Barbara Joan Schaffer

Barbara Joan Schaffer

My builder and general contractor, Lorenzo López Ruíz, and I began this project with a shared vision of a rustic house that would accommodate my particular needs and budget. The architect Juan Carlos Linares drew up the plans with much assistance from Peter Voss, the creator of the Beach Hotel Ines. Peter’s famous last line: “But think, Barbara. What if one day you want to sell your house to a normal person.”

A TU GUSTO

Building a House in Mexico

Building your house, no matter how humble, is a Mexican rite of passage much like starting a family. So when my Mexican friends learned that I wanted to settle here, they urged me to build rather than to buy an existing house. Renovating an older house would be as expensive in the long run as building, they counseled. Most importantly, if I built I would be able to have a house a mi gusto - to my liking.

What was my gusto? I considered the question for a year and a half before I bought my property. I knew I wanted something simple and economic; it wouldn’t have a pool or air-conditioning. I favored a traditional Mexican ranch house, because I assume that local domestic architecture reflects the best use of space and materials for the climate and that it would be the most economical way to build. I then went around taking pictures of houses I liked so one day I could show them to an architect.

Next I learned about Mexican house construction which is very different from that in California, although both respond to the same problem of being able to withstand an earthquake. In Mexico houses are usually made of reinforced masonry - brick or cement block with reinforced concrete (rebar) beams and columns. The most economical construction requires rebar every three meters - and steel is very expensive - which explains why so many Mexican houses are either three or six meters wide. Square or rectangular structures with interior walls are also better able to withstand earthquakes, according to articles on construction I’ve read on the Internet.

By the time I sat down with an architect, I knew my gusto included exposed brick for maximum coolness and a master bedroom with a study and empty space between the bed and the desk for pacing back and forth. With the help of the architect and a friend, a plan emerged. It would be an “L” shaped house, with my bedroom the foot of the L and the kitchen at the other end, the porch would turn the L into a rectangle. I wanted cement overhangs over all the exterior walls to shield the rooms from the heat of the sun and protect the porous brick from the rain. A second story palapa over the master bedroom would keep the sun from beating down on the cement roof.

It wasn’t until I had chosen an architect and a builder that I set about buying a lot. Both men inspected the three properties I was most interested in, and they were able to tell me the pros and cons of each one. The lot I bought was the most expensive of the three, but it was the cheapest to build on as it didn’t need to be leveled, was connected to the city’s sewer system, and was on the electric grid.

LAYING THE FOUNDATION (cementación) May 21 to May 31.

Monday, May 21: A shack was built for the night watchman while across the street the workers wove wire around steel rods (rebar) for columns (castillos) and beams (cadenas).

On the fourth day an outline is drawn in chalk, like at a crime scene, and a backhoe is brought in. The outline looks very small, too small for a house. When my house is built it will be larger than I had ever imagined. Rooms grow in size when they have walls and ceilings. Except the bathroom was too small, but being there allowed me to make it bigger.

The rebar becomes beams and columns on days 5 and 6. Concrete is poured into wood frames.

Sunday is a day of rest. The watchman shows my friends and me around as though it were his construction. He has no radio or TV or books. He doesn’t seem to drink. Maybe he is a simple man at peace with himself. I haven’t a clue.

Monday, May 28: Cement blocks are placed over the beams; then another layer of reinforced concrete is added. Cement blocks are always used in foundations because they are less porous than brick.

PUTTING UP THE WALLS (paredes) June 1 - June 20

June 1 (day 10): The walls start going up. In three weeks I will have an obra negra - the shell of a house. At this point, the rooms still seem small to me.

The bricks are artesanal and irregular in color, texture, shape and size. They were laid with the longest, most even side facing the outside walls; thus there is more space between the bricks on the inside walls than on the outside.

It’s June 6 and the electrician is there with his crew running cables through the steel columns.

ROOFS (techos) June 21 - July 7

June 21: My money and my vision have come to this: 22 men are mixing and pouring the cement for my roof. I felt like I was Donald Trump, and it felt good.

As the morning progressed the sky got grey. It was important that it not rain, and it didn’t. It was OK for it to rain after the cement was laid. As per tradition, the workers were treated to a big lunch once the roof was finished. Lorenzo rented tables and chairs and his wife made and served a delicious chicken stew.

July 2: Rebar is put into store-bought columns for the fiberglass porch roof, and cement blocks are put over reinforced concrete beams to make a retaining wall cum fence foundation. The hidden cost of a corner lot is in the fence.

July 7: It’s been exactly seven weeks since construction began, and the fiberglass roof is being attached to the porch. It will take another four weeks for the house to be completed. It’s common knowledge that the finishings (terminaciones) seem to take forever.

FINISHINGS (terminaciones) July 11 - August 3

July 11 - August 3: I needed a firm completion date, because I was going to have a big housewarming party before I moved in. This would be Lorenzo’s opportunity to show his work to prospective clients, so he was every bit as eager to get the house completed on time as I was. As it turned out, the house was finished, except for the plumbing, by August 1, and I finally had running water on August 2. The party, on August 4, - a catered affair with an 8-piece brass band - went well, from what I remember of it. We ate barbecued lamb stew and the beer and liquor ran freely.

Ceilings and walls (techos y paredes)

I saved a lot of time and money by opting for exposed brick, cleaned with muriatic acid and covered with a sealant rather than having the house plastered and painted. Because of it porosity, the exposed brick will also keep the house cooler.

The ceilings, except for the bathroom, are finished with a mixture of tile cement (pega azulejo) and sealant (sellador Tauro 5:1). The “painter” used a spoon and a plains trowel to apply the mix. The work is slow, but it is a lot quicker and cheaper than applying plaster and paint. The irregular texture is also very attractive.

The cement beams and columns were painted to look like brick. The faux-brick round porch columns are truly unique.

Plumbing (plomería)

The plumbing was a mystery to me. I kept hearing the word registro (register) and I saw pipes that never seemed to get connected to anything. As it turned out a register is a sump into which wastewater drains from one set of upper into a lower pipe. I have a register outside of my bathroom that connects to another register outside of the kitchen which connects to the register in the sidewalk and the city sewer system. A construction worker was responsible for making the concrete reservoirs, the plumber for installing the pipe, then the iron smith (herrero) who also installed the doors and the window grills, made an iron lid for each of the registers.

I have two sets of pipes for bringing water to the 1,000-liter tank (tinaco) on top of the roof - one for getting it directly from the street connection and another from the 5,000-liter cistern (cisterna). The city water has enough pressure to reach the roof without a pump, but I need to use the pump if I draw water from the cistern. The cistern is a back up for when the city supply fails, but if I don’t use up the water in the cistern every few weeks it will become brackish. I also use the cistern for watering my garden.

Doors and windows (puertas y ventanas)

I bought laminated doors at Home Depot in Acapulco and had them shipped by a moving company. These doors were sturdy, inexpensive and not locally available. Otherwise my options were iron, aluminum or wood. Iron is the least expensive but requires the most maintenance; aluminum and wood are more costly. Even after paying the smith to add inches to the doors so they would fit into the doorways, I saved money by buying them at Home Depot rather than having them custom made.

I had aluminum jalousies (persianas) put in the smaller windows, and hinged, iron-frames for the large windows. The aluminum windows are made by the aluminum guy, and the windowpanes were put in by the windowpane guy. I ran myself ragged, but in a nice way, getting bids on the windows. The price variations for the identical work were enormous. In the end, Lorenzo hooked me up with people he knew, and their bids were the lowest. The ironsmith made the iron framed windows, installed the doors, made the front entrance gate and the car entrance gate, and the security grills (protección) for all the windows.

During the final weeks there were always new workmen installing one thing or another and decisions to be made. What kind of screens did I want? (The best, but not painted green.) Did I want clear or tinted glass? (Clear.) What design did I want for the grill? (Curly S’s and twisted columns.)

WORKERS’ INSURANCE (seguros)

Included in the cost of “materials” is the money I paid for the workers’ health insurance. Fortunately there were no on-site accidents, but without insurance I would have been responsible for medical bills. Besides the building inspector, a municipal medical worker came to the site to give all the workers free tetanus shots. A representative of IMMS, the state-run medical insurance, came with the forms for covering the workers. Later he came back with a computer disk that I had to bring to the bank. The bank downloaded the data, collected the premium, and gave me a receipt.

THE PARTY (fiesta)

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Barbara Joan Schaffer 

BUYING PROPERTY AND BUILDING IN MEXICO

Buying property in Mexico, even in Puerto Escondido, is no more - or less - risky than buying it in the U.S. It’s just that the risks are different. I’m writing this in September of 2007, a time at which many Americans are losing their homes because of deceptive financing arrangements. Mortgages will not be your problem in Mexico as you will be expected to pay cash for your land.

There are many new developments (fraccionamientos) along the coast. The things to check for are: accessible roads, electric lines, telephone lines, water, and drainage. Typically the developer will promise all of the above, but may not provide them until all the lots are sold (if then). In Mexico fraud is a criminal offense, but you would need a lawyer to pursue the case, which would drag on for years. Even buying a lot in a neighborhood where there is electricity does not guarantee that you will have a hook-up. An electric pole costs around $5,000 and you might need a bunch of them to reach your property. A transformer is also a few thousand dollars. The electric company can tell you if the lot you want to buy is ready to be put on the grid or not.

In a lot of areas, road building and road maintenance is the responsibility of the local community which typically votes an assessment on the property owners. This, plus the ravages of the rainy season, explains why there are so many unpaved and poorly maintained roads. The fewer houses there are the less likely it is that your road will be maintained.

More worrisome are properties that by law (i.e. the Mexican constitution) cannot be sold to foreigners. This is any property within 50 kilometers of the coast or 100 kilometers from an international border. There is a legal instrument, however, that allows foreigners to get around this restriction - the fideicomiso [fee-day-co-MI-so]. The fideicomiso is a bank trust which holds the title to the land in your name. With a fideicomiso you can sell your property at any time to a Mexican or to another foreigner. The fideicomiso is for 50 years and is renewable. The bank does nothing for you except hold the title in trust; for that service you pay around $500 a year plus $75.00 in federal taxes. Real estate taxes are very low - only 0.1% of the assessed value at time of purchase.

In order to get a fideicomiso, which costs around $5,000 to set up, the land must have a title that is free and clear of any debts or claims. However, most land in Mexico is not privately held; this means there is no clear title or deed. Instead the land is held communally either through an ejido [ay-HI-do] or in a federal trust (tierra comunal). Communal land can be divided into lots and bought and sold but only to Mexican citizens. Instead of titles these lands have actas de posesión. If these lands are abandoned they revert back to the community. The problem for foreigners is that you cannot get a fideicomiso without a clear title. It is possible to privatize a communal lot, but it’s costly and time-consuming, figure a year. One hears of the process being expedited, but there’s always the risk, albeit small, that a future administration might question the privatization or of someone else claiming the land.

Many foreigners do build their houses on communal land. Some buy land with the help of a Mexican national. Typically, and sometimes for a fee, the Mexican puts the property in his name and signs a contract giving you full use of the land. The nominal owner in this agreement is called a presta nombres (name-lender). The problem is that this contract is not lawful; it will not hold up in court. If the name-lender dies, his heirs can claim the property. For immigration visa purposes, you are a renter, not a homeowner. The situation can get complicated when you need the name-lender’s signature on an official document when he happens not to be in town. Ultimately, you have to ask yourself how much risk you are comfortable with.

The other alternative is to form a Mexican corporation. Mexican corporations can buy communal land and they can be 100% foreign owned. The downside is that the property has to be developed commercially; it cannot be used solely as your residence. If you are planning to rent out your house part of the year or to rent rooms, this may be a good option. Speak to an accountant first. Even if you have a fideicomiso, you are expected to pay taxes on any rental income.

For obvious reasons, private land tends to be more costly than communal land. But even having a bank trust does not guarantee that there will not be problems; it does however greatly diminish the risk. Currently (2007), some condos near the beach, which do have fideicomisos, are under dispute and a judge has ruled that none of the units can be sold until the matter is resolved. It seems that the land was usurped from its owner by a developer in cahoots with local and state politicians. The case traveled through the courts for years, and the landowner won. Now the question is who is to pay him and how much.

Even in the nicest, costliest neighborhoods of Puerto Escondido, one cannot help but notice the number of half built and seemingly abandoned houses there are, very few of which are for sale. Presumably the owners ran out of money or plan to build in stages according to their means. Rule of thumb: whatever you plan to spend, be sure to have an equal amount in reserve. Architects and contractors, both scrupulous and unscrupulous, are notorious for underestimating the real cost of labor and materials. Plus you will find that every change you make to the original plan will be billed at a higher rate than the original per-meter cost. So don’t fall for the architect’s “you can always change it later” routine. Abandoned construction sites always give me pause as I imagine each owner started out as optimistically as I did.

BARBARA’S TIPS FOR BUYING PROPERTY AND BUILDING

Some of the following tips are so basic that I’m embarrassed to write them. However, there is something about a tropical climate, ocean sunsets and tequila that makes even the most prudent people take leave of their senses.

1) There is no such thing as an earthly paradise. Watch your wallet both literally and figuratively.

2) Everything can be negotiated; people are more flexible than you might think. If someone says, “this is the way it’s done,” you can respond with, “this is the way I do things.” If an architect insisted on my paying 50% up front, I would look for another architect. After all, he could drop dead tomorrow and my contract would just be a claim on his estate.

3) Realtors and developers are salespeople. Some will wine and dine you, but it’s still all about doing business. In Puerto Escondido, it seems like every other person has properties for sale, which means they know someone from whom they can get a commission on a sale. Sometimes there is a whole chain of commissions between the buyer and the seller.

4) Before you put out any money, have a lawyer or notary write up the purchase agreement. If the seller doesn’t want to deal with the lawyer, you know you have a problem. There is no system of escrow accounts per se in Mexico, but the notary can hold the initial payment. The final payment should be made at the notary’s office at closing, when the fideicomiso has been approved and paid for. This process usually takes three to four weeks.

5) Architects sometimes manage construction, but it’s a lot cheaper to just pay an architect to draw up the plans (you will need them to get a building permit) and then hire a contractor/builder. It is extremely important to get multiple bids and to get references from former clients. It is not unheard of for an architect or builder to claim credit for someone else’s house, so be sure to speak to the owner.

6) Pay for the materials yourself. My contract with my builder was just for labor (mano de obra). The local building supplier, Zimat, gave me a line of credit so that the builder could order whatever he needed whenever he needed it; all I had to do was write the checks.

One hears too many stories of people being ripped off by architect/contractors using inferior materials and charging for more expensive ones. Some contractors just add a percentage of the materials cost to the building cost as part of the contract. This system does not encourage the contractor to look for the best deals.

7) Try to get a pay-as-you-go contract. I paid for my house in five installments for amounts agreed on before construction started. The first installment was for the foundation. When that was finished I paid for the walls, next I paid for the roof. This system is much better than paying by the week which gives the workers no incentive to finish in a timely way.

8) Find out how large a crew will be working on your house and if they will be there everyday until completion. There were at least eight workers plus the builder/contractor on my site five-and-a half or six days a week. My house was completed in 11 weeks.

9) Everything costs money. Building a house in Mexico is relatively cheap; it becomes a lot more expensive when you put in the “finishings” (terminaciones): plaster and paint, windows, doors, iron grill work, tile floors, kitchen and bathroom fixtures. This is where everyone goes over budget, which is why you need to have money in reserve.

10) Visit the construction site as often as possible. I usually drove by at least once a day. It was a good thing I was there when the electrician was about to put in the connections for the ceiling lamps. I hadn’t noticed that they were in the architect’s plans; he had never consulted me about them. I wanted wall fixtures and that’s what I got.

The bathroom was another story. They were ready to put up the walls when I realized it was too small. (If I knew how to think in meters, I might have caught the problem when I read the architectural plans.) Luckily, I was able to make the bathroom a mi gusto by taking a meter out of the guest room. Of course, it added to the construction cost.

11) Know how to say “no”, but listen to advice. The architect acted like I was a fool when I said I wanted one bathroom not two. He kept saying how cheap it would be and that I needed my privacy. What nonsense! Of course two bathrooms cost more than one. I live alone, and I have no problem if guests use my toilet. Fortunately, I was dissuaded from my idea of having a laminated roof over some of my rooms instead of cement. I was adamant, however, about having an inexpensive fiberglass roof for the upstairs deck and the front porch and that has worked out very well.

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Barbara Joan Schaffer 

THE PURCHASE AGREEMENT

A purchase agreement (contrato privado de promesa de compraventa) is typically a boilerplate two-page document prepared by a lawyer or a notary. It states the seller’s and the buyer’s name, address, age, marital status and other particulars. It also states the exact size and location of the property as it appears on the deed.

The agreement must show the amount actually to be paid including the down payment which is paid at the signing of the agreement. For tax purposes - or to avoid paying more taxes than necessary - the seller may request that the declared purchase price be less than the actual purchase price. (The capital gains tax is 15%; 28% for foreigners.) In this case, both amounts must appear in the purchase agreement. (If the purchase agreement is written by a notary and the declared price is not the purchase price, be sure to request that the document not be notarized, i.e. entered into the public record.)

The date of initiation of closing must also be declared. My purchase agreement allowed for three weeks to lapse before the title transfer process would be initiated with a notary. This was the amount of time that the seller would need to get a certificate of non-encumbrance (certificado de no gravamen) from the deed office and that the buyer might need to get his papers in order. If the sale does not go through because the seller does not present the paper work to the notary by the agreed upon date, he must return the deposit to you.

Remember: an oral agreement is as good as the paper it’s written on.

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Barbara Joan Schaffer 

THE FIDEICOMISO

It took 16 working days from the time I paid the notary (after the seller had provided the below mentioned papers to the notary) to the closing date. Closing occurs after the bank approves the fideicomiso and the buyer has paid the bank fees. The State Department fee and the taxes are handled by the notary. At the closing the seller and buyer (or their proxies) sign papers at the notary’s office and, unless other arrangements have been made, the buyer pays the seller for the property. At this point the buyer receives a stamped letter saying that the fideicomiso for this property is being processed. This letter is the functional equivalent of a fideicomiso and you can use it to get a building permit. The actual fideicomiso paper is a thick document which you will receive around a month after closing.

If the seller is a foreigner and there is already a fideicomiso, the fideicomiso is merely transferred to the new owner. This saves you time and money. If you later sell your property to a Mexican national or to a Mexican corporation, the fideicomiso is dissolved and the new owner receives clear title (escritura).

(Information courtesy of Notaria Pública No. 57, Puerto Escondido, Oaxaca)

The SELLER must provide the notary with the following documents:
- The title (escritura).
- Certificate of non-encumbrance (libertad de gravamen) - an official document showing that there are no mortgages or liens or other claims on the property.

- A receipt showing that the current year’s property tax has been paid.
- If the seller is married and the property is not joint property, proof of marriage under the separate property act.

- If there is a house and the house has been the residence of the owner: receipts for the payment of utilities.

-The bank that will administer the fideicomiso may require other documents.
If the seller is a corporation (persona moral) the requirements are different.

The BUYER must provide the notary with the following documents:
- Current passport.
- Visa (tourist visa, FM-2 or FM-3)
- Copy of passport or birth certificate of the person who will inherit your property
- Proof of current address (utility bill or bank statement)

-The bank that will administer the fideicomiso may require other documents.
- If the buyer does not speak Spanish, a translator must be present. The translator must provide identification in the form of a Mexican voter card or a foreign passport.

If the buyer and/or seller is represented by a proxy with power of attorney given outside of Mexico, the power of attorney must be apostilized or have a consular certification.

FEES:

Buyer’s costs:

Notary fees - 12,000 pesos, half payable at the start of the process, half at the end. (This is what my notary charged in May 2007.)

State Department (Secretaria de relaciones exteriores) - 11,800 pesos for permission to establish a fideicomiso.

State Department: 3,196 pesos for inscription in the Registry of Foreign Investments.

Bank fees: $1,150.00 U.S. (tax included) $500.00 is for setting up the fideicomiso; $500.00 for the first annual payment; $150.00 federal tax.

Transfer tax (traslado de dominio). 3% of the cost of the property or of its assessed value, which ever is higher.

Seller’s cost:

The seller must pay the capital gains tax (ISR) at the time of the sale.

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