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The ocean's wonderful sights and smells and the peace of living or vacationing along Mexico's 6000 miles of coastline is a powerful attraction for foreigners.

If you've been considering purchasing a vacation home or a retirement property in Mexico, there are a few things you'll need to know concerning the legal and financial issues surrounding the acquisition of property in Mexico. Many people believe that foreigners cannot own land in Mexico at all. This is not true. There are ways in which a foreigner can purchase and own their own property anywhere in Mexico, it is just a matter of going through the proper channels and obeying the proper regulations.

It is written in Article 27 of the Mexican constitution that no foreigner may own any Mexican Property within 100 km of the border or within 50 km of the coast. Naturally, this "restricted zone" includes the largest portion of resort cities in Mexico. The Mexican government does, however, allow foreigners to establish trusts with Mexican banks allowing indirect acquisition of properties within the restricted zone.

This is how the process works: Anyone interested in a particular property in Mexico must, through his or her broker, have a Mexican bank acquire the property for him/her. The bank then becomes the legal owner, but only in trust. All rights to and use of the property is the purchasers. These trusts are for a period of thirty years and may be extended for another thirty years at the end of this period. The trustee's rights to the property may also be transferred to a third party.

All banks in Mexico are protected against bankruptcy by the Mexican government, so failure of the bank that owns your property in trust will not mean the loss of your investment.

Naturally there will be additional costs due to the addition of the Mexican bank as a third party in the real estate purchase. In addition to the cost of the property and the taxes (which will be discussed later), the purchaser will have to pay a percentage of the value of the property to the bank and a tariff for the drawing up of the agreement. There will also be an annual fee for the bank's services as trustee.

In Mexico, all real estate deals must be processed through a "Notario," a government official hose duty it is to see that all real estate is transferred properly. The Notario's duties are to make a title search through the Public Registry and to obtain a non-lien certificate and tax statement from the Treasury. The Notario also conducts an official appraisal, and makes sure that there are no unpaid bills or taxes on the property. The Notario charges approximately 2% of the appraisal value for the services.

The only tax paid by the purchaser is a variable transfer tax. This should be around 2 to 4% of the appraised value. The seller must pay a capital gains tax on the sale.

When it comes time to close a real estate deal, it is not uncommon for a seller to require a written offer as well as a 5 to 20% deposit. Due to the highly unstable interest rates in Mexico, financing of property is rare. Most real estate deals are paid for in cash. It is common to pay 20 to 50% of the total amount of the purchase upon signing the contract and the full cost upon signing the official deed.

Out of the Closet ... and on to the 'Net

Editor's note: The following article attempts to present the facts about Vacation Timeshares. While vacationing in Mexico, you will be offered enticements in exchange for your presence at a timeshare presentation. Be an informed consumer and learn about the benefits and costs of vacation ownership before you purchase.

When was the last time you received a "You Are A Winner" offering in the mail? Recently, most likely. Reading further: If you can endure the 90 minute presentation of So And So.'s Vacation Property, you could qualify for . . anything from an All Expense Paid Trip to a cheap Mexican blanket. "Why you?", you ask. Because like the majority of Americans, you vacation yearly and spend your share of the millions of dollars in the process. You fit the demographics for vacation ownership and also qualify for the guaranteed winning prize.

The great surprise is that over 380,000 of you did purchase during one of those 90 minute presentations last year, making timeshare sales BIG BUSINESS. If you thought it was the just the other guy, think again. The profile of a typical vacation owner is a couple: well educated, middle aged and upper-middle-income.
Of that likely group:

69.5 percent have incomes over $50,000,
67.5 percent are 45 years of age or older and
55.7 percent have at least a bachelor's degree.

So then, if not you, perhaps your accountant, your grocer, your neighbor or even Uncle Ernie are likely owners of a vacation program.

And if you thought it was still the carnival tent barkers or the high-pressure schucksters doing the selling, better think again. Companies like Marriott, Disney and Hilton have joined the fray. They are in the vacation ownership business and in it big time. Timeshares are out of the closet.

One of the primary selling points made by the timeshare industry - saving vacation dollars, is ironically not one of the primary reasons given for purchasing in a 1995 nationwide survey of owners. And for good reason. It is very hard to make a convincing argument for cost savings when airfares continue to be a big and uncontrollable part of the expense. Membership prices begin in the six to ten thousand dollar range all the way up to twenty-five thousand and all timeshares have some kind of annual maintenance fee which is subject to change - usually upwards. Also, careful shopping, the 'wannabe' vacationer can find package deals at very low prices in the off seasons

The most important reason given for purchasing by the 2000 surveyed was the "high standards of the resorts at which they own and exchange, followed by the flexibility offered through these exchange programs". In other words, quality of the vacation experience was more important than any money they might save. This says a lot for Americans and how they value their playtime.

The second most prevalent reason sited was the flexibility offered through vacation exchange programs. This is a system where you may exchange your vacation plan for one of similar size and season in one of the over 4,145 participating resorts located in 81 countries. While there are several such exchange organizations, the most popular are Interval International (II) and Resort Condominiums International (RCI). The latter being the largest in number of participating resorts. Rules for exchanging are very similar between them and on the outset simple to accomplish.

Fundamental to each is the: Like For Like Rule. For instance: you may exchange for a different area than the one you own-for one in a season of equal popularity. In this case, perhaps a Colorado Ski Lodge in January for your Cape Cod bungalow in August. Both represent prime vacation time at their locations. Likewise, if you own a one bedroom with kitchen you may request just such a facility at your visiting resort, ergo like for like.

You are normally free to request an exchange for something lesser than what you own, be it size or season, but rarely greater. Because the system is based upon availability, being flexible in your choices increases the likelihood of fulfilling your request. RCI sights a 97.4 percent confirmation rate on requests in 1995. As more and more vacationers own and more use the exchange system, the likelihood of a satisfactory exchange increases exponentially.

Also important in the II and RCI systems is the ability to deposit and save or carry over your week into the Next year or years. If this is the summer the in-laws come to visit, you may save up your vacation time and double the fun next year.

In the same survey, 75.3% claimed satisfaction with the vacation purchase they made. While this number will not likely qualify the industry for a Malcolm Baldridge Award for Excellence, it probably comes as a surprise to most having heard the horror stories from years gone by.

There are a number of considerations to keep in mind before making a purchase:

The membership is only as good as the Resort Developer or Owners' Association underlying it. Yes, it is possible that either could go broke and you would be left with little but the cheap blanket, however more and more States are getting involved through their timeshare or real estate divisions of the Attorney General's Office. Most US resorts are required to give some kind of prospectus and cooling off period as well as a full accounting of your rights and responsibilities. So it pays to study up a little if you have any doubts.

What type of ownership are you being offered? The two primary types of ownership are fee simple as in the ownership of your home or right-to-use similar to a long term lease. The difference being in the former you own it forever and the latter is usually 25 to 30 years in duration. While fee simple ownership may appear to have the advantage, it is usually governed by an Owners Association with its attendant problems rather than the Developer maintaining an active interest in the property (because he will eventually get it back). These differences are often reflected in the price with fee simple slightly higher over right-to-use in price.

What should you expect during your 90 minute presentation? First, don't expect to be there for ninety minutes. The prevailing attitude of the timeshare industry from top to bottom, from inside to out is they have one chance to sell you, so take no prisoners. While there are certainly exceptions to this rule, they are greatly in the minority. The best advice is: If you have absolutely no interest in the product, the two to four hour investment is probably not worth the price of the gift. The salesperson will sense your purpose and only get frustrated at best, high pressure and ugly at worst. Instead, why not spend a nice day with the family?

On the other hand, if you have interest, do your homework before attending.

How often does your family vacation and how many weeks per year?

What could you afford today and/or how much could you budget?

Would you prefer to vacation primarily at your resort or exchange for distant places?

Ask friends their advice or better yet, seek out an owner at the resort you are visiting. If they enjoy it (and chances are they do), they'll be happy to share their experiences with you.

Be prepared to negotiate. It's half the fun.

Financing? Interest rates offered by Developers are notoriously high. The risks and difficulties in collection keep the banks and many financial institutions away. You may well be able to negotiate a much better price if you can offer cash. In such a case, use your credit card to purchase by offering cash and pay them off after arriving home. Those with air mile or auto cards do especially well, saving on their purchase and earning air miles or credits.

What type of interval ownership? There are three types of interval plans popular today. Normally only one type will be available at a particular resort. The oldest and most familiar is the fixed week type. The weeks of the year are numbered 1-52 and you purchase one or more weeks to be used at the same time each year at your home resort. The advantage to this type of ownership is the assurance that your unit will be waiting for you faithfully each year. If you choose to exchange your fixed week you will receive a week at another resort in a similar season as yours, but most likely not the same week as you own.

The second type is floating time. You buy your vacation time by the season, not designated as to the actual date or week of the year. It is your responsibility to contact your resort each year and confirm your exact arrival date. Check-ins are usually Friday, Saturday or Sundays. Obviously this program offers some scheduling flexibility, however it is usually based upon a first come-first served basis, so highly desirable weeks go early during their season. Also, when exchanging, you must first reserve or affix your time at your home resort before the Exchange Companies will accept it for deposit.

The newest form of ownership to become popular is the points system. These can vary widely, but most Often depend upon an accounting system to determine your vacation plan. You can purchase sufficient points for a desirable unit during your favorite vacation season each year or you can double up those points and go every other year and stay in a larger unit or use them in the off season for more time. The system is very flexible and for that reason is growing in popularity. If there are drawbacks, they are the sometimes confusing accounting systems and the same subject-to availability as floating time.

Another way to get involved with vacation ownership without going through the 'sales presentation' is to buy on the secondary or used market, a true misnomer. After all, the whole concept of timeshare is to use it over and over again. So purchasing a preowned membership has no effect other than saving you money - sometimes thousands. Do not confuse the secondary market with what a developer or resort salesperson may represent. It is not in their best interest as their profit margin in the resale market is nonexistent. Individual owners can often be found in the local newspapers or posted in company cafeterias. You are going to get the best deal by shopping around. There is also a growing number of broker/dealers representing timeshare sellers as well as buying and selling for their own accounts, much like a real estate broker may do. Most are licensed under their respective State's real estate or timeshare laws. Be sure to ask.

While there is no actual multiple listing service, 'a one stop place to shop', one of the best and growing areas to look is the World Wide Web on the Internet. By inserting the subject timeshares in any of the popular search engines such as Yahoo or Web Crawler you will receive a list of many topics which may include a single 'for sale by owner' to major brokers selling timeshares from all over the world. There will also be support organizations and user groups listed there that offer further information.

Holiday Reseals, Inc. a division of Holiday Group of which I am affiliated has been on the Internet for three years. As the first major Web site of its type, there were a lot of lessons for us to learn, both from our customers and the technology itself. We have enjoyed an ever increasing level of business from this medium and our customers seem to enjoy it also. It allows them, as single individuals or whole families to shop for their vacations from the comfort of their own living rooms. Pictures and text of resorts and supporting information on exchanging, buying and selling is available. Whether their vacation dreams extend only as far as their regional recreation area or as far away as the Caribbean, our clients can locate it fast through an interactive global map and an index of listings. If they have further questions or wish to purchase a particular property, they may e-mail us directly or call on the toll free phone number at their convenience. No sales are actually consummated over the Internet as of yet, but as an information tool, it is unsurpassed. While great savings and convenience is the plus side of shopping this way, there is one obvious draw back, no cheap Mexican blanket.

The author and partner Donald Boehm, are the CO-owners of Holiday Group, a multifaceted vacation and timeshare marketing company. Their services include Marketing and Consulting for Resorts as well as Resale and Rental of timeshare properties throughout the world. The Company is a licensed real estate brokerage as well as member of American Resort Development Association. Their offices are located in Seattle, Washington and Puerto Vallarta, Mexico. The Holiday Group may be reached at 1-800-704-0307 or at their web site, http://www.holidaygroup.com

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