Real Estate Investors have thrived in Puerto Peñasco, (Rocky Point) for many years. This important aspect was seemingly overlooked in recent articles published in the Arizona Republic. An informed, unbiased representation of the real estate community in Rocky Point should mention that the vast majority of investors, literally tens of thousands of satisfied people have had much happier stories to tell than those found in North Beach. One could walk for miles along Sandy Beach, Playa Encanto, Las Conchas or most other communities around Rocky Point on any weekend and hear glamorous reports from people not represented in recent articles. Living in Rocky Point is such a pleasure; we are so often reminded of our blessings as we greet the return clients and happy homeowners. There have been some challenges and obstacles, which certainly can happen anywhere.
NORTH BEACH IS AN UNUSUAL SITUATIONThere were misfortunes that hurt many good people in North Beach, an expansion of beach approximately 15 miles away from downtown Puerto Peñasco, bordering the Mayan Palace. Many people were attracted by developers with beautiful marketing material and equally attractive visions of grandeur. It is however, irresponsible to characterize the practice of real estate in Rocky Point or Sonora as similar in whole to one with issues older than most of the respected developments in this town. There is no question that North Beach has had some issues, some going back to 1996. Also very important to point out is that the problems faced by the developers and resting on the shoulders of investors are not losing their money; there are delays in gaining title. The article in one sentence wrongfully challenged the credibility of a bank trust, stating that “All believed literature published by government agencies, including the Arizona Mexico Commission, stating that Mexico’s Fideicomiso, or bank trust, system safely ensures property rights to Americans.” It then went on to say that none of the people devastated in the North Beach debacle ever received trusts. Raul O’Farrill, A notable attorney practicing in several Mexican cities as well as the U.S., was retained in 2003, long after the deepest of issues took root in North Beach. Two satisfied clients within the boundaries of North Beach were quoted, as being extremely satisfied; together they represented about 150 homeowners in North Beach’s sub-communities of Playa Dorada and its neighbor, Playa Miramar. This by itself indicates 150 satisfied clients. The Mexican, (Agrarian Law) legal system is complex much like the Common Law system used in the U.S. There are pros and cons involved with both systems; one example in the Agrarian system is the way the facts are presented to a judge, in writing, and not to a jury, thus eliminating the ability for flamboyant showmanship skills influencing decisions. O’farrill’s continued involvement through many disputes shows evidence of satisfied clients and no more implicates him than to imply that Johnny Cocheran was an accomplice of O.J. Simpson. The recent article, though it painted a much more dismal description than we are actually witnessing here may help bring the attention of Mexican officials, and help us resolve the issues in this one community, most of which have little to do with the developers themselves. HOW TO BUY SAFELY IN MEXICOThere are several things to consider when investing in Mexico. First and foremost, with proper representation it is totally safe to invest in Mexico. The Fideicomiso, also known as a bank trust is not a lease. If it was not a safe mechanism, companies like Stewart Title, First American Title and others would not warrant its validity. The United States Government would not allow the investment in Mexico Real Estate as legitimate self directed IRA’s if there was uncertainty. There are a number of highly regarded financial institutions lending millions of dollars that certainly would not risk this kind of revenue on leases or unwarranted real property, and more than 1.6 million Foreigners in Mexico would not be happy homeowners in MexicoINFORMED BUYERS GATHER INFORMATION AND DEMAND DISCLOSUREAnother consideration is that an uninformed buyer can get hurt. When someone buys a home, they have a right to expect honest full disclosure. Disclosure is a very important aspect that has often been overlooked by investors in Mexico’s beachfront communities. Impulse has driven many investors toward their acquisitions, most experienced positive results. When purchasing real estate anywhere, remember to ask yourself, “Who is representing me?” In the end, any buyer can protect themselves, in any development with the proper contract that addresses potential issues. In Rocky Point we often refer to all buyers as investors because in a sense, real estate for most has outpaced the stock market, or most any other holdings. It is however important to differentiate a condo buyer looking for a place for the family to enjoy, from an investor. A one time second home purchaser expects to pay money and receive a clear title with no liens and no surprises. An investor looks to overcome risks based on gathering information and implementing controls or risk management through carefully drafted contracts. The concept of higher risk/higher gain comes to mind, but needs clarification. The risks can be identified by asking the right questions. What is the title situation? What are the financing sources? Is my earnest money expected to be used for construction or will it be held in a third party controlled escrow account? (Third party escrow accounts were not commonly available when the first clouds appeared over North Beach.) There are many other questions that need full disclosure that require attention. If the answers are not explained in full, there should be yellow flags going up and these and all other questions need to be addressed in the offer of trust contract. If title insurance is offered, understand what is insured and what is not. If title insurance is not available ask why. Title insurance is not the magical savior in all cases and in some rare instances can simply be an extra unnecessary expense. Proper representation is what is important. Demand proper representation and full disclosure. Do not hesitate to request information, and make sure your agent knows what questions to ask. You are not out of line to ask your agent or developer for full disclosure, or request specific documents, such as permits, title insurance documents, as well as financing agreements; and have these looked over by a Mexican attorney or qualified individual. LICENSED REAL ESTATE AGENTS ARE HELD ACCOUNTABLEThe real estate community as a whole in Sonora has changed dramatically in the past several years. In Puerto Peñasco there are approximately 200 agents and two organizations with the specific purpose of protecting buyers and sellers. AMPI for example is Mexico’s National Association of Realtors. About a year ago, AMPI Puerto Peñasco started requiring its members to be certified at the state level. This certification included criminal background checks, fingerprinting, as well as continuing education classes to insure the highest level of trust and security. An AMPI agent is a Realtor that has accountability enforceable by law. Effective in 2007 every single real estate professional obtaining income in the state of Sonora, by virtue of commissions not only needs to be certified but needs to hold a real estate license. The licensing process is very similar to that in the U.S. including a course mandated by the state that is 109 hours of intense real estate studies. The topics included in this course provide current technical and administrative skills to participants allowing them to improve their performance in Real Estate activities this accreditation did not come easy, but was done to insure problems in the past do not surface again. Both associations, AMPI and PPREA hold integrity of ethical standards as their most important virtue. Has Arizona seen its share of real estate scandals? How many buyers threatened with foreclosure due to the turn of the market and the sub-prime lending craze would speak of questionable representation? Were some not pressured with hard to understand documents explained briefly by commission hungry agents? Does this mean that all real estate transactions in Arizona are suspicious? There have been examples of prime debacles in many places but to paint us all as Frito banditos is wrong. There are plenty of upstanding ethical professionals selling real estate in this community, and there are highly credible developments worth noting. SAFE INVESTMENTS ARE ABUNDANT Not all agents are the same, and our system is not perfect, but with the best interest of the long term growth of Rocky Point and beyond, in the hearts and minds of licensing and oversight organizations there is no reason not to consider investing in what so many Americans and Canadians have found to be paradise. You truly can enjoy your investment portfolio in Mexico, but as they say, don’t leave your brain at the border. There were issues handled poorly in the past, and there will be projects with all the best intentions in the world that fall short yet to come. But with the right information available now, and your ability to protect yourself through contracts that address any of the unknown variables you don’t have to be a victim. Do not attempt the process alone recruit proper representation. Kent WhiteRealty Executives, SonoraPresident Elect AMPI Puerto Peñasco
Vaya con Dios !KENT B. WHITE
602 – 288 – 8649