Are You Dancing with Wolves or Lambs?

by Enrique "Henry" Saldana  (April 2012)

Back in March 2009 I wrote an article where I was referring to a friend of mine, a very successful realtor from Chicago, who used to tell me that he "would dance with his clients" every time he would go out to get a property listed. What he actually meant was that he would go and deal with each client differently and according to their needs to ensure he could meet his client's expectations. In Mexico there is a saying "al son que me toquen bailo" (meaning, "I will dance to their beat.") Anyway you may put it, the outcome is the same. There are some things and times in which you have to adjust or just go along with what the main players in the business bring to the table or dictate, and the real estate business in Mexico is no exception.

So in this article I decided to write about, What Your Developer Is NOT Telling You. Or what I would call: Are you dancing with wolves, or lambs, when signing a property purchase agreement in Mexico?

It was brought to our attention, and though it is a known fact to most local realtors, that there are developments that promote, or impose rather, their Pool Rental Programs on the buyer, and, worse yet, they are charging condo owners astronomical amounts for their Condo Maintenance Fees.

We know of Home Owners Associations being created in order to stop this type of abuse, and also of individual owners who, against their will, are being forced to enter the rental pool programs. This has created an issue for many unsophisticated buyers and new owners, causing them to sell their units to avoid overpaying the maintenance fees they are being forced to pay by the developer, which in some cases amounts to $1,000 US per month. WOW, you would say. That might equal the payment of a whole new mortgage!

Lenders are also concerned about this abuse, for it creates very risky loans and potential foreclosure properties, or mortgage clients falling on default.

A lender asked a realtor that had brought a client buying one such property from one of these "high maintenance fee charges" developers, if he was aware of it, and if he had mentioned that to his client, and the response was, "Well, yes, I am aware. But I don't think that is any of my concern."

WRONG. It should be a concern, unless they are playing the old game of "Bing, bang, thank you, Ma'm" as we used to call it back in the States. The practice of, I will sell you a property now doing whatever it takes, and I will see you never.

In another case, a developer has the new purchaser sign off their voting rights in the HOA (Home Owners Association) once it is created by the condo owners. This means the HOA would have no say in how the condo complex is run, what fees are charged, and how much those fees would be.

These issues, I would think, should be major concerns and a determing factor in your final decision when buying into a certain development.

Unfortunately, the fact that there is no Real Estate Regulatory Governmental entity in Mexico which would require the disclosure of these fees to the client prior to the buyer entering into a contract agreement for the purchase of their unit, permits this type of abuse on the part of the developer.

So, what is our recommendation?
- Talk to your realtor and ask him to find and disclose any "hidden" fees that might be part of the acquired compromises when signing into a contract.
- Prior to signing any sales purchase agreement on your condo, find out what the maintenance fees are.
- Compare those fees against other developments in the area so you know whether or not you are being overcharged and whether or not you are entering into a sound investment agreement.
- Consult with an attorney.
- Find out what the policies are for the creation of an HOA once the complex is nearly, or completely, sold.

All in all, you will thank yourself in the long run for raising those questions, and thus, making the right decision, and not see yourself losing money acquiring a problem property, rather than a good and sound investment in Paradise. Or, in other words, make sure "You are dancing with Lambs, not Wolves."

This report courtesy of Enrique (Henry) Saldana
Mexico Realty Solutions
Tel: (984) 147-2388
Cel: (984) 111-8743

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