Building your dream home in Mexico

Get a feel for the vibe, both for locals and expats. How are the schools, parks, restaurants, and supermarkets? Don't forget the hospital--where would you go if you had a medical emergency? We didn't find this out until later but Valle de Bravo doesn't even have a modern ambulance (a group of residents are pooling money to buy one now).

Consider environmental hazards. Is the land in a seismic zone? Is it vulnerable to storms? What will happen if sea levels rise? Unfortunately, Mexico has its share of earthquakes, hurricanes, and flooding. Don't be put off by problems. Problems are good--at least fixable ones. They scare off other buyers and bring down the price. And in solving problems you create value. In our case, the land had been used for years as an unofficial garbage dump and had mountains of trash. The land was also 15 feet below the level of the road on a steep hillside, making it a challenge to build on. But raw land almost always needs work. This is where you get to squint and imagine the possibilities that other people can't see. Remember that the view from your second-story deck will usually be better than what you can see on foot, so ask your broker to pack a ladder.

Do your due diligence on the local real estate market. Pick up old classifieds and see if the same properties have been listed continuously for months. If things are slow, you'll have more bargaining power. On the flip side, if the market is hot, consider subsidizing your project (if you can afford to) by buying a double-size lot and building two homes, one for you and one to sell. There are huge economies of scale in the building
process and you can engineer a great deal this way--you might even get your home for free!

Be sure to inquire what services come with the land, like water, sewage, power, and access roads. Raw land can be alluringly inexpensive but beware of the time and money needed to improve the infrastructure. But as with other fixable problems, the absence of services can be an opportunity, too. Many people have been building in remote areas in Baja where beachfront land is still dirt cheap. The opportunity here is to build your home in an eco-friendly way--with solar power, desalinization facilities, and waste treatment systems. You will have a cool, self-sustaining home and save money on utilities to boot.

Before buying land, invest a few hundred dollars to test the soil and do a topographical survey. We were pleasantly surprised to find that our land was larger than the seller had advertised. Had we found that the lot was smaller, we might have been able to negotiate a lower price. We also did a soil test but unfortunately it did not alert us to some rock hard subsoil. Excavating that subsoil to lay the foundation required more time and money than we anticipated. Had we done a better test, we could have at least budgeted for it.

Once you've found your dream land, get yourself a good notario. Notaries in Mexico are not like the clerks in the US who stamp signatures; they are lawyers sanctioned by the government to process transactions. Among other responsibilities, they verify that there are no liens or title disputes with your land. They can also set up your fideicomiso, the trust instrument that foreigners need to buy land near Mexico's coasts and borders. Although notarios are licensed to act on behalf of the government, their fees can vary greatly. Solicit recommendations and interview at least three before choosing.

Consider getting title insurance, which costs about 0.7% of the total. I've heard horror stories about Americans who bought land in Mexico only to find that the seller did not have the right to sell them the land in the first place. This is particularly true of ejido land--communally owned land that is especially tricky to buy and sell. Two American title companies have recently become active in underwriting title insurance policies in Mexico. This has paved the way for US lenders to issue mortgages in dollars, collateralized by Mexican property. In the past, foreign buyers either had to pay in cash, borrow against their property back home, or get an expensive mortgage in pesos from a Mexican bank.