spanish style house This might be the vision but the reality could turn out to be rather different.

No pesky regulations means buyer beware

The Joy of Construction in Mexico Part 5 — Pre-construction purchase nightmares

This column is about the pre-construction purchase of real property in Mexico, a common practice which in this country is unfettered by pesky government regulations which protect a buyer’s investment.

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Buying “off plan” is the practice of purchasing a condo or house in Mexico that will be built sometime in the future. The land has been purchased by the developer and a glitzy sales office has been erected and nicely landscaped.

The sales staff all have perfect smiles and will claim the ability to accommodate your every need when you purchase within their development. The discount for a pre-construction purchase is generous, they tell you, and your sparkling new tropical domicile will be ready before you know it, exactly as you ordered it.

You don’t have to make the final payment until it is ready for you to move in. Entering into such an agreement is like playing the futures markets but with real estate instead of options and, of course, can be equally dangerous.

This purchase process requires three-dimensional visualization of a tower, or golf course or a gleaming white casa with a red tile roof, somewhere beyond the sales office. Given the arbitrary timing which can plague this type of development, the buyers are rarely present when their unit is ready for occupancy, or claimed to be ready for occupancy.

From various people who experienced it, I was aware of the propensity for developers to lure their buyers into making that final payment with a verbal guarantee that their new home was ready for occupancy.

So, as part of my home inspection business, I could not in all conscience refuse to undertake “verification of completion inspections” for absentee buyers. And from my experiences during that time, I now know the phrase “ready for occupancy” can be as nebulous as the word mañana.

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One of my first experiences came about after I received an email from a Canadian woman wanting me to verify that her new condo was complete, with all services up and running, as well as functioning appliances.

She was prompted to get in touch with me after the developer had contacted her with the great news that she could move into her new condo within days. Indubitably, the developer was also requiring her to make the final payment as soon as possible.

When I arrived at the condo in question it was two days past the recently promised completion date but a world away from being complete. The only people at the condo were two painters both of whom had just started that day. No toilets, no sinks, no light fixtures and no CFE-sanctioned electricity. There were two 12-gauge wires spanning the contacts that should have been sporting an electrical meter.

After sending my client 30 photos I had taken of the mess, I ran down to a neighborhood tienda, bought a liter of Pacifico and rejoined the two painters, suggesting that we lunch together and relax over the cerveza.

When during our time together I discovered that the painters were requiring the developer to pay them at the end of each day, all the red flags went up. If the subcontractors did not trust the developer past the end of each day, it could spell big trouble for the buyers.

I later discovered that somehow the developer had seriously alienated and fallen afoul of the federal government’s electrical utility, the CFE, and that much of that development, even after homes or condos in it were actually completed, was hot-wired.

After I sent off the photos to my client I followed up with a phone call, hoping she wasn’t going to shoot the messenger. But she had spent some time in Mexico and knew about the differences here, so she calmly accepted the delay. She merely decided, correctly IMHO, not to make another payment until I was able to sign off on completion of the work.

She then gave me the contact info for friends of hers who had purchased a house in the same development and who told her they would like a similar inspection in light of the photographs she had shown them.

The next day I went to their house, which I anticipated finding incomplete as well. On the contrary, the place was finished with all the appliances in place and it looked very nice, with no obvious flaws. As I was finishing my inspection, I heard someone come in through the front door and I went to investigate.

I introduced myself to an older couple from Minnesota who had just flown in. They asked what I was doing, so I explained my task which had been commissioned by the owner of the house. I was then told it was their house and they were there to begin the process of moving in.

I quickly apologized for being in the wrong house told them they had a lovely place which appeared to be completely functional, and I quickly left.

I went outside and called my clients for clarification of the location of the house. I was given the exact same address and lot number I had transcribed in my notebook and I got a description of the location relative to a couple of landmarks within the development.

At the end I gave the news that I had just finished my inspection and the house looked great, but there might be a problem unrelated to completion. I said I would call back in 15 minutes.

I rejoined the couple who were now engaged in measuring rooms for furniture, and told them we needed to talk. After I explained the apparent dilemma the woman became a bit faint, a condition that developed markedly as she futilely looked for some place to sit.

Her husband’s scarlet face betrayed his rising blood pressure. I quickly excused myself to avoid the slings and arrows and called my client to confirm my worst fears.

My clients were unaccustomed to the vagaries of Mexico thus they could not comprehend how a house could be sold twice. My conscience required me to be honest, so I responded with, “Well, that’s twice that we know of, there could be other casualties of this gambit.”

Later that year, in the same development, I learned about a fifth-story penthouse in a four-story building that had been sold for a shamefully high price.

I continually hope for newcomers to have a greater awareness that in a poorly regulated country where money trumps conscience (which means when profit takes precedence over ethics), paying over money for something that requires the use of your imagination is going to have some risks.

Author’s note: The multitude of emails I have received since beginning this series has been staggering as well as enlightening. I quickly learned that the tales I have been telling are not of an anomalous nature but reflect an integral part of life in Mexico.

However, several people have expressed displeasure that I only write about the dark side of building in Mexico while never mentioning the many homes which are completed with a minimum of problems. That does happen and, yes, I don’t write about it.

The simple fact of the matter is that trouble-free home ownership in Mexico is not the stuff that brings laughter to me and my friends over a cerveza as the sun goes down. On the other hand, the multi-dimensional circus of some Mexican construction projects does, and it is entertainingly twisted into a humorous antidote for my writing.

Those folks who have been living in Mexico for longer than 15 minutes know that a person is required to view life in this amazing country a bit like a theater of the absurd. Anything less leads to Gringo Anxiety Disorder and a slow tailspin into the inevitability of culturally induced madness.

This column is the fifth of a series by Bodie Kellogg, who describes himself as a very middle-aged man who lives full-time in Mazatlán with a captured tourist woman and the ghost of a half wild dog. He can be reached at buscardero@yahoo.com.

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  • J. M. Davis

    Will someone who has read all 4 previous articles in this chain by Bodie Kellogg please send me the links to 1-4

  • cooncats

    Great article and series, Bodie, thanks very much!

  • A property can be sold twice? Or three times? Or four? You betcha!

  • Marty Rosenzweig

    I fear for your safety. You’re not in Kansas anymore. When I notice a bale of pot or coke wash up on the beach I just walk away and don’t become the investigative reporter. Your stories are certainly informative and entertaining but you’ve moved from “construction anamolies” to messing with their financial ripoff schemes. Be careful out there!

    • TioDon

      I live in Mexico and, although I enjoy his stories, worry about his safety. I was in Real Estate my whole life albeit Commercial and when I moved here decided I was now a renter forever. I’d never buy anything in Mexico. Be safe, Bodie.

  • Your article describes exactly the scam that Donald and Ivanka Trump pulled in Punta Bandera on the coast in Tijuana. they leased a beautiful spot, put up an office with a model and sold 40 million dollars worth of condos to US and Canadian retirees in 2006 and never built anything. He was sued and lost but no one has collected anything. There is a warrant in Baja for his arrest for fraud.

  • ben

    excellent i know so many horror stories.

  • Mike S

    Anybody dumb enough to hand over money to a “developer” on a “brochure” cash real estate project in a Mexican tourist area and then leaves the country and wait for their “move-in green light” gets what they deserve. My god how naive and gullible can you be? If you want to be an expat who lives full or part-time in Mexico…rent first at least a year. Next choice after living there awhile would be to buy an existing home and have it well inspected and negotiate the price accordingly. Finally if you want to build your dream house, find a reputable builder with good references and stay on top of the project as you release funds (or have somebody else you trust do that for you). I know lots of gringos you have had very nice houses built in Mexico for very low prices compared to the US. Well researched land title is a must. This story has a lot of similarities to Trump’s “Punta Bandara” project:

    http://www.sandiegouniontribune.com/sdut-1b14trump213846-trump-sued-investors-over-failed-r-2009mar14-story.html

  • ben

    this would been on national MSM 24/7. believe me they cover the waterfront. when it gets slow they report about icecream. bignews in some crap hole in mex? what do you take us for?

  • ben

    he would have been arrested when he came down for the meeting before the election. idiot.

    • I am not an idiot, I am an attorney in Baja California. This has been on national news and is constantly in the news here and in San Diego. Look for it on the internet, and you can read about the case, it has been well covered. It just recently was revealed that they had no work permits, no environmental impact study and no permission to operate in Baja California. They had a short term lease on the site. Try to have a civil discourse without name calling.

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