Financial Obligations When Selling a Property

When wishing to sell a property, it is recommended that you collect information allowing you to know in advance what the financial obligations will be at the time of conveying the property, such as: income tax, commissions to real estate agents, documents proving that the property is current in payment of services and taxes, and legal advice.

Income tax was once exemptible by proving that the property was the seller’s primary residence during the last five years. The tax laws have changed so that there are no exemptions, but if certain deductions are applied, this will allow you to reduce the tax payment.

One of the deductions that can be applied is by using the 700 thousand UDIS (Investment Units) allowed by law; however, to obtain this benefit, you must prove yourself to be a resident and taxpayer in Mexico. It is important to note that the benefit can only be used every three years.

Therefore, to formalize the sale, the notary must deliver:

  • CURP (Registry of Population ID).
  • Federal taxpayer registration.
  • Proofs of address in the name of the seller and taxpayer, which can be telephone bills, electricity bills, and bank account statements.

However, in cases where tax cannot be deducted for having used UDIS, here are some deductions that the notary will take into consideration to calculate the corresponding tax:

  • Proven cost of acquisition. You can deduct what the seller paid to acquire the property. It is accredited for properties acquired before April 2014 with the corresponding title deed, after that date, with a supplement to the invoice issued by the notary (CFDI).

 

  • Investments in buildings, improvements, and extensions. They are accredited with the corresponding invoices. It is vital to request tax invoices, not just receipts, on these investments.

 

  • Commissions to real estate agents. This refers to the amount paid to real estate brokers. As explained above, to deduct these expenses a tax invoice must be provided at the time of the property sale.

For these reasons, it is advised that you consult with a legal advisor to calculate income taxation well in advance. Furthermore, you should make estimates before listing the property with a real estate broker, since the listing price could change depending on the amounts to be paid.

The importance of urban design: a work agenda for the cities of Quintana Roo

The role of urban design in the growth of cities has been underestimated by the various key actors directly involved in the expansion of the urban sprawl. It is vital to identify the correlation between social development and quality of life in a city, as these factors derive from an urban design focused on creating public spaces equipped with basic street furniture, such as street lighting, signage, bus stops, benches and garbage deposits.

Only through urban design can we shift the mobility paradigm, if the latter is hierarchized to prioritize the pedestrian as the main character and user of the city with walkways and sidewalks, ramps and bridges in road junctions; secondarily, with bike paths, bus stops and public transport lines. This way, we place the car’s importance in the lowest position, because unfortunately, today this means of transport has become the great urban predator of space and resources.

It is a fact that well-designed cities that provide their inhabitants with an adequate environment for them to lead more pleasant lives, that is to say, an environment where they find happiness in their daily lives, become part of a virtuous circle of creative work, and generate innovative investments that enter into positive competition.

A well-designed urban space will be a determining factor in the behavior of its citizens. Streets that lack lighting, garbage deposits, bus stops or sidewalks encourage vandalism and theft. On the other hand, when we have all of these elements, a sense of belonging grows in the citizen who uses these streets, these parks or these well illuminated walkways with proper signaling, with visibility for the neighbors around. All these elements can reduce the risk of and the conditions that favor crime.

I vividly remember the case of the first two kilometers of the bike path along Kukulcan Boulevard, in Cancun, over 30 years ago. Because of its proximity to the urban area and Bonampak Avenue, a large number of neighbors used to walk and run there. When night fell, the lack of public lighting allowed for robberies and all kinds of assaults to occur, something rather unusual for a linear park with an adjoining road – Kukulcan Boulevard, that is – whereby more than 20,000 vehicles circulated per day.

No one witnessed these unfortunate happenings. The solution came by installing public lighting with lower poles, lamps with 360° lighting and twice the power as street lighting, terracotta-colored pavement contrasting with people’s clothing, and eliminating the hedges that blocked the area’s view. Crime decreased almost 100% after deploying the urban design project for the rehabilitation of that bike path.

We introduce the following proposal for both the authorities in charge of urban development and real estate developers; an agenda that we can address in each project or sector of the city that is developed, remodeled or updated with urban design activities:

Prioritizing the road system, giving preference to the pedestrian and taking it from vehicles (inverting the mobility pyramid), and developing:

  • Master plans for bike paths in the city.
  • Recovery actions for city parks: design of street lighting, street furniture, signaling and connection with walkways and cycle paths.
  • Master plan for walkways and sidewalks. Our cities and real estate projects should favor all types of pedestrians: seniors, people in wheelchairs, mothers with strollers, etc. Our aim is a universal city.
  • Firmly set specifications for real estate developments and their interconnection with roads, bike paths and, particularly, their adjoining walkways, sidewalks and public transport stops.
  • Street lighting in public areas, everywhere and at all times.
  • Reuse of abandoned buildings and vacant unfenced land lots as public spaces.

Lastly, we must recognize that awareness is of the essence for the successful operation and good functioning of any city. We citizens should put garbage in the corresponding deposits without the need of anyone watching or commanding us, we should do it out of awareness of doing the right thing, but the corresponding street furniture should also always exist.

The next step for Quintana Roo: Economic diversification

Today, we can safely say that tourism activity dominates the economic landscape in Quintana Roo: it has been strengthened over the years with the emergence of destinations that represent an alternative to the cities of Cancun and Playa del Carmen.

Novel destinations such as Tulum, Bacalar and Mahahual have made of Quintana Roo one of the most attractive Mexican states for both national and international tourism. As such, it is not surprising for the tourism sector to have reached extraordinary maturity here, with its sphere of influence exceeding even that of the Mexican Caribbean and reaching almost the entire country, that way allowing for economic diversification, a matter of utmost relevance for the future development of the state.

Building on the success of hotel investments in this state, services, materials and equipment have today reached over to other tourist destinations such as Los Cabos, Huatulco, and as far as the Dominican Republic. The local know-how, developed as a result of these successful operations, has encouraged the export of different goods and services such as food, furniture, industrial equipment for inverse osmosis (desalination equipment), pre-insulated piping, legal & managerial services, cleaning services, audiovisual services, and many other.

Quintana Roo is clearly now the home of a very own economy and manufacturing industry, rapidly expanding over to other destinations.

This growing diversification will benefit from the strategic presence of the Cancun International Airport, directly connected and at the same distance from cities such as Los Angeles and New York, Bogota and Houston, Atlanta and Panama, CDMX and Santo Domingo, Guatemala and Miami, and more. This airport is also a direct entry point for Europe.

On the other hand, a new economic approach is also needed; an approach focused on the corporate side of things that can address not only regional needs, but also national and international needs, including all of Latin America and the Caribbean. Such an approach would open the door to new real estate investment in Quintana Roo that would accommodate its emerging business economy, this way further developing and diversifying other economic hubs, so as not to depend so heavily on tourism and the hospitality industry.

In several ways, there are certain parallels between Cancun and Miami: both cities are located at a peninsular end in the Caribbean, both were conceived from their inceptions as tourist hubs, located in once-inhospitable areas lacking communication channels at the time. Miami is today an important financial axis wherein large companies operate for the US, Mexico, the Caribbean and South America. It is clearly not necessary to reinvent the wheel, it is just a matter of replicating and modelling after success stories.

banner-RM

Riviera Maya, will it grow upward or outward?

All over the world, it is accepted and expected for large cities to grow vertically. But that is not so much the case in small and mid-sized cities, where development usually happens horizontally. Hence, it is usual that, as the latter expand, different visions will arise regarding the direction that urban growth should take: apartments in tall buildings vs. houses.

The present short piece aims at raising awareness on this matter, as it relates to a destination such as Riviera Maya. Although this destination has a small population and has shown mainly horizontal development in housing, or in the form of low-rise apartment and hotel complexes, today it faces an accelerated population growth and with it the chance to switch to a well-planned vertical growth.

Would a pair of modern and iconic towers be well-received in Puerto Morelos, Playa del Carmen or Tulum? For many, such would be a bad bet, yet for others something natural and necessary. Cancun already has several towers that have had good acceptance among the population; is it because it is considered “an actual city”? Or is it because for years several tall hotel buildings have been built there? Towers are currently under construction in Merida, and even planned communities include land allotted for height housing in their master plans, as they aim at offering a diverse and comprehensive concept.

The current trend all around the world is to build thinking vertically, due to the advantages this represents. Vertical growth is the answer to many practical issues, among them the optimization in the provisioning of commodities such as drinking water, drainage and electricity. It also concentrates populations in smaller radiuses, this in turn resulting in savings in commuting times and fuel, thus reducing pollution levels.

Although there are urban planning criteria that serve as a decision-making basis for designing cities, it is of utmost relevance to take into account the specific characteristics of a given destination, including the tastes and needs of future buyers, which should be considered by the developers over the permits they can get. Underground rivers, the footprint in the jungle, existing ecosystems, wildlife habitat, and natural hazards such as hurricanes are some of the other variables that should be factored in when it comes to vertical development in the region.

Density can be another advantage. By transforming a horizontal project into a five-levels vertical one, on the same land and with the same number of units, its environmental footprint will diminish without a doubt. This will double the space available for green areas and social interaction. Now, if the buildings were even higher, the free construction area would logically increase even more. But, how many levels are optimal? Vertical projects in new large developments (100+ hectares / 247+ acres) carry with them a huge responsibility: to keep balanced the total number of houses, square meters and levels to be built, and most importantly, the environmental footprint generated. This in order to ensure that a high percentage of land is destined to conservation and spaces of social interaction.

Riviera Maya is in perfect time to define the type of growth it will have. The most important factor to consider when it comes to new developments is and will remain to care for the environment, both flora and fauna. Vertical projects can be the answer to the momentous growth in the region, always that balance is maintained between the environmental footprint they generate and the surface allocated to green and conservation areas.

The relationship between the real estate agent and the notary

Clients need to have sound knowledge of the distinct stages and actors in the real estate market. This is important whether they are making their first acquisition, a subsequent purchase, an investment, or a settling into a retirement property. Besides the clients themselves, there are two other parties that play a momentous role in these transactions: the real estate agent and the notary public.

The notary is a legal professional who attests and grants legality to any agreement entered into by the parties. Since impartiality is inherent to the position, the notary does not voluntarily intervene in the other negotiations. Providing legal certainty to the parties involved is one of the notary’s main functions. Toward that end, the notary also executes the below actions.

  • Checks the validity of the documents presented by the selling party and validates that the agreement can be carried out accordingly.
  • Obtains the corresponding certificate of no lien from the Public Registry of Property. This paperwork indicates the current status of the property regarding ownership, the existence of a lien, limitation of ownership, etc.
  • Confirms that there are no Cadaster irregularities and verifies that the owner is up to date with contributions and water service.
  • Confirms the identity and capacity of the people involved, and, where appropriate, the matrimonial regime or powers intended to be used.
  • Calculates, withholds, and pays the local and federal taxes resulting from the sale for any of the parties, as appropriate.
  • Registers the new deeds in the Public Registry of Property so that the buyer is recorded as the new owner. This is of vital importance, as the effects of the Public Registry of Property in the state of Quintana Roo are constitutive of rights, not merely declarative. This step also protects the privacy of third parties.

 

The role of real estate agent is also of utmost importance. The agent, who may either be affiliated with an association or act independently, is a professional in the real estate field. Independent operations or affiliations with an association do not affect the merits of the position. However, it is important to note that associations keep the guild updated and provide additional support to the agent.

Apart from the sale itself, real estate agents are responsible for locating ideal properties for clients, as well as provisioning the legal framework of said properties. The agent should know the physical state of the property and any possible faulty condition that may exist. Likewise, the agent is the first point of contact for property documentation. Additionally, the agent will provide market and profitability information to clients, along with market growth projections and investment opportunities.

Clearly, it is well known that, in practice, the relationship between the agent and the notary is complementary. The two parties are external to the real estate transaction, and they are both inherently obligated to cooperate and support the parties involved. The agent and notary are responsible for providing data and information that can generate legal certainty, and they are expected to act as intermediaries. They are responsible for maintaining contact with each other throughout the entire acquisition process, not just the sale.

Riviera Maya, a highly profitable tourist gem

Riviera Maya’s weather, location, infrastructure, and tourist industry have made this location a very attractive and highly profitable place in which to live, invest, or vacation. A favorite of national visitors, international tourists, and retirees, this destination has proven the economic strength from its many attractions by registering a permanent double-digit growth rate. This has made foreign investors eager to pour their resources into this beautiful region.

Today, Riviera Maya stands out as one of the strongest developments in the area. There are several upcoming innovative projects involving tourism, industrial parks, residential areas, corporate buildings, and shopping centers that will further enhance this gem. Data from the Association of Real Estate Developers (ADI) reported that the members’ investments will reach 90 billion dollars by the end of 2018.

The latest Lamudi Real Estate Market Report (2018) described the state and its peninsular area as a very dynamic market, where vertical housing and mixed developments are expected to attract residents in cities with high growth rates. Such is the case of Playa del Carmen in Quintana Roo, which, in recent years, has grown exponentially because its supply is valued in dollars. This is due to the strong and permanent presence of foreign visitors.

 

Real estate opportunities for everyone

Where to buy or invest? There really is something for everyone here; from very ambitious commercial projects, to new vertical housing developments scaled for both investment and living. Riviera Maya also has made earnest efforts in building the best luxury shopping center in Mexico, which showcases premium brands and first-class entertainment.

 

Looking to invest?

Investment through mortgage credit (purpose loan) is still very much in demand—even more so when it is supported by the advice of a mortgage advisor. This credit specialist works with the main banking institutions in the country and has full knowledge of all mortgage products. These services and support are provided at no additional cost.

The latest offering in credit arrangements is the Presale Credit, through which many developments have multiplied their sales. This credit is issued before the house is completely constructed. The bank grants a certificate under which the rate is guaranteed and remains frozen for six to 24 months. Additionally, the financing institution can grant a personal credit of up to 20 percent of the value of the home to those lacking a down payment. These benefits make it possible to invest in real estate on presale.

Investing in or purchasing property is not a simple decision to be undertaken lightly, thus it is important to consider the different financial angles to get the best credit offer. The mortgage advisor will visit your home, office, or wherever you choose and make the appropriate bank proposals after an analysis of your profile and needs. This white-glove treatment will help you choose the best option.

“Whoever gets out of the real estate business does so because they don’t know what they’re doing.”

-Warren Buffett

AMPI and the INFONAVIT mortgage mobility program

The Mexican Association of Real Estate Professionals (AMPI*) has signed an agreement with Mexico’s National Workers’ Housing Fund Institute (INFONAVIT*). By this means, AMPI members are given access to the Institute’s real estate listings through the new mortgage mobility program called “CAMBIAVIT”, allowing users to buy, sell, and exchange their homes through a real estate professional. This program will be available to more than 4,200 AMPI members so that potential clients can be assisted with their real estate transactions. Using this approach, in one year, members would be able to cover up to 70,000 of the credits offered by the INFONAVIT and even increase that number, depending on the amount of interest and scope generated by the program.

This will guarantee growth of the real estate sector, since two properties will be commercialized for each transaction. The borrower will upload the property he wishes to sell onto the INFONAVIT web portal and he will be able to choose one of the AMPI consultants to handle the process for advertising and selling the old home and then purchasing the new home.

Borrowers of INFONAVIT credit benefit from this program due to the reduced cost of notary fees and property advertising, while for AMPI members, the program formalizes promotion of INFONAVIT credits and provides direct access to the Institute’s real estate listings.

Real estate consultants who are interested in this program must demonstrate the knowledge and ability required for handling INFONAVIT home-buying credit, which they achieve by being certified in Competency Standard ECO903 “Specialized Promotion of INFONAVIT Credit Products” issued by the National Council for Standardization and Certification of Labor Competencies (CONOCER*). In addition, they must be AMPI members and be registered in Mexico’s Housing Registry (RUV*). Accordingly, the AMPI’s Training, Research and Statistics Center (CCIE*) will be providing training and refresher courses, as well as certification in this program.

The impact of the new airport on the real estate sector

In the opinion of the president of the Mexican Association of Real Estate Professionals (AMPI), Alejandro Kuri Pheres, the project for the construction of Mexico City’s New International Airport (NAICM*) cannot be detained. Given that it is a multi-million dollar investment, involving both national and international financing, its construction is not dependent on the decision of any candidate in the upcoming presidential election.

To date, the new airport project has generated more than 70,000 jobs during the construction phase, while its operation will open up around 400,000 new job opportunities.

The land left behind by the current outdated airport – approximately 1,976 acres – is being scrutinized by the country’s real estate specialists, and projects are already in the works to potentially use the land to build a grand avenue, a new university city, a zoo, urban parks, and other attractions that will jump start the area’s economy.

 

The symbol * indicates that the preceding initials are the Spanish-language acronym for the organization’s name.

INDUSTRIAL INVESTMENT IN RIVIERA MAYA

In addition to the growth in tourist and residential infrastructure, Riviera Maya’s industrial sector is also on the rise. One of the most outstanding projects in this dynamic region is Pangea, the highly-expected Logistics Center of the Southeast, still under construction.

This building will stand 20 kilometers from the International Airport of Cancun and five kilometers from the pier of Puerto Morelos, in the location that used to hold the Industrial Park of Puerto Morelos, on a total area of 84 acres (34 hectares) intended to house 160 national and foreign companies.

This development will group together local, national and international free trade agreements aimed at supplying the hotel chains of Quintana Roo with products such as sheets, furniture, construction equipment, meat products, food and beverages, among others.

Requiring a Group E private investment of 500 million dollars, 250 of which will be invested in the construction of the building, this will be a two-stages project. The first will consist on a focal point for the supply of local, regional and national products aimed at the industry, mainly hotel, in the northern area of ​​Quintana Roo. It will have warehousing units, a cold-storage network or refrigeration area to store a high variety of perishable products, a hotel with no less than 250 rooms, an assembly department, banks zone, offices, business lounges, restaurants and convenience stores. The second stage is much more ambitious: It will bring together a marine supply and export center that will take advantage of and expand the current pier of Puerto Morelos for ships that are small and easy to maneuver.

The idea of ​​launching this project dates back to 2016, arising from the invitation extended to hospitality businesses by the Secretary of Tourism, Enrique de la Madrid, for them to replace their imports with domestic production, this way fostering economic diversification by taking advantage of this strategic geographical location and of the national and international airport connectivity. We must not forget that the state of Quintana Roo is Mexico’s access to the Caribbean Sea and the connection platform to a large part of the world through one of the largest airport centers in this area of ​​Mexican territory. Undoubtedly, this opportunity opens the door for the development of new economies and investment, not only in tourism, but also in logistics and commerce.

 

PRE-CONTRACT: THE PRIMARY CONTRACT OR THE PROMISE TO CONTRACT

In the real estate market, it is common to hold pre-contracts, also called primary contracts or promises to contract. This is due to various circumstances, among them: the flow of capital, the temporality of the stay of the parties, or remodeling and adjustments agreements to the property so that it is in optimal conditions and out of any fault in its delivery, first instance at least.

It is very important to determine the nature and effect of these contracts, as many people believe that by entering into a “promise of sale”, “a promise of assignment of rights” or a “promise of trust”, they acquire the rights owned by the “buyer”, “transferee” or “the” trustee “; being that, in the event that the contract was bilateral, the obligations and rights acquired by both parties for the celebration thereof are future but well-determined.

It should be noted that both parties must be willing, the subject matter of the future contract must be lawful and possible, and the price must be certain and determinable. It must be borne in mind that the natural consequence of signing the pre-contract is entering into the promised contract and not the sale, trust or assignment of rights in and of itself.

All investors, whether national or foreign, must be aware of their actual contractual position; that is, the improvement of the main contract should not be confused with the will of the parties to hold a specifically nominated contract in a certain and determined future, even when the pre-contract contains the elements of the main contract.

In the particular case of promises of assignments of rights, it must be specified that only what one actually possesses can be assigned. In that sense, we must refer to a real right or to a contractual position. A real right is that which weighs on a specific property and the ownership that is held over it, while the contractual position may refer to rights to be acquired over it. This is where the kind of contract entered into between the parties becomes relevant.

The above being said, the legal certainty generated by the signing of pre-contracts is not aimed at real rights, as it is rather limited to the certainty of signing a specific contract in a certain and determined future. It is of utmost relevance to clarify this to the investor, since, as law professionals, lawyers and notaries, or commercial intermediaries and brokers, must be obliged to legal certainty and law compliance, as well as to correct advice and information. Thus, the invitation to keep investment within the State is reinforced, thus avoiding capital outflow.

We must be inclusive and generate certainty with information, investment with legal security, movement in the real estate market with the correct advice; let’s take investment by the hand, so that the closing process is always safe, through the correct channels and with the greater information and security that the law generates.

Public Relations in Real Estate

By YAHAIRA GAVIDIA – RP GUIDE

Why is a real estate public relations strategy important? Successful public relations management of a real estate product can mean positioning the real estate professional as an expert in the local market. It can also mean publishing an article about why it is a good time to invest in the sector, or obtaining coverage in different types of media in order to spread the word on events being carried out in the real estate project. There are different ways to influence the buyer’s decision through formal communication, so it is important to create a strategy with clear objectives.

Public relations are often confused with free publicity or with sending random press releases. However, in order to be effective, it requires considerable, time-consuming effort dedicated to creating alliances, communicating messages, and implementing activities.

Exactly what are public relations? They are what the name implies: the relationship between brands and the general consumer. While a large part of public relations is focused on managing editorial content in the media, it is not the only thing that should be taken into account when a brand or a real estate project is intended to be positioned long term.

 

Some basic suggestions for establishing a real estate public relations strategy are:

  1. Maintain a constant presence in the media. This requires being available at all times to make statements, and being consistent in the truthfulness of the information provided the media. Understand that they need a continuous flow of readers/followers, and help them in their labor – this will provide editorial spaces that aid in positioning a company.
  2. Create content that is of interest to the target audience. We often want to send the media our latest news expecting it to be published immediately, but it is worth asking ourselves whether it truly corresponds to a general interest or to a market trend. Does it provide useful information for the potential buyer/investor to make a final decision?
  3. Take advantage of our own media. We live in a digital age that allows us to immediately and pervasively upload our stories on the web, blogs, newsletters, and social networks, among other media. The challenge is to keep the content current and up to date with a rapidly changing market.
  4. Create alliances with journalists and industry opinion leaders in order to share information, ask for recommendations, and work together to create trust in the market. In the long run, this benefits everyone.
  5. Engage the community through social events such as festivals or races, participate as speakers in universities and associations, and raise funds that benefit non-profit organizations. All of these are effective ways of creating brand trust among the general public.

 

Consistent, transparent, and sound public relations open communication channels with potential clients, so they must be a part of any strategy for commercializing a product or real estate brand.  The credibility that causes a third party to write or speak well of the brand has multiple benefits above and beyond traditional sales schemes. However, carrying out these recommendations involves prior implementation of a good public relations strategy.