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Judicial/Bank Auction Properties in Mexico, it’s Safe to Invest?

Recently, the demand for properties subject to bank auctions has increased and become an opportunity for investing in México. However, as with any business, there are several aspects to consider prior to investing in a property under this condition.

What are bank auctions?

Banks and/or Limited Purpose Financial Companies grant tens of thousands of loans for home acquisition every year. To protect their investment, these financial institutions receive as a guarantee the property subject to the purchase. Around 4% – 8% of the loan’s creditors default with the payment of the mortgage, so the banks are forced to use their legal mechanisms to recover the guaranteed property and proceed with the auction to recover their liquid assets.

Since banks/Financial institutions usually have no interest in keeping the real estate as payment of their debt, by common practice, the real estate promotion prior to the conclusion of the judicial process has become a perfect means for them to recover their investment. The bank/FI as creditors can sell their rights prior to, during, or after the judicial process.

There are several types of extrajudicial and judicial proceedings that can be used for the bank to recover their assets (depending on the loan’s agreement documents and type of guarantee), so it would vary in each case, to determine the proper legal paperwork to complete an offer with these characteristics.

Another way to invest in this type of property in México, without involving the creditor, it’s by following up the judicial announcements and attending a judicial auction. A real estate judicial auction is a process through which a judge makes a recovered real estate property available to the highest bidder. The money obtained from the sale will help the bank to recover a part of its investment. Any person can participate in these auctions, but it would require a lawyer to prepare an offer according to the legal requirement that fits with the procedure that corresponds to the auction and complete the offer and acquisition by obtaining the court’s declaration in the bidder’s favor.

If you’re considering investing in properties subject to bank auctions in Mexico, don’t hesitate to get in touch with us. We will provide expert guidance throughout the entire process. Before making a significant investment in Mexico, it’s crucial to consult with a lawyer who specializes in Judicial/Bank Auction Properties. You can rely on Mexlaw’s dedicated real estate legal team in Mexico, where our bilingual lawyers will work diligently to ensure a successful transaction for you.