Market Update: Mexico Real Estate
Many who come to the Baja Wine Country of Mexico are interested in real estate as well. In lieu, we offer this general informative market update from Doug Jones, a financial mortgage professional who’s been working in the Mexico real estate finance industry for the last 6 years.
By Doug Jones
Hola a todos – Just a quick update on the Mexico real estate market
In my recent conversations with agents and developers, although we have seen the normal slow-down of new buyers in August/September, October has seen an increase in the number of new buyers purchasing Mexico real estate. One developer told me they have had 10 new sales in the last 2 months.
Although this isn’t the same as the boom times, it is certainly a welcome sign. We are actually seeing some developers starting to inch up their pricing on some of their prime units. Just as we now know that for the past year we have been out of the recession in the US (statistically speaking anyway), the same will be true of pricing in Mexico real estate.
It will be many months AFTER we hit the bottom before everyone realizes the bottom of the market occurred and prices are heading up. I truly feel that we are at rock bottom for prices in the Mexico real estate market right now. We are going to see some very good activity in the market in tis high season that is beginning in much of Mexico.
We have seen an increasing number of new buyers looking to purchase in Mexico over the next several months. They are contacting us to be pre-approved before they come down. With a loan approval in hand, they can submit this with their offer and be considered the same as a cash buyer. The closing time is shortened, and there is no need for a loan contingency in the contract, which are what sellers are looking for – no contingencies and a quick close.
By having a pre-approved loan, we simply add the address to the loan, with specific sales price and loan amount, and then get the new fideicomiso and lender appraisal done. This may take up to a couple of weeks longer than a pure cash transaction, but this is a timeframe most sellers are willing to live with since they know they have a qualified, pre-approved buyer.
Through the end of October, we have experienced the best year we have ever had, and we still have a good pipeline of loans to close and 2 more months left in 2010. We celebrated our 6th year anniversary in September. Although there have been many hours invested into my business, it is still hard to believe that six years has gone by. We have been able to help a lot of buyers get into a property that they wouldn’t have been able to purchase without a loan, and we have helped put a lot of commission money into the pockets of agents and developers.
As I’ve mentioned before, there are not as many transactions as in previous years, but a higher percentage of the contracts being written now include financing.
This trend of increasing mortgage financing is going to continue. Even buyers who CAN afford to pay cash are choosing to hold on to their cash and leverage their purchase using a mortgage loan in Mexico. It has become much more difficult to get an equity loan in the US, not only because equity has shrunk on properties in the US, but also because rates and fees have increased to the point where a loan for Mexico real estate is much more viable.
Mexico Real Estate Loans
I have had many potential borrower talk to me, look at the alternatives in the US and decided to get their loan through me to purchase their new property. In the past, many of them never called me back because they got an equity loan in the US or Canada. This has been a significant change.
Savvy buyers are looking at Mexico real estate as a much better investment opportunity than the US. Although there are some great deals in the US, it is going to take years and years for any appreciation in prices to occur. The market in Mexico real estate has not dropped like it has in the US, so it is a more stable investment environment than the US. We continue to see a lot of Canadian buyers – their economy remains strong, their banking system didn’t experience even a hiccup, and it’s cold in Canada in the winter, so they are buying up properties in Mexico at bargain prices.
This along with the Canadian dollar at nearly par with the US dollar, and Canadians are like kids in a toy store when they come to Mexico. Most Canadians are more conservative by nature than US buyers, but they recognize the great buying opportunity that Mexico real estate represents and they are not having any problem making the decision to buy now.
Okay, I promised this would be a “quick” update, so I’ve gone on long enough. I want to thank all the agents and developers who have referred buyers to me and who have called with questions they have about mortgage financing. Education is power, and the more you know about financing, the better prepared you will be when a buyer asks you the question “What can you tell me about mortgage financing in Mexico?”
Do you know what you would say when asked this question? If your reaction is “Well you know, this mortgage financing thing really doesn’t work very well in Mexico, you really need to pay cash.” then you’ve just lost a potential buyer to another real estate agent who can help them do a transaction with a loan.
All you need to do when someone asks you about financing is to put them on the phone with me and let’s get the deal put together. I’ll make you look good to your prospects as they become real buyers. Mortgage financing will continue to grow in the Mexico real estate industry – it is here to stay, so make sure to you know what you know how to handle a prospect who inquires about financing.
Remember also that we can help your friends and previous buyers get cash out of the real estate they currently own in Mexico. There are a lot of people looking for cash right now, and this is an option available to them if they already own in Mexico.
Make it a Successful Mexico Real Estate Season!
Oh, we’ve heard rumors of hard times and recession. We have chosen not to participate and our business is booming.
Doug Jones, President (NMLS Lic# 139824)
918-398-9588 (Canada/US)
555-350-6331 (Mexico)
044-322-135-5822 (PV cell)
01 212 706 332 (UK)
617-600-9675 (FAX)
The Trusted Name in Mexico Home Loans
