Purchasing Real Estate in Mahahual, Buyer Beware!

Things are heating up in Mahahual, it seems to do that in the winter here, and along with the warm winter days, tequila nights and habanero salsa, so too is the real estate market. Which means it might be a good time to discuss a real estate issue that I believe is both totally overlooked here in Mahahual, as well as a fundamental element of any real estate transaction, and that is the manner in which you are represented. From the title, you might think I’m going to tell you not to buy real estate in Mahahual. On the contrary, I would tell all to hurry and buy now because the pre-hurricane Dean boom is starting again and prices on some properties are already going up. Our higher volume of cruise ships, Puerto Costa Maya is up 20% this year with similar increases expected for the next several years, means more people falling in love with our little slice of Caribbean paradise, and when they do, they often return to buy a piece for themselves. And they should, because it is a great investment and an equally great little town. But when you do, be aware, realtors are basically unregulated here, so the professional Realtor you sign an agency agreement with in the US or Canada, the one who has a legal and fiduciary responsibility to represent you, is not the same here and buyers need to be aware of this before they even speak to a realtor here.

In the US and Canada, the real estate industry is overseen by a national association that produces standard real estate procedures, regulations and legal, as well as ethical codes, that all professional Realtors work under. There are standard real estate contracts for example that are thorough and work well, but also cumbersome and intended to address a very complicated sales and legal process. There is no such universally used contract in Mexico and in fact, most contracts are very simple documents drafted for a specific sale, with just basic info like the legal address, price and any special contingencies either party want to include. The legal work once the contract is signed, the checking of the clear title and the procedural part of moving the ownership from one party to the other is performed by the government appointed “Notario”, and when done properly, which is almost always, is a very solid process that assures clean title and ownership of the property. You might check my previous blog on the 3 questions you should ask when buying property in Mexico for more detailed info on that process, but my point is that unlike the legal portion of the process, the sales portion is very unregulated.

In the US and Canada, there is something the real estate industry calls “agency”, which simply means representation. If you are working with a Realtor, you are typically working under a contract that legally obligates that Realtor with a fiduciary responsibility to represent you in a specific legal and ethical manner. One key element is the promise to get the person the very best deal they can. which Realtors are obligated to do. If you are a seller, they are obligated by the listing agreement to represent you in a manner that gets you the most money for your property. If you are the buyer, you are working under a buyer’s agency agreement that assures the buyer that the agent will try to get the very lowest price they can in representing them. In most states, it is not legal for a single agent to represent both the buyer and seller because of the obvious conflict, however there are some that do. When states do allow this, something called “duel” or “limited” agency, it is heavily regulated and agents are watched very closely because the industry recognizes that this is a very fine line. In Mahahual, there is no line.

One of the problems with a single realtor representing both sides is the confidentiality that goes with working with a representative in a real estate transaction. Sellers for example might tell a Realtor what their real lowest acceptable price might be, knowing that under the terms of their contract, they can’t disclose that to a buyer or they are breaking the law. In Mahahual, realtors can, legally, and often do, disclose a seller’s real lowest price to a buyer, because they they also represent the buyer and want to get the sale. Often, if it is an investor buyer, they will even turn right back around and put the property back up for sale with the higher price, getting another commission on the next sale. They have done nothing illegal in Mexico in doing that and some might argue it is just smart business. Perhaps, but in the US or Canada, even where duel or limited agency is allowed, it would have been illegal.

Having said that, it is best to then understand how most property is typically “listed” here in Mahahual, as well and how that too is not the same as you are typically accustomed to seeing. Again, in the US and Canada, Realtors contract to “list” your property and by doing so, almost always become the seller’s sole representative. In Mahahual, a “listing” most often means the seller and the realtor have agreed to a price and commission, and can therefore put up a sign, and very little else. Sellers often will even allow multiple signs from different companies on a single piece of property. Some even claim to do “exclusive” listings, which only they can sell, and still the property is on multiple web sites and at different prices.

The argument as to whether or not Realtors can get the highest price for a seller and the lowest price for a buyer in the same transaction is an abstract one I suppose but since it is my blog, I can say what I think and I happen to think, like most states in the US, it is not possible. If you are going to use a real estate representative, that person should not be also working for the opposite party. It is that simple. In defense of the realtors we have here, the way contract law disputes are settled, an unpaid commission because a buyer went around them to sell independent to another realtor is almost impossible to collect. Realtors will argue that seller loyalty and a long legal process makes exclusive listings impossible and they are probably right too.

So how do you fix this? First by simply being aware that duel representation is going on and proceeding with the understanding that yours is probably not as solid as it might be elsewhere. Watch and don’t totally trust your realtor here. Not because he or she is a bad person, because almost all of them I know seem to be very good people. You watch them because none are professionally trained Realtors, governed by industry backed regulations and the uniform practice of how to sell real estate.

Next, do a lot of the research yourself before you choose someone to help you with the transaction. Most local companies have web sites and post properties on them with prices and basic information. It is safe to say, that well over 90% of the property that is for sale in this area is posted on someone’s site. Start there and then go and meet all the local realtors personally. There are not that many and a few minutes to make a personal evaluation if nothing else, is worth the time when making a real estate purchase anywhere, especially Mahahual Maxico.

And finally, find a professional to assist and represent you in the sales process, as well as through the legal process that follows, and pay that person independent of the sales contract. Depending on the amount of time required, that service should cost between $500 and $1,000 US and worth every penny because they can save you that and much more on the sale, by simply negotiating on your behalf only. As the buyer, just figure that amount into your offer and by doing so, you are really forcing the seller to pay that service or the seller’s realtor to take that from their commission. That person might be another local realtor or attorney, anyone familiar with the process, but does not also represent the seller as an agent. If you look at property with a local realtor, clearly state to that person that you will most likely be using another person to represent you on the purchase of any property that has that same realtors sign on it. Local realtors might not like or even understand your doing this, but it is always best to apply the “other” golden rule when buying property in Mahahual, and that is; he who has the gold, rules, and as be buyer, you have the gold, so do the unregulated transaction your way. Get an independent representative and get the best deal you can. And hurry too because the market is heating up fast.

Cheers!

About talesfrommahahual

Stuck in Paradise!
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2 Responses to Purchasing Real Estate in Mahahual, Buyer Beware!

  1. Ella Georgescu says:

    Hi !
    I love your blog ! You have the gift of writing and there is so much useful info here. I intend to come to Mahahual somewhere in October to try to find a good deal for a piece of land and establish a small eco resort. Since it will be my first time there, I would kindly ask you to recommend me a notary with whom I can get in touch in advance. I would be grateful for any piece of info. Have a wonderful summer ! Ella

    • Hi Ella. Sorry I’m slow getting back. There might be some people you might want to talk to in advance, but not sure a notario is the right person?? They are more like contract judges, so talking to them for a consult is actually not something most do. I do not know one that actually speaks English, but might could find one for you to meet in person once you are here. I would not think you would ever get one to talk to you on the phone or even answer an email. You might want to talk with an attorney before or even an accountant, depending on what you are wanting to know. Send me a private note with some of what you are wanting to know and perhaps I can point you toward someone. Send the note to my email,steveuhl@sandalsandskis.com Let me know a little about what you want to build to, as I know some owners who I can point you toward as well who have property for sale that might work for your plans. Thanks for reading the blog and I’ll hope to hear from you and meet you in the fall.

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