BajaNomad

Real Estate commission

gnukid - 12-12-2007 at 02:41 AM

Hi,

When selling your home in Baja, Mexico what has been your experience? Do you sign with an agency exclusive listing and offer 8% commission to the selling and buying agent? Do you simply offer it for FSBO sale and see what the buyers bring?

What has been your experience?

Is there a flat 10% IVA tax on the sale of the home? If so who pays?

gnukid - 12-12-2007 at 07:37 AM

Any ideas?

BigWooo - 12-12-2007 at 07:39 AM

Real Estate taxes are very complicated. When we sold our last place (3 or 4 years ago) it was 25% of the sale, or 35% of the gain in value from the purchase price, your choice.

It’s best to ask a good notary to figure out your potential tax liability. There are a lot of variables:

*The documented purchase price on your fideicomiso may be different from what you actually paid. Sometimes notaries will put a different price on the fideicomiso (with or without your permission) to save you money in acquisition tax. That ends up screwing you later because it shows a larger gain in value (on paper) and a higher tax liability when you sell.

*If you built on your property, your construction may not be manifested properly, or at all. This is important because proper manifestation will give you credit for the cost of construction and lessen your tax liability. If your building was not manifested properly, your notary can guide you on how to take steps to remedy this.

If you have legal residency, or are a Mexican Citizen, there is the possibility you may not have to pay taxes, or that they may be less. Only a notary can tell you for sure.

We had a notary figure out our potential tax liability before putting our last house up for sale. No surprises that way.

Sorry, I edited this a bunch, didn't like the way it was written.

[Edited on 12-12-2007 by BigWooo]

BigWooo - 12-12-2007 at 07:48 AM

One property we sold ourselves, no agent. Selling yourself requires a lot of running around to get the necessary documents. or paying someone to do it.

Once we paid 6% and another time 5%

gnukid - 12-12-2007 at 08:05 AM

Thanks

Cap gains are high, but are sometimes avoidable by doing your Manifest de casa with the catastro which documents home improvement costs and reseidency can reduce capgains completely.

But in terms of RE agency they often ask for 8-10% commission and in so doing try to lock it up as a double ended deal, that is the selling agent tries to keep all the money and pay the buying agent a refferal fee for less.

And when compared to USA agents the mexico agents dont do much work, they don't stage, they don't advertise so what are we paying for to the selling broker. For a home at 200k if they share a 8% commission thats 16k for basically nothing.

And worse most can't show up anyway.

To me it seems the selling agent does very little, in that all docs are responsibility of the selling client who should have them all at the ready, taxes, registro, recent water, electricity and the actual title inscripcion.

So the buying agent is responsible to present the offer and once accepted by the seller then bring the buyer to the notario of their choice. That's it.

Therefore it seems incredibly wasteful to pay a selling agency? or a buying agent for that matter. Especially when no regulatory laws exist and they are legally responsible for nothing.

comitan - 12-12-2007 at 08:08 AM

Gnukid

Exactly!!!!!!!!!!!!!!!!!

BigWooo - 12-12-2007 at 08:23 AM

Gnu Kid,

It's not that difficult to sell yourself. The notary does most of the work. All you have to do is run around and make sure you get the documents the notary needs. The notary will tell you what to get. Sometimes notaries have guys that you can pay to get the documents for you.

When the sale is done and it's time to sign papers, meet the buyer at the notaries office, sign documents and have them pay you in the presence of the notary.

Selling yourself requires a little effort and some frustration, but it will sure save a lot of $$$

The key is being able to communicate with the Notary. If you don't speak spanish, make sure you pick one that speaks english.

Bob and Susan - 12-12-2007 at 08:26 AM

or bring a translator that reads:light:

gnukid - 12-12-2007 at 08:38 AM

Simple question can mexican contracts be written in english and be binding?

I thought they must be in spanish.

longlegsinlapaz - 12-12-2007 at 08:49 AM

In La Paz, the current standard real estate commission is 10%!!:O There's one local company that charges 8%. There's some degree of flexibility in that some, but not all, offices are willing to negotiate a lower commission, but typically only on higher priced homes.

I signed an exclusive listing for the sale of my first casa, commission at that time was 6%, it took a full year to sell, I got my full asking price of $275K, but paid a $16.5K commission.

My second casa, I created a website, put it on the internet FSBO at $375K & accepted an offer of $360K in 4 months. ZERO commission.:yes:

Buyer pays a 2% acquisition tax on the declared selling price.

Seller is liable for approximately 30% capital gains tax on the difference between the registered value at Catastro & the sales price. If you have made improvements to the property or the constructions costs exceeded the registered value, it IS possible to LEGALLY file a revised value with Catastro, thereby increasing the true current value, and reducing or eliminating the sellers capital gains taxes. This manifestation must be done by an authorized Architect.

I had the value of both homes revised to a "tourista" construction rate on each of these casas prior to sale. On the first one it cost me approximately $5-6K to save $80K in capital gains, and $7-8K on the other to save $90K+ in capital gains. And I insist the actual sales price is the recorded amount on the sales contract.

There are a LOT of common "work-arounds" to reduce cost to both buyer & seller, but I prefer to do things legally & refuse to buy into the "but everybody understated the sales price" argument!!

FSBO is more labor intensive, but for me, a few days of my time was well worth it to have kept nearly $30K in my own pocket!!:bounce::bounce::bounce::bounce:

In my personal experience, only one of the local real estate offices puts a reasonable amount of effort into marketing homes/properties. IMHO, dealing with most offices is not a value-added experience!

All contracts must be in Spanish...English translations attached are fine, but the Spanish version is the legally binding one!

Oso - 12-12-2007 at 09:07 AM

BTW, as this thread was titled "Real Estate Commission", I thought at first it was referring to a government agency with the power to regulate licensing, censure malfeasance in real estate dealings etc. and thought it necessary to point out that no such entity exists in Mexico. Now I see it refers to the commission charged by RE salespeople, none of whom are "licensed" in Mexico. Also, some of these people use the REALTOR trademark designation under an "accommodation" with the U.S. Board of Realtors association. I personally find this highly suspect as the U.S. association exercises no supervisory control over such people in Mexico. I am not saying that EVERYONE selling real estate in Mexico is a crook. It is possible that some people have had relatively positive experiences. But I find the implied representation that the same regulatory procedures exist in Mexico as do in the U.S. to be very deceptive.

gnukid - 12-12-2007 at 06:20 PM

Thanks to everyone for the replies. I think the circumstances are summarized well by Longlegs and furthermore if you chose an agent you can negotiate whatever you choose to pay and only on completed labor, do not agree to pay a selling agent a huge amount of money for nothing.

I visited three of the top agencies here in la paz, the first which serves many gringos made and missed ten appts., the second which is among the largest and most successful agency misssed five appts with so many great excuses and the third, I simply arrived at the office repeatedly and they proceeded to draw red flags with their complete lack of knowledge of the most basic aspects of a the sale process and further incriminated themselves. So I have no choice but to do it myself, like most things here and it probably go fast and just fine with no help.

Cervisin - 12-12-2007 at 07:01 PM

Quote:
Originally posted by gnukid
Thanks to everyone for the replies. I think the circumstances are summarized well by Longlegs and furthermore if you chose an agent you can negotiate whatever you choose to pay and only on completed labor, do not agree to pay a selling agent a huge amount of money for nothing.

I visited three of the top agencies here in la paz, the first which serves many gringos made and missed ten appts., the second which is among the largest and most successful agency misssed five appts with so many great excuses and the third, I simply arrived at the office repeatedly and they proceeded to draw red flags with their complete lack of knowledge of the most basic aspects of a the sale process and further incriminated themselves. So I have no choice but to do it myself, like most things here and it probably go fast and just fine with no help.


Jejejejeje, bet I could name all 3......

comitan - 12-12-2007 at 08:15 PM

Me Tooooo!!!!!!

So....

BMG - 12-12-2007 at 10:43 PM

Quote:
Originally posted by gnukid
So I have no choice but to do it myself, like most things here and it probably go fast and just fine with no help.



....did El Chino win? Is he driving you out of El Manglito?

[Edited on 12-13-2007 by BMG]

gnukid - 12-13-2007 at 02:59 AM

Finally the question... He has gone recently, but who knows where. Muchos malitos se fue. No se por que... He is a fantasma y no existe. Bueno, el dejiste que el va a un rancho con un boleto. No se pues.

Who cares about him, I was lost in the sierra arroyos trapped i the overgrowth from the storms and the wind was strong for kiting. though on the upside, today was the final dia de guadalupe which means no more sirens starting at 3-4am followed by parades, fiestas en el sanctuario and fireworks and horns which sure are great, repeating, the parties, dancing at the church, and tomorrow muchas posadas. wahoooo!

bajajazz - 12-13-2007 at 08:12 AM

Before this thread drifted off into unrelated subjects, it was discussing R.E. commissions and capital gains taxes on sales of homes by non-Mexican residents.

As regards capital gains tax on the sale of a primary residence, the information given above completely contradicted the information put forth on another thread a few months back in which it was claimed -- by people who had recently gone through the sales experience -- that holders of FM-2 visas were exempt from capital gains.

Can someone clear up this contradiction and tell us in a definitive way the real story on avoiding capital gains tax? Thanks in advance to anyone who is willing to take a few minutes to share the knowledge. :?::?:

vandenberg - 12-13-2007 at 09:11 AM

Quote:


As regards capital gains tax on the sale of a primary residence, the information given above completely contradicted the information put forth on another thread a few months back in which it was claimed -- by people who had recently gone through the sales experience -- that holders of FM-2 visas were exempt from capital gains.

Can someone clear up this contradiction and tell us in a definitive way the real story on avoiding capital gains tax? Thanks in advance to anyone who is willing to take a few minutes to share the knowledge. :?::?:


This subject has come up a few times before, has been addressed by ( so called ) real estate experts in the Gazette, but has never been in any way clear to me. I have inmigrado status and believe that the only one who'll be able to answer that question is a notario who deals with those matters.:(

gnukid - 12-13-2007 at 10:13 AM

I found no contradictions regarding the posts here about RE cap gains in Mex? Yes you should spak to a Notario in your region. What questions did you have?

According to current heresay, if you can establish primary residency in the home for some period of time such as 2-5 years there is no cap gains. Inmigrado status would be helpful as an indicator you live here. In addition you should provide copies of bills, water, lights for the period to show you paid and live there in the house as your primary home.

A Notario is the one who receives this info for filing for cap gains tax exemption. They can inform you and prepare your filing for tax exemption, a RE accountant would assist the notario in preparing the docs. A Notario should be able to suggest a RE accountant.

As Longlegs noted, those who can not establish residency in the home for the extended period and everyone else should file a manifest de casa which demonstrates the construction costs and can be prepared by a RE Architect for the Catastro office and once approved should be submitted to the notario in advance of the close.

comitan - 12-13-2007 at 12:17 PM

For what it worth there was a house sold here in Comitan that the people had done the Manifest, but when it went through the Notario they were told it was not needed. But they had lived here long enough and had no other residence.