BY GREGORY BÓRQUEZ
The market is shifting there is no doubt about that..
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The real estate market in Baja saw an unprecedented boom over the last five years and the market flourished with lots of new developers pouring into Baja to meet the incredible amount of demand of people wanting a slice of Baja Heaven! Having a lot more inventory on the markets makes competition fiercer between sellers. The upcoming federal elections in both the US and Mexico and the sensitive economic slowdown in the US and Canada have limited buyers’ spending capabilities.
How do we navigate this shifting market and maximize our profits when selling your property?
Competitive Pricing:
Some listing agents will agree to list your property at any price you ask them to, but this is counterproductive both to you, the agent and the brokerage representing you. The Baja real estate market is forever changing, and it the most important for your agent to understand how the market is responding to the demand as this will determine if your property sells and for how long.
Despite a slower market, we are still experiencing multiple offers on well-priced properties. How do you determine a competitive listing price?
Your agent should be providing a detailed comparison of your property so you can see what the real numbers are in the area. Understanding the real numbers of the sold or “closed” properties you will be able to see what your property is truly worth. Based on that number, you can compare it with the competition and make sure that you are a better option in quality and in price. Once you have a realistic sales price, it is fundamental that your agent gets you a capital gains tax estimate from a top-tier closing attorney. Having a competitive capital gains tax estimate can allow you to lower your price making you even more competitive without affecting your final takeaway. This is why it is so important to find this cost out from the beginning.
Pricing a home above what the market is offering is one of the most common mistakes that is seen here in Baja. Having a price well above what the competition is asking, leaves the possibility that the property stays on the market for a long while with very little interest. Lowering the price after it has been listed, can affect future offers as buyers will assume that the seller is negotiable. You also don’t want to list too high as this can be the difference between selling in less than ninety days or sitting on the market until next season. The ideal situation for a seller is to list their property with a strong but competitive price so that the property receives offers on it right away, perhaps even undercut the competition ever so slightly if the timing is important to you.
Capital Gains Tax
When selling your property, you must consider your Capital Gains Tax known as “Impuesto Sobre la Renta” or ISR. On average, it is a 35% tax on the gain and is payable on any vacation property once sold. There are many ways to reduce this tax exposure, the main way that a Seller can reduce capital gains is the fact that the Peso is strengthening against the USD. Since all property sales are registered in Pesos, and the Peso is stronger against the dollar, it means that although you are seeing a significant gain in USD the gain registered in Pesos is much lower. Should you have purchased your property around the 20 Pesos to 1 USD era and you are selling around the 16 USD to 1 USD there is a 20% savings on the gain.
Should you own a built property, you can seek a primary residence deduction. There are possible deductions of up to $4,000,000 Pesos per person on the title, however, you will need to qualify for these deductions as there are certain limitations. There are other possible deductions that can be used, and it is important to consult your closing attorney to help calculate your capital gains tax, so you know what to expect to pay before determining the sale prices for your property.
I can recommend a top-tier closing attorney and get you a free consultation and capital gains tax calculation if needed.
Full Exposure to the Market
Baja´s strongest demographic for buyers is the U.S. and Canadian markets, and your property must be featured on US & Canadian platforms but also on local platforms. Listing on the MLS is the most important factor in selling your property here in Baja. With over 1,000 agents from Loreto to Cabo each agent has access to a complete set of photos and specs of your property in just a few clicks. Aside from listing on the MLS and waiting for another agent to sell it, your listing agent and brokerage must be paying for online and local marketing.
At Diamante Realtors both the broker and the listing agent invest in our sellers to make sure that we have skin in the game and to bring results to our sellers.
Strong Representation
The most important factor when trying to maximize your profits when selling your house is working with the best! Get the best advice and the most knowledgeable realtor you can find! His or her experience will pay for themselves many–fold.
Working with a top agent can make all the difference when it comes to the sales price, the amount of time on the market and the amount of time it takes to close the property. Here are some qualities to look for in a strong listing agent:
Full-Time Sales Agent: Real Estate Sales are not for the faint of heart. It is important to choose a professional who only focuses on real estate sales and is not distracted by rental services or property management. These agents will be more focused on the sale of your home as their livelihood is based on the sale. And a good sale with you will bring them more clients.
Investing in our Sellers: a sign, a listing and a photoshoot of your property is not enough! Social media is nowhere near a strong enough platform for the sale of a home in Cabo. You will need to pay for targeted marketing ads that interact directly with the potential buyers. A strong agent will invest in their Sellers so they can reduce the time your property is on the market.
Team of Experts: A strong realtor does not work alone; they have a team of experts to help with the journey of selling a property. Access to top closing attorneys, top marketing teams, and other experts makes the closing process very smooth and efficient. Transparency and knowing all the steps are important and the team of experts will offer lots of knowledge.
Time & Energy: Showings are only 20% of the sale. The Closing process can be complex and time-consuming, it is easily 80% of the sale. A strong agent must know the closing process inside out. Having sales that drag out can be frustrating and it is not cost effective from an investment standpoint. It is important to check who is representing your interests and how efficient they are at completing the closing process.
Creating urgency: You want an agent who can effectively market and promote your property, who can create urgency and who can set up your property to receive multiple offers. Be sure your agent can handle a possible bidding war and multiple offers.
For more information contact Gregory Bórquez, Investment Strategist and Licensed Realtor with Diamante Realtors. +1 612 228 0361, gregory@diamanterealtors.com
