You are Not in Kansas anymore, Dorothy!
Understanding the International Marketplace
By: Cheryl MIller, Broker, Baja Realty and investment
Real Estate in Mexico….with Mexicans
An interesting thing happens in real estate here in Los Cabos that bears some discussion. Foreign buyers, from the United States, and from other parts of the world, come to Los Cabos expecting the process of purchasing real estate to be the same as their native countries, as well as their home regions. Nothing could be further from the truth. What may be acceptable and expected negotiating behavior where you are from, may be offensive and deal breaker to the person you will be negotiating with here in Los Cabos. This is an international marketplace, governed by Mexican law, but involving a myriad of cultures, languages and social expectations from the transaction. Even when the transaction is between Mexicans, the differences between the cultural and social standards from one part of the country vs. another part of the country can be daunting.
There is no doubt that the negotiating style of a business man from Manhattan or Mexico City varies greatly from the social/cultural negotiating expectations of a person from Baja California Sur or even small town Georgia. And although either style may be a winner for you in your home base, in an international setting it may actually be a detriment to a successful “deal”. So getting to know the other’s party’s cultural and social expectations is key to a win-win situation.
Among some cultural differences to make note of when dealing with a Mexican Seller or Buyer here in the Baja are as follows:
1) Real Estate for Mexicans can be for investment, but, for the vast majority, holding property, is a legacy for their family. Selling is not usually done, unless there is a purpose, need or emergency. Family values are very strong in Mexico. Selling their family patrimony is a serious and may be an emotional time for a Mexican Seller.
2) The concept of Escrow is foreign to the majority of Mexicans. It is something that traditionally was performed by Notarios … holding money for a transaction. Up until about 5 years ago, when the tax laws changed, this tradition was used and benefitted most Mexican transactions. However, since the tax law changes, the Notarios no longer can hold money without a) being taxed as income on “trust” money, b) the money MUST return the depositor’s money, if requested by the depositor and c) some Notarios will not take responsibility for the deposit, either in cash or check. So, what used to work as Escrow in Mexico for Mexicans, no longer is safe, particularly for the Seller, and thus is not accepted by members of our MLS BCS. Most Mexicans, are not aware of the changes to this long traditional method of holding money. Most will ask for a Notario to serve in this position, and it may take your realtor quite a bit of explanation to educate the Mexican that this is not a good choice in a real estate transaction.
Escrow is an American tradition, with about a 200 year old history. But it is new to Mexico.Many Mexican metropolitan lawyers have noted how needed Escrow is to Mexico now, but it will take time for it to be generally accepted and a complicated thing to accomplish now in light of the new tax laws.As such, paying Escrow fees, for a Mexican Buyer is, the majority of time, a strong objection.
3) “Time is Money Concept”. Culturally, Mexicans do not have the same concept of time as do persons from the United States or Canada. A deadline is looked at more as a “goal” rather than a fixed and final date. Here in Los Cabos, your realtor will be in the background assisting the closing agent to meet deadlines, not only with the Buyer or Seller, but with the myriad of other players: banks, Notarios, appraisers, government agencies. But delays do happen. Don’t get annoyed or stressed, it will not change the situation. In fact, any outward disrespect can land your file, right on the bottom of the pile.
4) Relationships. In Mexico, relationships are most important element in any transaction. Respect, is tantamount. Discussing personal items, getting to know each other prior to discussing business is an important step. Greetings and ending salutations are a sign of breeding and education. Hardball scare tactics, insults, pressure and vulgarism is not a successful tact here, whether that be in the form of a verbal conversation or a written offer.
In Mexico, the Buyer pays the closing costs and Escrow fees, and the Seller pays the commissions. In the United States, closing costs may be shared, not in Mexico. An exception may be that the Seller will need to pay for Escrow to safeguard the funds, if the Mexican buyer refuses.
5) If you are a foreigner with a trust, a Mexican buyer will probably have no use for your trust. You will be responsible for paying the bank fees to cancel the trust. Some educated, wealthy Mexicans MAY choose to assume your trust, as it is a good vehicle to “will” property to their heir without probate court, but it is rare.
Truth is tempered by need for diplomacy. For persons from the United States or Canada, direct, truthful answers are imperative. Truth is an absolute concept. For Mexicans, truth is relative. A Mexican would rather say yes, than disappoint by directly saying no. Culturally, truth is achieved in longer conversations and in the understanding of their position and circumstances. Listen, carefully, the truth is being stated, just not directly.
Of course, in Los Cabos, we have real estate transactions between persons from all over the world. Between persons form US and Canada. Canada and France, Mexico and Italy transactions, etc. And every one of those cultural have social and cultural traditions to be considered. In some cultures, lowballing is the norm, in others it is an insult. How do you maneuver this vast melting pot? Be sure and hire a NAR certified CIPS realtor. They were trained in the various expectations of transactions from all over the world. Lean on their expertise to guide you!
A good deal is one that all parties win.
By Cheryl T. Miller, Broker, CIPS, Baja Realty and investment, 624-122-2690, firstname.lastname@example.org