title will have to be checked before the deal is made final. Many titles to various real estate properties have issues surrounding them. Another route is to get an attorney who can obtain a clear title to the property you wish to purchase Also check whether the seller has a U.S. title clearance and a Fideicomiso. If he doesn't, there are possibilities that the land or property has title issues. But, if a Fideicomiso is already in place, there is no guarantee that the title doesn't have other problems. It is therefore necessary to play it safe by getting some title insurance before the deal is struck. But then, even this is risky. It is possible to pay for the insurance coverage and then never get the appropriate papers from your agent. By dealing through the escrow agents, you can however avoid this problem. These escrow agents are recommended by authentic real estate agents and enjoy attractive incentives to ensure that your cash is disbursed as it was agreed on and your deal hassle-free.
And third, real estate deals can be difficult, complex and pricey to close. Foreigners buying properties near coastal regions or borders are required to obtain a permit for foreign investment and hold the land/property title through a bank trust (the earlier discussed Fideicomiso). These trusts for doing the necessary services charge about $300-500 annually. This amount is extremely well explained in your trust documents; therefore, you can ask your agent to dig around to get the best possible deal. Also factor in the transfer tax that will be due, and may be sizeable. The fees due at closing can be close to $7,000, and this amount can't be recovered during the time the property is in the process of being sold. And, there's no point underreporting these transfer values because that is considered illegal and large fines can be imposed if caught. If you do this or allow the seller to do this, then you will be yourself accountable for the seller's capital gains. The simple fact is that the capital gains will have to be paid, and if the seller doesn't do it, the buyer will have to. You need to therefore mention in your contract that the seller doesn't receive any money from your end until he has paid all his capital gains.
