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To Buy, or Not to Buy? Risks of purchasing property in Mexico. Part Two - Foreign Ownership Limitations.

This month in VantagePoints, our ongoing series regarding international business operations continues, with the first of a two-part installment about buying property in Mexico. Specifically presented is a discussion of some risks associated with vacation timeshares.  
Buying a timeshare interest can be a great way to frequent a favorite spot along the gorgeous Mexican coast. On the other hand, it can be a complete disaster if you fail to take the proper precautions. We provide some ways to avoid a bad experience.
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Founder, Owner, and Manager

To Buy, or Not to Buy? Risks of purchasing property in Mexico  
Part One: Timeshares

Ah, the beauty of the Mexican Riviera! The Pacific coast is among the best places in the Western Hemisphere to relax, soak in the sun, and unwind. This region abounds with gorgeous residential properties, many of which are marketed to tourists at "bargain" prices. Often they are made available through the purchase of a vacation timeshare.

The timeshare is a popular way to contend with the Mexican prohibition against foreign individuals owning coastal property. It is essentially a long-term lease that entitles the shareholder to a specified number of days of occupancy each year at a residential property, usually a condominium or townhome. Properly investigated and executed, such an arrangement can provide regular Mexican vacations for less than what one might otherwise pay to stay for an extended time in a luxury hotel. The residential developments typically provide added privacy, security, and convenience as well.

It is common to encounter legions of slick salespeople at the airports trying to spot the affluent foreigner who might equate to a nice commission. They are known to ply their marks with complimentary drinks while delivering a well-rehearsed pitch on the virtues of buying into a timeshare.   Many otherwise intelligent and sober buyers have coughed up money and committed to a long-term agreement that proves too good to be true in the end. At times they do so without even seeing the property, relying instead on an attractive brochure.

Countless timeshare investors have disappointedly learned that the property they invested in was nothing like what they were shown. This is why it is critical to physically visit and inspect the specific residence involved in the transaction. It is better to have a reputable realtor participate, and best to consult with a Mexican attorney before signing or paying. The salesperson might use pressure tactics to avoid such wise safeguards, but caution and firmness are essential to ensure the deal is beneficial. Remember, there are plenty of other deals out there. It is easy enough just to walk away.

For those who do fall victim to unscrupulous marketers, the good thing is that Mexican law stipulates that a buyer has five business days to cancel a timeshare without penalty. The bad thing is that it is sometimes difficult to enforce. Many timeshare developers are reluctant to refund money, although they are required to do so within fifteen business days. Some will do so only under the threat of prosecution, and the Mexican Federal Prosecutor for the Consumer (PROFECO) is usually responsive to complaints.

Once the initial payment - which typically ranges between $10,000 and $25,000 - is made, there are annual taxes and maintenance fees. Frequently, the fees are reduced during the first year or two, and then they increase dramatically afterward. It is not uncommon for an investor to experience "buyer's remorse," especially if financial circumstances change or they find they are unable to use the property as envisioned. This can open the door to fraud in the form of the timeshare reseller.

Cadres of crooked telemarketers, representing impressive sounding companies with professional-looking websites, contact likely sellers of timeshares and claim to have a purchaser lined up to buy them out at a significant profit - all they have to do is pay a nominal fee to cover closing costs, etc. Hundreds, or even thousands, of dollars later they discover they have been duped by expert scammers. Yet, the ongoing timeshare obligation remains.

Before you pull the trigger on any timeshare venture, take the time to become fully informed about the transaction and your options. If you need help, call on the ResultQuest team. Our extensive network of professionals in Mexico, developed over the course of three decades, will provide you with the knowledge you need to make an informed decision.