Our first visit to a timeshare resort was in 2006 to the Villa del Palmar in Puerto Vallarta to which we had been invited as the guests of a friend and current owner. As visitors, we were asked to participate in a fairly relaxed, though not low pressure, sales presentation for a new resort in Nuevo Vallarta, the Flamingos, this being the only way for guests to avail of the 10% owner discount on food and beverage services. Open-minded, we ultimately elected to purchase. Indeed, we’ve made a very good friend in our sales person, Brian Heilig, now a manager with that particular office, and Nuevo Vallarta remains our preferred destination.
During last week’s visit to the sister Villa del Palmar property in Cabo San Lucas, I sought out the timeshare sales team’s manager, Mary Thomas, an elegant, straight talking Texan and empty nester, who has lived and worked in Cabo San Lucas for the past decade. With over twenty years of timeshare sales behind her, Mary’s primary role is one of team management and customer service. Indeed, when asked what she liked most about her job, Mary replied with utmost sincerity. “I love helping people. I believe in timeshare’s affordability for people who travel. You own your own home, so why would you rent your hotel room.” In essence, for her an investment in timeshare offers the opportunity to secure your future vacation accommodations at today’s rates. Certainly a compelling argument when the one bedroom we enjoyed would have easily cost $300-$400 per night at a typical luxury hotel rack rate.
My primary goal was not to discuss the benefits of timeshare ownership, rather gain a better understanding of how real estate transactions are conducted in Mexico. As Mary is also a licensed property locator and maintains her own Mexican corporation, she proved to be highly informative. I should caution, however, this information is deemed only as accurate as Mary’s understanding of the ever shifting tides that is Mexican real estate. You should definitely consult professionals and/or legal counsel when considering any investment whether domestic or international.
Here are some key points:
· Cabo appears to be the only community in Mexico currently where any form of regulated licensing is required to be a real estate agent, and this only in the last twelve months or so. Furthermore, that requirement is reserved only for foreign nationals. Mexico does not require licensing for its own citizens. Presumably, this has evolved from the reality that most “real estate agents” in Cabo or any of the other resort towns and cities are immigrants (ex pats), typically Americans and Canadians. Mexico’s immigration department is the governing body for this licensure, requiring sixty clock hour classes and an exam for any prospective agents. In Cabo, there is a ten thousand dollar fine for non-nationals transacting real estate who are not appropriately licensed.
· Mary tells me those U.S. based companies whose presence in Mexico is visible, (Prudential Realty, California comes to mind) do have their own corporate requirements for agents including standards and practices and some form of code of ethics.
· Foreign nationals may not own property in Mexico. For instance, when you purchase that dream home on Cabo’s water front, your ownership is actually held in trust by a Mexican financial institution and must be renewed every fifty years. However, I’m told there is a way around this. By incorporating in Mexico, a person may transfer ownership to said corporation, thus retaining possession of the property as fee simple (Fido Comiso). The cost to establish such an entity is typically $2,500. Again, consult a lawyer before embarking on this track.
· Mary shares with me that, per Mexican contract law, a contract must be written in Spanish and signed on Mexican soil to be enforceable. So, if you’re considering buying that Shangri-la you just previewed in Mazatlan, but have decided to take time to review the purchase and sale agreement, which you now wish to execute from the comfort of your home in Chicago, be advised you may be signing a non-binding agreement.
· A five day right of rescission period is a key component to Mexican real estate contracts. Buyer’s remorse can be a powerful antidote.
· If you purchase, be certain to conduct a title search and review of the property. Traditional title insurance providers such as Stewart Title have a presence in Mexico. It is not uncommon for a person to take possession of a property (not having conducted a title search) only to have a disputing party appear, newly registered title in hand. Who owns your dream home now?
· Squatter’s rights, a form of adverse possession, may prevail in Mexico. Let’s say you purchase ten acres of ocean front spread which you plan to develop sometime in the future. You pay it a visit every six months or so, but never notice the ramshackle shed built and occupied on the back forty. Twenty four months from now, your ten acres may belong to someone else. Mary noted that it’s common to see small manned security huts where there are large swaths of unoccupied land along the highways, indicating parcel owners have taken it upon themselves to insure squatters do not move in during their absence.
· Be certain to define a due diligence period in the purchase and sale agreement to cover contingencies such as structural inspection and financing. Don’t presume them to be a part of any boilerplate language.
· Listing agents and their brokerages represent both sides. I presume this to mean there is no buyer, only seller protection. Agents act either directly or as sub-agents to the sellers. Commissions, though negotiable, are payable to the listing agent and broker.
There is no question, if you are intent on purchasing abroad, do your homework, get sound legal and professional advice. Do not assume all the mechanisms and consumer protections with which you have become familiar and comfortable in domestic real estate transactions exist elsewhere. On the other hand, be respectful of local laws and statutes.
The points I’ve bulleted are the product of my conversation with one real estate professional in one Mexican resort. They are not intended to be anything other than informational, and should not be construed as legal advice. If I have misstated anything, then I welcome your comments and clarification. It’s my goal to elevate everyone’s understanding of our industry, including my own, both here and abroad. I extend a special thank you to Mary Thomas for taking time out of her busy schedule to sit down with me. After all, I was the one on vacation, not she. Thank you, Mary.
As I write this, Hurricane Henrietta has just come ashore in Cabo. These storms place a tremendous burden on the local population who rely so heavily on tourist dollars. With services either cut or turned off, hotels, restaurants and bars as well as all the excursions closed, the local economy suffers. My thoughts are with all the good people we met last week accordingly.