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Sonora Becomes First State in Mexico to Require Licensing

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RISMEDIA, June 19, 2007-(MCT)-Sonora has become the first state in Mexico to enact a licensing requirement for real estate agents, which may include criminal-background checks in select U.S. states, including Arizona.

Because the majority of Sonora’s foreign real estate investors are from Arizona, state regulators applauded the new law, which was unveiled at the Arizona-Mexico Commission meeting Thursday.

Investing in Mexico is safe, officials insisted, but while safeguards are in place, it’s up to buyers to exercise common sense.

Kevin W. Hardin, chief executive officer of Phoenix-based International Mortgage & Investment Group, said investors run into problems after “leaving their brains at the border.”

“Americans get to the border and someone on the beach shows them a beautiful condo and asks for a cash deposit now,” he said. “You wouldn’t do that in the U.S. Why would you do that in Mexico?”

Government officials in Sonora, meanwhile, are legislating and regulating those who peddle to their greatest investors: foreigners.

Last year, more than $550 million in foreign investment poured into Sonora. The state ranks third out of 31 states and Mexico City for foreign investment.

“It’s not in our interest for investors to have problems,” said Epifanio Salido Pavlovich, director of the Sonora Office of Tourism

On heels of investor dispute

In 2001, Tucson couple Eva and Francisco Durazo paid $8,500 for the right to use a Puerto Penasco condominium 10 days a year for 10 years. They pay an additional $80 a year for maintenance.

Their last visit to the Fiesta de Cortez development was in April 2006, and for the past two months they have been trying to contact the hotel operators to plan their next trip.

“It was our dream to go up there and spend the summers,” Eva Durazo said. “We feel like we’ve been taken.”

Last month, the Arizona Department of Real Estate issued a “cease and desist” order against the condominium developer following complaints from nearly a dozen investors that developers took deposits or advances totaling $378,318 for property never turned over to the consumers.

Because the company advertised in the state and finalized contracts in Tucson and Scottsdale, Arizona regulators were able to exercise jurisdiction, said Mary Utley, a department assistant commissioner.

The owner of Fiesta de Cortez Hotel Urbanizadora Vacacional de Puerto Penasco, Ignacio Chavez Moran, did not attend the commission meeting, but his attorney vowed to resolve the dispute at a meeting set next Saturday.

“We are going to analyze the contracts and come to an agreement between the parties,” attorney Gilberto Pena said. “We consider this situation to be resolved.”

The 100-plus-room hotel has 13 condo owner and numerous time share owners. The rest of the units are rented out as hotel rooms.

Pena said the majority of investors are from Arizona.

Binational resolution

Rafael Rochin of the Sonora Office of Tourism told commission members that his office intervened on behalf of the investors and said the company will resolve the dispute, up to and including reimbursement of investors’ down payments.

“This is a good-faith public gesture,” he said. “We are two distinct countries, but with shared concerns so we look for solutions together.”

Fiesta de Cortez representatives will meet with the Arizona Department of Real Estate Wednesday, said Commissioner Sam Wercinski.

After he addressed commission members and met with Pena, Tucsonan Francisco Durazo said he was hopeful that he would once again enjoy a Puerto Penasco vacation.

Investor Le Bertha Umbreit, a Phoenix attorney, thinks Chavez is sincere and plans to attend the Saturday meeting in Puerto Penasco, she told commission members.

“I believe he will honor the contracts and I believe he’s trying to come to an amicable resolution,” she said.

Regulations and legislation

When Sonora’s new licensing law is implemented — likely this fall — people selling real estate without a license could face fines of up to $5,000, Rodolfo Elias Calles, special projects manager with the Sonora Secretary of Economy’s office, told commission members.

Aside from background checks, agents will be required to undergo training in real estate law and regulations, he said.

“Sonora is trying to be on the cutting edge,” Elias said. “Although I’m sure somebody who’s had a bad experience is going to contradict me on that.”

Ultimately, investors must protect themselves.

Hardin said people should seek the advice of an attorney and consider a U.S. lender, who then assumes part of the risk.

“The bulk of the risk for most buyers is removed when you bring in a lender,” he said. U.S. banks also offer better interest rates to U.S. citizens.

Puerto Penasco broker Rick Ramirez, owner of Century 21 Sun & Sand, said problems arise when investors don’t apply the same logic to real estate transactions in Mexico as they do in the United States.

For example, Ramirez said, people should not buy property and sign paperwork that is in Spanish if they can’t ready Spanish.

“It’s all common sense.”

Fast Facts

–Sonoran officials expect tourism to increase 10% by 2009 to 9.6 million people – 70% from Arizona.
–Today, Sonora has around 5,000 housing units built or under construction primarily for sale to foreign investors.
–Officials expect that to grow to 40,000 units in the next 20 years.
–55% of the state’s new construction is in Puerto Penasco.

Source: Sonora Office of Tourism

How to protect yourself

In Mexico’s restricted zone — within 60 miles of the international border or 30 miles of a coastline — foreigners may obtain all the rights of ownership but formal ownership must be in a bank trust, known as fideicomiso.
To make a property purchase, the buyer requests that a Mexican bank act as a trustee. The bank obtains a permit from the Ministry of Foreign Affairs to acquire the chosen property in trust.

The bank becomes the legal owner of the property for the exclusive use of the buyer, who has all the benefits of a direct owner, including the right to lease or transfer the property to a third party or heir.

The only national professional real estate organization in Mexico is the Asociacion Mexicana de Profesionales Inmobiliarios or AMPI (Mexican Association of Real Estate Professionals).

At this time, there are no license laws regulating real estate brokerage and sales in Mexico. Sonora legislators, however, recently passed a bill requiring real estate agents to be licensed. The law will go into effect later this year.

Potential buyers should also check with the local chambers of commerce or an attorney for advice.

Time-share purchases do not follow the same regulations and can be handled as a private two-party agreement. Experts say it’s still a good idea to check with an attorney or agent before signing any time-share agreements.

Source: Sonora Office of Tourism and Century 21 Sun & Sand

Copyright ? 2007, The Arizona Daily Star, Tucson
Distributed by McClatchy-Tribune Information Services.

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