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This week, Tijuana’s daily Frontera reported that a four-million-dollar fraud was claimed by a group of U.S. citizens who bought into a Baja real estate scheme.

Plaintiffs’ attorney Monica Gutierrez is quoted as saying that in 2006, Realty Executives (a Mexican firm) sold to U.S. investors a multi-unit condo complex to be called La Esmeralda del Mar. The project, which was supposed to rise in the vicinity of Puerto Nuevo, has never been initiated.

About 30 investors made large deposits on the property in advance. Realty Executives reportedly cannot produce proof that they were legally qualified to sell such a project.

The lawyer added that the project was kicked off with the gathering of deposits, but in 2009 the plaintiffs filed a lawsuit to get their money back when the project failed to get off the ground.

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Comments

David Dodd Jan. 20, 2011 @ 3:41 p.m.

A note to "investors": You want to grow a garden, then you have to get your hands dirty. Mexico doesn't work like the U.S., and it never will. Buy a plot of land and build a house on it. Any other deal is likely a dirty one. That's how it's done. Real Estate isn't a speculation here, it's where you build your home. You buy some land and you build a house on it. There are very few true developers here. Bienvenidos a Mexico.

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temeculabetty Jan. 20, 2011 @ 10:32 p.m.

In buying real estate in mexico. It's really pretty simple to be protected:

1)Insist your money is escrowed in a reputable third party, escrow account like stewart title or first american title.

2)read the contract.

3) take title when the money is exchanged.

if these people had just done these two things they would have had no problems.

People go to mexico and do things they would not do anywhere else. just like anywhere, if the selling party is not willing to escrow or has a shakey looking contract , dont do it!

there are plenty of safe investments in mexico. you just have to be as prudent as you would be in the US.

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nan shartel Jan. 20, 2011 @ 11:17 p.m.

good advice u 2...thx

i've been doing some serious thinking about it lately ;-D

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poff Jan. 21, 2011 @ 7:36 a.m.

Mexico is shady. If you invest in Mexico you are an Idiot.

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Fulano de Tal Jan. 21, 2011 @ 10:36 a.m.

Temeculabetty said: "1)Insist your money is escrowed in a reputable third party, escrow account like stewart title or first american title.

2)read the contract.

3) take title when the money is exchanged."

Sound advice Betty. However, there are a few small problems. First of all, there is no such thing as an escrow in Mexico. There is no enabling legislation that recognizes an escrow and which keeps your money separate and apart from the escrow holder.

Secondly, for a contract to be legal and admissible in court in Mexico, it must be in Spanish. The courts will not enter a contract written in English into evidence. So what good does it do to read the contract, unless you happen to be fluent in Spanish? And let us not forget that the poor saps who bought La Esmeralda have to enforce those contracts in a Mexican court. Even if they get a judgement, the chances are between slim and none of ever getting back one penny from a long-gone developer. You might as well just take your purchase money, place it is a burlap sack and leave it by a taco cart.

Third, you got that backwards. It is not "take title when the money is exchanged." It is exchange money AFTER THE PROJECT IS COMPLETED AND YOU HAVE TITLE. Of course this will never really happen, as you seem to be totally ignorant of the requirement for a fideicomiso titleholder for foreigners in Baja or the fact that the developer will not sell you a condo until you put up a substantial downpayment, which they either use to build it or just put in their pockets and walk away. And you have yet to explain how to take title to a condominium unit that does not exist, nor have you considered the process of making sure the developer has paid off the underlying liens on the property you "took title to." After all there is no escrow and Mexican title insurance does not insure the buyer for any liens on the property, disclosed or not. They do not insure that because it is the legal obligation of the Notario to pay for any damages due to his negligence. Of course, no Notario has the money to actually do that and the Notario is not liable for the action nor inaction of the developer.

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temeculabetty Jan. 21, 2011 @ 3:49 p.m.

Fulano_de_Tal, with all due respect:

When I said "take title" I was referring to the title being transferred into a Trust (fidecomisio) for the benefit of the buyer. And when I said the money is exchanged I was referring to the transfer of cash from the escrow account to the designated disbursements. Excuse me for my assumptive ambiguity.

There is secure escrow offered by First American Title Insurance and Stewart title. They are both held in US banks and funds are not transferred until the Fidecomiso is finalized by the Notario. If these buyers had insisted that thier presale deposits be handled in this way they would still have their cash.

In this case the contracts were also in both English and Spanish and specifically did not stipulate that the money would be deposited into one of these escrow accounts. However, whenever entering into a contract in any foreign country, especially where you are not fluent in the language, it is wise and prudent to have a well referred lawyer review all documents before entering into an agreement.

Many people have put large presale deposits down, using these escrow accounts, on developments that ultimately failed and invariably received their money back.

This process is accepted by several US banks who offer financing. Both of those organizations offer title insurance and will issue a letter of exceptions prior to the transaction for full transparency. The bank will not issue financing if there are liens or encumbrances or if there are unreasonable exceptions.

Do you really believe Compass bank would lend on transactions if the process was not secure?

You are correct that many developers (NOT ALL) will only take a reservation if you allow them to release the funds for them to use in the building of their project. There is a simple solution to be safe in these cases. DON'T BUY THERE! There are plenty of developments that are of the highest quality that will!

The problem arises when agents and buyer do not follow such secure practices as can happen with cash transactions.

It is unfortunate but if a buyer did the same thing in the states the same result is possible.

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vbloza April 5, 2011 @ 10:17 p.m.

temeculabetty, you are absolutely right. There are many good developers in Mexico, and escrow accounts can be open and are used on any real estate transaction and you can get as well a title insurance for the protection of the buyer.

First Title, Stewart Title and other U.S. based companies offer this services.

Do everything like if you were doing a R/E transaction in the USA

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