By Harriet Murray ● Cochran Real Estate ● February 2014
“DOROTHY, YOU ARE NOT IN KANSAS ANY MORE”
Preconstruction sales of condos or homes can be very enticing if you are given an incentive to buy before there is anything built. If the developer says you can get a preconstruction price equal to a 30% or 50% discount from what the price will be later. Wow!
Would you give a builder 50% or 80% of a “price” without any proof of the legitimacy or the feasibility of the project? Would you do this in Kansas? or Toronto?
New construction sales are not that different. The property can be physically finished, or partially, with great amenities promised or in place, but how do you know it will be finished? Even when you see physical unit, has everything been done correctly legally and have expenses paid to this point and are there funds to complete the project? Would you buy this property in New York? Or Miami?
In some states of Mexico, the legality of the project and the condo regime may legally be completed after the construction is finished.
Insurance or bonds for performance are rare.
Developers do business differently based on their culture, education, experience, business models and beliefs.
Ignorance of the law is not a defense and this applies to you as a consumer.
Assuming there are laws and agencies to protect you is not wise on your part. You are responsible for your decisions.
You can succeed at these kinds of purchases if you are prudent, wise, and open to learning.
You need expert advice and the cost is a bargain compared to the risk you take otherwise.
How would this sound to you after you are already ‘’in love” with the property:
The developer or his agent says:
1. Send me 30% in 4 days and we will send the purchase contracts signed by the seller in a week or so after receipt of funds.
2. We are going to develop 90% of the project and you buyers can finish it up.
3. We do not have a permit yet, but we will get one.
4. We are offering a 30% discount off the list price if you pay 70% right now.
5. We are giving you the condo bylaws and rules in 50 pages of Spanish.
6. The money you give us will go into a trust which will pay us your funds to build the project and we are ok that you don’t understand how this really works. You will stop worrying when you hear the word “’trust.’’
These are actual cases we have recently seen in the Bay of Banderas.
Is it true we lose our normal sense of caution when we are in such perfect weather and an intoxicatingly beautiful environment?
Does seeing all those foreigners walking around make you feel safe and believe that nothing bad will happen to your money?
Do you think you may have a false sense of security?
How much due diligence did you do?
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.