BY THE MLS TEAM
The Mexican government has introduced significant new regulations aimed at increasing transparency and protecting consumers involved in real estate transactions. The new rules, officially titled NORM-247-SE-2021 or "Commercial Practices - Requirements for Commercial Information and Advertising of Real Estate Intended for Housing and Minimum Elements that Related Contracts Must Contain," went into effect in September 2022.
While originally designed with residential developers and home builders in mind, these regulations now apply to all real estate sales and involve oversight from Mexico's federal consumer protection agency known as PROFECO. The core requirement is that any real estate professional marketing properties to the public must have an officially registered contract with their clients.
On the surface, more bureaucracy and government meddling may not sound appealing. However, in the often murky world of Mexican real estate dealings, this regulation is actually a positive step in cracking down on fraudulent activities and underhanded practices that have become far too commonplace.
Real estate transactions, especially those involving foreign buyers, have historically been a grey area rife with abuse in Mexico. Stories abound of buyers being misled, agents misrepresenting properties, undisclosed fees, fraudulent deeds, and other unscrupulous behavior. With no overarching regulations or enforcement mechanisms, it has largely been a Wild West scenario with little recourse for those taken advantage of.
By mandating official contracts registered with PROFECO, the government is attempting to bring stricter standards, transparency, and accountability to the industry. The required contracts are designed to clearly spell out the rights and obligations of both the consumer and the real estate professional they are working with.
Some key aspects that must be included in these PROFECO-approved contracts:
- Real estate advertising and marketing materials must be fully truthful and not misleading
- Clients must be kept informed of all activity and updated on the status of their property sale
- The broker has a fiduciary duty to act in the best interests of their client throughout the transaction
- All offers on the property must be promptly communicated to the client
- Commission rates, fees and all costs owed to the broker must be explicitly stated
- The length of the listing agreement and procedures for termination/cancellation
- Confirmation that the broker is the sole party approved to market and promote the property
- A list of all documentation the client must provide related to the property sale
- Requirement to use an independent escrow service to handle funds
- Ability for parties to accept or reject the use of electronic signatures
Perhaps the most impactful aspect of these new regulations is the mandated process for dispute resolution between parties required for BCS MLS members and clients. Rather than having to work through Mexico's notoriously backlogged court system, which can take years, these contracts require mediation followed by legally binding arbitration to settle any conflicts.
This is why working with a trusted BCS MLS agent is so important.
MLS agents abide by a rigorous code of conduct, and should there ever be a dispute, there’s a mediation and arbitration clause that ensures a speedy resolution.
If the broker and client cannot resolve an issue through mediation within 45 days, it then goes to arbitration. The losing party must pay all the costs of arbitration, which aims to incentivize fair dealing. This arbitration process should allow for much quicker binding resolutions compared to court proceedings.
While PROFECO has provided a long, cumbersome Spanish-language contract template, organizations like the MLS BCS real estate group, in operation for more than three decades, have worked with attorneys to create more concise approved contracts in both English and Spanish for their members to use.
From a consumer perspective, working with an MLS broker who has an approved PROFECO contract provides peace of mind and guarantees a fair transaction. More paperwork, in this case, leads to a more secure real estate transaction.
