STATS FOR LAST 7 DAYS

new listing 6, price reduced 5, sale pending 1, sold 2

new listing         791 Stralla Ct, $495,000, 3 br 2 ba, 1,160 sf

                               1504 Voorhees Cir, $539,000, 1 br 1 ba, 1,475 sf

                               n/a, $1,950,000, 4 br 4 ba, 2,306 sf

                               n/a, $2,400,000, 3 br 3 ba, 2,400 sf

                               1457 S Whitehall Ln, $5,600,000, 5 br 5 ba, 3,517 sf

                               n/a, $6,900,000, 5 br 3 ba, 4,074 sf  

price reduced  1080 Mariposa Ln, $419,000, 3 br 2 ba, 1,312 sf

                               970 Crane Ave, $595,000, 3 br 2 ba, 1,690 sf

                               1590 Grayson Ave, $829,500, 2 br 2 ba, 1,253 sf

                               453 Fulton Ln, $1,650,000, 2 br 2 ba, 1,179 sf

                               800 Zinfandel Ln, $2,600,000, 3 br 4 ba, 3,377 sf

new pending     762 Suunyside Rd, $599,900, 3 br 2 ba, 2,066 sf

new sold             929 Signorelli Cir, $1,100,000, 3 br 2 ba, 2,020 sf

                               1 Swanston Rd, $2,500,000, 4 br 4 ba, 3,324 sf

average prices, days on market                  

current listings for sale  109   avg price $2,800,939;  avg days on market 162

current sale pendings          2   avg price  $597,450; avg days on market 348

sold in last 6 months         36    avg price  $1,160,413; avg days on market 141

Series #6 Purchasing real estate in Mexico, for the most part, is a good investment

kitchen counter and prep area

             If you’ve been following my series, let’s cut to the chase.  By now, I’m sure you want to know how much it costs to build in Mexico versus the United States. A lot depends on where in Mexico you build and the quality of materials you select.

            When we first arrived in San Miguel de Allende in May 2005, the average per square foot cost for new construction was $65. But like the states, that number has continued to escalate following the devastation of hurricane Katrina, ever rising transportation costs and the increased demand for construction materials to rebuild New Orleans and the many Olympic stadiums in China needed to host the 2008 summer Olympics. In our case, our land cost was $110,000 for a 250 m2 or 5,000 square foot property. Our construction costs ran $300,000 to build 3691 share feet of livable space plus 1917 square feel of outdoor living area which includes a center courtyard, two terraces and a rooftop patio bringing the total construction area to 5608 square feet. We paid an additional $40,000 in architectural fees and $20,000 for professional Viking appliances which retail for twice that. Because my husband is a Viking employee, we were able to purchase these products at cost.

living room entertaining area

             So given these figures, if we compute our square foot cost based on our total area ($470,000 ٪5608), our cost was $83.88 per square foot compared to $127.33 if we only consider the enclosed livable space. To make an accurate comparison with the United States, I asked Curtis Van Carter to provide square foot costs in Napa for the cheapest construction, for an average custom home and for high-end luxury properties. For a basic, simply constructed condo in Napa, average square foot costs range between $150-$200, for an average custom home from $400-$500 and for luxury properties from $1500-$2000. He estimated our custom designed Mexico home would run about $500 per square foot in Napa, or almost six times higher than SMA. Furthermore, our property taxes here are only $250 a year compared to an estimated $7,500 for a similar home in Napa.

            Keep in mind, we choose top end plumbing fixtures, appliances and even custom designed our sinks made of copper and hand hewed pulido. We also have three kitchens: one in the main house, a 600 square foot teaching kitchen in the center of our complex and a small efficiency kitchen in one of our guest rooms or casitas. Add to that 3.5 bathrooms, three bedrooms and a two bedroom guest house/casita and you can see that you get a lot for your money in Mexico.

living room

            In reality, I believe we could have saved on construction costs if we hadn’t chose to build in stages. Over those three years, construction costs rose and we weren’t efficient using our construction crew stopping and starting the project twice. What took three years to build could have been compressed to 1.5 or 2 years at the most if we stayed on schedule.

            So if you ever contemplated moving or building here, for me, it’s been a worthwhile investment. According to one local builder, in this down market, our home should sell for a minimum of $650,000. A year ago, it would be valued $100,000 more, but like NapaValley and the U.S., the market for outside investors is also down in SMA.

main kitchen

            Now that you’ve heard my story, I’d like to end with some lessons learned that hopefully will make your building experience in Mexico more enjoyable.

1)      If you plan to make SMA your permanent home, rent for a minimum of one month first before making that decision. For some—like my husband—SMA is better as a half time residence. He still longs for Napa….the food and wine experience just isn’t the same here, so make sure you are truly ready for that change before committing permanently.

2)      Don’t live on site while your property is being developed. Monthly rentals are relatively cheap here. Spend the extra $350-$500 a month and rent a place nearby that allows you to supervise construction without being consumed by it.

interior stairway

3)      Don’t apply for your FM3—which allows you to bring your belongings into Mexico one time in the first six months without import taxes–until your property is complete. We brought ours in early and incurred rain damage. Better yet, just buy new furnishings here.

4)      Check out your neighbors before buying. We discovered after purchasing our property that the rear wall of our home backs up to the largest hierro/iron worker in town. On some days, when he is pounding on his anvil, our teaching kitchen reverberates from the concussion and it can be hard to hear and hard to take. On those days, we run our fountain at full blast.

5)      When choosing between Cal (a traditional water color like pigment used here for centuries) versus modern oil based paint, choose the latter. While we wanted to keep with tradition using Cal, each time it rains the color of our home also goes down the drain.

living room and entertaining area

6)      There are many wonderful artisans in Mexico willing to custom make anything from your floor tiles to your lights and plumbing fixtures. We choose a beautiful hand painted floor for our teaching kitchen that looks much like a carpet. And while we love it and would make the same choice again, we had to accept that the tile colors varied from piece to piece and it was even harder to seal them without some discoloration. Be prepared to accept this fact or choose something prefab.

7)      Caulk is the one product that holds all the homes together in SMA. So if you are moving here from the U.S., bring as much as you can carry to seal your doors and windows as you won’t find an equilivant performing product here in Mexico.

For more information on properties for sale here, contact Curtis Van Carter or drop me an email at insideroute@aol.com. Better yet, stop by for a visit on your next trip here.

Buen Dia!!!!!!!!!!!

Series #4  Remodel or New Construction?

master bath shower and skylight

In my last article I stated that the single most important decision you’ll need to make is whether to choose a “fixed price bid” or “time and materials contract” with your builder in Mexico. That decision will often be influenced by the kind of property you buy? Are you looking to remodel, simply interested in land you can develop or seeking a new home that offers a builder’s warranty? There are arguments—and temperaments—for all three. Even though my husband survived and now loves our home, which is a combination of renovation and new construction, he vows he would never do it again. Instead he would purchase a new home with a warranty like our neighbors, where he can actually see the finished product first. He admits he doesn’t have the temperament to make all the decisions required to build another custom home. I on the other hand feel I’ve learned a lot and could do an even better job next time. But there are benefits to purchasing a new home in Mexico, mainly the builder’s warrantee.

            When problems occur during the first year, the builder pays for all repairs. In our case, we purchased a remodel and agreed to a “time and materials” contract which puts us on the hook for all repairs for the life of the property, with the exception of sub contractors like the plumber, electrician, window and door man. In the case of new construction, if you negotiate a fixed price bid, be sure to ask the builder whether a warranty is included and, if so, get it in writing.

Valarie's crew hard at work

            Due to the size of our property and the cost, we chose to build in phases. Phase I involved remodeling the existing three bedroom home. Phase II renovated the ruins or outbuildings into two casitas or guest rooms, a bathroom and fountain, and phase III constructed a new 600 square foot professional teaching kitchen, master bedroom, terrace, center courtyard and main entrance. The entire project took three years to build because we paid cash for each phase of construction. Mortgages at that time were unavailable. Ultimately we sold an investment property in California to finance phases I and II and moved to SMA the third year to supervise phase III with the proceeds from the sale of our Napa Valley home.

There were some decided advantages and disadvantages with this strategy. On the positive side, we now own our Mexico property free and clear and sold our Napa Valley real estate when it was most valuable. We also built our home when the US Dollar-Mexican Pesos exchange rate was much higher. But on the downside, we no longer own CA real estate, construction materials rose during that three year period due to hurricane Katrina and for each year you are under construction here the government requires owners to pay their Mexican workers a Christmas bonus, or aguinal equilivant to 2 weeks pay, and host a party…..so the longer you take to build the higher the costs.

Our "aguinal" for our crew

Nevertheless during those three years of construction, we saw our property miraculously transformed from a diamond in the rough to an architectural wonder. I witnessed our entire compound being built with only two power tools: a drill and tile cutter, the rest crafted from a chisel, hammer, trough, iron cutter, level, plumb bob, paint brush and bucket. 15 men lifting a 700 pound, 12 x 9 feet piece of glass to the third floor of our home to form the ceiling, using only a combination of ladders, scaffold and brute strength. Sinks being made from hollowed out dirt in our center courtyard. And an army of workers humping nearly one ton of professional freezers, refrigerators, ovens and cookers manufactured by the Viking Range Corporation with nothing more than ropes and their backs. 

Our 12 hombres were some of the strongest, most honest and hard working laborers I’ve ever seen. We recognized and rewarded them weekly for their devotion by preparing lunch, here called comeda, every Wednesday–hump day…something no one had ever done for them before. They eagerly enjoyed arrancherra, spaghetti… tacos, chili, grilled chicken, carnitas, puerco con tomatillo and anything else I put before them.

Some of the ironwork in our home

And they rewarded us by being unconditionally hardworking and concerned for our home, returning late one night when the rains came flooding a casita which housed many books and furnishings being stored until project completion; diligently carrying the basura to the trash man every Monday, Wednesday and Friday; and putting pressure on the hierro, our iron man, to finish the railings throughout our home when he had been prepaid but slow to deliver. It seemed the more we did for them, the more they wanted to please us. They became in the process more than laborers, they became friends… Guadalupe, Antonio, Pablo, Patricio, Gustavo, Gerardo, Lauro, Ramon, Moises and Carlos…….. we began to think of them as members of our family.

Gustavo, Antonio, Melton & Guadalupe

And as the project drew to a close, there was reluctance on their part—and ours—to finish, Listo….in English. But not having an unlimited budget, we declared Friday, May 3, 2008 finito and said adios to our crew. Much to my surprise the following Monday, they all returned in force as I was departing for a much needed vacation. As my cab pulled away from the curb, they appeared lost—much worse, homeless………but not for long.  We only thought we were finished!

Sinks made from hollowed out dirt in our center courtyard

Series #3  From the Flying Pan Into The Fire????????

San Miguel de Allende is rich with history, culture and celebrations

So what could go wrong in a third world country giving power of attorney to a total stranger we’d known only three weeks to close our real estate transaction? Well in our case nothing. Our transaction went smooth as silk. No clouded title, no unexpected unpaid utility bills, no unpaid real estate back taxes. There were no unexpected surprises except for the condition of the property during our next visit. We attributed our good fortune to the conscientious work of our professional real estate team because such problems have happened to other gringos we know.

            But in our case, as buyers—not sellers, we paid the full 6% real estate commission which we considered money well spent purchasing property in a foreign country, especially when English isn’t the primary language spoken here. Of course, 6% of $111,000 doesn’t amount to much and is good insurance, especially in areas like San Miguel where title insurance isn’t readily available. But for those of you who are braver than us, you can forgo paying real estate commissions altogether if you purchase a FSBO, referred to here as Trato Directo (Direct Deal). But it will be your job and responsibility to hire a translator if you aren’t fluent in Spanish and a lawyer/notario to research the title, negotiate the contract, handle the closing and transfer of funds. We have known friends to choose this route only to regret it later.

We purchased a FSBO called here Se Vende Trato Directo...or for sale by direct deal

            Okay, so I mentioned there were no surprises at our closing, but our walk through was quite another matter. If you purchase a true Mexican middle class home or fixer, expect the house to be devoid of light fixtures when you arrive and in some cases plumbing fixtures like faucets and towel racks. Even though the seller promised to leave a few lamps and light fixtures I’d chosen, what we encountered were bare bulbs in sockets if they had bulbs at all. There was also garbage and debris everywhere and no apparent concern for the new buyers or condition of the property. Fortunately for us, we hadn’t planned to stay there during our week long visit to begin working on our dream house. The mission of this trip was to hire an architect and builder, pay our property taxes and transfer all utilities. All mundane tasks made better when we learned our annual property tax bill was a mere $212.00. What’s more, if we paid our tax bill during the first two months of the year, we received an additional 17% discount. Of course the government of Mexico only provides public education until the 9th grade. Thereafter families are responsible for their children’s education in addition to the cost of uniforms. Nevertheless, the tax difference represents quite a savings over the $4,000 we paid in Napa property taxes each year.

San Miguel de Allende is rich with history, culture and celebrations

            At the top of our priority list was to secure the property. In Mexico, it is possible to loose your property after you’ve acquired it to squatters if it isn’t properly secured. That’s right, if you aren’t living there and squatters can easily enter and occupy your property, they can stake claim to your residence. So if you don’t have a door or gate to barricade, hire a night watchman, called a Velador or Candleman, who will sleep on the bare floor from the time the crew quits until they arrive again the next morning, as well as the weekend, day and night. Even after you begin remodeling or construction efforts, it is common to have a night watchman on the payroll to ensure against squatters or theft of construction materials. We happily paid the additional $1000 pesos (approx $75 USD) a week for the two years we lived in Napa while developing our property. Only during the last year of construction when we were living on site, did we forego this expense. But in hindsight, if we were to make this decision again, we would keep the night watchmen and rent a residence close by to live in during construction. We called that last year, our year of “pain and suffering” as we never had any privacy, had chronic allergies and respiratory infections living in a construction site and truly struggled to keep our marriage together. Not that we didn’t love each other; we were just ill equipped or prepared for the endless decisions that needed to be made each day with no respite from the noise that enveloped us from 7am-5pm, five days a week, all while still trying to make a living to pay for our dream home.

After shot of our center courtyard

Our final decision this trip was to choose our architect and builder. If you don’t already have one in mind, I suggest touring homes in your community to determine what style of architecture you like best and then researching who was responsible. Many Mexican towns and cities offer home tours and it is a great way to discover your likes and dislikes…colonial or contemporary, rammed earth or adobe. There are also countless books on Mexican architecture to explore your unique tastes and desires.

Outside before shot of Michael and Valarie's home

In our case we chose a San Francisco architect, whose vacation home we rented and adored, and who split their time between Mexico and California. We also had to choose from a “fixed price builder” or one who charged based on “time and materials.” This will be the single most difficult decision you’ll make. With a fixed price bid, you know up front the cost—provided you don’t make any change orders–however the home will be constructed as quickly as possible with less concern for quality. With a time and materials contract, you’ll never know what the home will cost but it is generally better constructed. We opted for the latter and time will tell whether we made the right decision…………..!

Series #2  Making An Offer

If you’ve journeyed with me to my second segment on purchasing real estate south of the border, you too must be a paradise seeker. If you’re like me, you have a million questions so let’s get right down to business?

How easy/or difficult is it to purchase and own property in Mexico?

Is your property/investment in any way at risk in this 3^rd world country?

What do you need to know before making an offer?

How do you get started?

First let me say that our leap into unchartered Mexican real estate waters–while somewhat intimating–was a positive experience. But that isn’t always the case. We’ve heard of friends purchasing homes with clouded titles resulting in endless legal fees and delayed construction. So it’s important you work with an experienced real estate agent or someone you know. Look for realtors who are certified members of the National Association of Realtors (NAR) or Mexican Association of Professional Realtors (AMPI).

In our case we asked for a referral from a fellow Napan who previously purchased property here and that referral served as one of our real estate agents. We had two; an English speaking Canadian gal named Trish and a bi-lingual Mexican hombre called Roberto who presented our offer to the seller and managed our transaction. We agreed on an opening purchase price of $100,000—not the best news for our real estate team–and set out in search of that perfect property.

Valarie and Michael discussing their purchase price

Because SMA has become such a popular holiday and vacation destination, prices vary significantly according to location. Properties near the jardin (our heart of the city) can range from $500,000 to several million US dollars. So given our budget, we began our search just outside of Centro in a neighborhood called Colonial San Antonio. Two hours and three properties later, we traveled to the end of a dead in street and fell in love with an artistically built Mexican home with good bones and good views. My husband and I knew this was the one because we were weak kneed, our hearts were racing and we were already considering how to get this done without even speaking a word to each other.

Valarie talking with her agent

Our agent was astonished that we didn’t want to look further. After all, this was the first day of our search and we’d only seen three properties. Not batting an eye, my husband simply said let’s find a coffee shop and discuss how to purchase a home in Mexico. We weren’t the first to make such an impetuous decision. Countless before us recounted similar experiences…you just know when a place is right.

Besides where else can you buy a home for $100,000.00 pesos or $93,000 USD? The 155.00 m2 (meters squared) 3 bedroom home we were interested in was part of a four parcel compound that was being divided among family members and sold off separately as each property gained a clear title. Adjacent to the 3 bedroom was a small 95.00 m2 parcel with a garden and several ruins. The other two properties were not yet ready for sale. We made an offer of $100,000.00 USD for the 3 bedroom home and the adjacent ruin and the offer was accepted. A meeting of the buyers and sellers was scheduled for 6pm that evening at a respected Notario’s (Mexican Lawyer) office where the contract would be signed and 10% of the purchase price or earnest money would be paid directly to the sellers. As buyers, we were then given 30 days to either rescind our offer and forfeit our deposit or come up with the remaining funds to ratify the contract. Bear in mind that at the time, home loans and mortgages were not available in SMA—and for the most part, still aren’t—so cash or wire transfers were our only option. Everything went according to plan until we told the Notario our purchase price. Between the time we made our offer and the time we arrived at the Notario’s office the sellers decided to up the price for the combined parcels. Instead of $100,000 USD they now wanted $111,000. We could have–and certainly wanted to–walk out the door, but we had come too far in the last 6 hours setting the financial wheels in motion and mentally designing our south of the border home to let the dream get away. Instead we accepted the fact that we were rookies and dove in.

Counting out the cash deposit at the Notario

At this juncture, there are a few things you need to know about what you can and cannot own in Mexico. As individuals, foreigners—with some exceptions–cannot directly own property within roughly 30 miles of the shoreline or 60 miles of the border. All other properties like those in SMA that are 100s of miles from the coast are fair game. As for those exceptions, you can legally own Mexican real estate in restricted coastline areas if it is set up through a bank trust or fideicomiso where the bank owns the property but you as trustee have total control of the real estate, or if you form a Mexican corporation. Bank trusts are good for 50 years and are renewable and transferable. Setup fees run around $500 and annual fees are about the same. Costs to form a Mexican corporation are several times higher than bank trusts and require corporate tax reports and the like.

Another thing you need to be prepared for is having cash for your earnest money deposit. If you are like my husband and I, we didn’t have $11,000.00 with us because we hadn’t planned on buying a home on our vacation. Fortunately for us, our real estate agent happily cashed our $11,000 check using our property as collateral until the funds cleared her bank.

When hiring a lawyer, make sure they are actually licensed to practice law in Mexico. Ask to see their cedula professional, an official license provided by the Ministry of Education. Your Notario will then check to see that the seller holds title and is legally able to sell the property. The seller must be able to provide a copy of the public deed (escritura publica) stating legal title of the property. Your Notario will also review all conditions, identify any problems, give advice and formalize the transaction. When making an offer, it should be in written form and is best when transcribed into both Spanish and English. This contract is known as a Promise to Buy (Oferta) and begins when the seller accepts the offer made by the buyer and both parties sign the contract. Once the seller accepts the offer, the buyer is expected to deposit 5-10% deposit of the purchase price and half the closing costs. Make sure that all deposits are made through the public notary or closing agent and not directly to the seller.

As I mentioned earlier, it typically takes 30-45 days to close the transaction. In the states we would call this our investigation period. But in our experience you simply have this amount of time to raise the rest of your funds or change your mind. If you do decide to bail regardless of the condition of the seller’s property, the seller keeps your deposit. If the seller on the other hand gets cold feet, he/she can terminate the contract but is required to return the buyers deposit.

Everything necessary for a successful negotiation

In our case, after 5 days in SMA we headed home a little poorer but a whole lot happier. Instead of returning to SMA 30 days later for our closing, we gave our Canadian real estate agent power of attorney to close for us. We decided since we had taken such a leap of faith in just 5 short days, why break with tradition. After all what could go wrong……?

Links for licensed realtors:  www.ampisanmigueldeallende.com