Thursday, May 01, 2008

Mexican Real Estate - Determining Appraisal Value

For centuries Mexico has been mainly a cash and barter based economy. Even to this day, only about 25% of the homes in Mexico are mortgaged. However, there has been a recent surge in interest in Mexican real estate both within the country and abroad and the need for mortgages is increasing by the day. Until now many aspects of buying and selling real estate in Mexico remained as it was for hundreds of years and no searchable records of real estate sales existed. This creates a bit of a problem from a lenders point of view.

You see, in the United States a mortgage lender determines the "fair market value" of a home by obtaining an independent appraisal of the home's current value. In order to determine the current value, the appraiser needs to use the local real estate market's sales figures as a chief determining factor for deciding the home's value. The amount the lender is willing to loan is greatly influenced by the appraisal amount. Usually a lender will allow a mortgage to be up to 80% of the appraisal value of the home. Without an active, usable database of the selling prices of homes in a local area it is very difficult and risky for a lender to determine a secure amount to loan on a home mortgage.

In the United States, appraisers and lenders are able to get this kind of information through multiple listing services or MLS. The MLS database can serve several functions including allowing interested real estate buyers to view listings of homes for sale anywhere in the country, no matter what realtor has the listing. This has not been the case in the past for Mexico. People typically had to find a home for sale by word-of-mouth or by driving around a area they desired to purchase a home in and physically looking for a home for sale. Visiting a realtor's office would only allow the interested buyer to view listings held by that office.

Several Mexican "MLS" sites have cropped up on the internet recently, but most are simply advertising sites for a particular realtor or real estate development and they do not offer potential buyers or lenders the information they need to make a qualified decision. There is one site however, that does offer this type of searchable database. MLS International is the first site of this kind to offer buyers, sellers and lenders the information they need to establish a home's value and track market trends. Buyers can search the database absolutely free and are not required to divulge any personal information in order to conduct a search. Sellers and agents looking for information can also run a free search and for agents looking to enter listings there is a nominal monthly fee.

The Mexican real estate market is still in its infancy and is poised for major explosive growth in the next few years. Establishing a solid real estate database is going to be absolutely vital for that growth to take place.

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