buying a house

Don’t Buy That House!

House for sale cheapWhat do you do when you see someone ready to make a huge, expensive mistake?

Do you try to warn them?

That’s what about 10 people tried unsuccessfully this past week. A couple had joined our Monday get-together group for dinner. The couple had been in Ajijic for the first time for only 3 days, and they wanted to buy a house.

“No!!! Don’t do that!!!” we all implored in a hopefully more persuasive way.

While I haven’t been here that long, most of us have heard the horror stories. While there are thousands of happy homeowners here, most of them, I’m sure, applied a more reasoned approach to their real estate purchase.

I live in a very enticing place. It’s a retirement “destination,” much the same way that Florida is for some, and Hilton Head is for others. People come to Lake Chapala to visit, and never go home.

Why?

  • Near perfect climate
  • Beautiful scenery
  • Comfortable life style
  • Lots of activities for every age and interest
  • A lower cost of living
  • Friendly people – expats and Mexicans
  • Relative personal safety – way better than [take your pick of any American city]
  • Excellent medical and dental care at a reasonable cost

Yes, there are negatives. But a 1-2 week visit isn’t enough time to find out about them. As I wrote about in a previous post, I came down for a 6 month test drive. I learned my lesson several years ago in Belize where I also took a test drive. 3 months in Belize was enough to tell me that it wasn’t a good place for me to retire. After 3 months at Lake Chapala, I knew that it was the place for me…at least for now.

However, one of the big negatives of this place right now is the real estate market. The prices are low by American standards. They are depressed because people want to sell, and no one is buying. When I looked this past weekend, there were 476 houses listed on Lake Chapala’s MLS (and not all realtors are members). They ranged from modest one bedroom condos to palatial estates.

So, let me tell you what happens when people who come down here to scope the place out for a week and haven’t thought things through or done their homework.

  • They meet lots of people (it’s real easy).
  • The weather is way better than where they came from.
  • A real estate agent sinks their teeth into them.
  • They do a few quick calculations, and figure they can save $XXXX a month living down here.
  • They become infatuated (love is too strong a word to categorize a fleeting fancy).

Retirement isn’t looking too bad.

When you combine this infatuation with a recently sold house stateside, a pocket full of cash sitting in a bank account that’s burning a hole in their pocket, and a north American attitude that believes renting is bad, it’s enough to make a real estate agent drool all over their preppy blouse and blazer.

You see real estate transactions down here are all cash, especially for foreigners. For the middle class, that means they’re tying up money they may need to live on or pay medical bills in the future. It can take years to sell a property. That’s when what you thought was an asset turns into a major liability.

That’s not all. Here are a few reasons why renting first is preferable when you are thinking of moving to a strange place:

  • Neighborhood: you don’t know which ones are good or bad; which ones have a higher incidence of petty crime or worse; which condo communities are having legal problems (there are several here); which ones have more blackouts, floods, poor Internet or telephone service, and other infrastructure problems.
  • Neighbors: the last thing you want is neighbors from hell having loud parties, playing loud music when you’re trying to sleep, barking dogs when you’re trying to sleep. Use your imagination.
  • Location and distance to services: how far are you from groceries, public transportation, and other services. You may bring down a car, but what’s your back-up plan?
  • Divorce: the stories are rife of couples who thought they had found paradise until one of them didn’t. One went back to the states and filed for divorce; the other stayed to live happily ever after in paradise. The chances are that many of those people didn’t have good marriages anyway. So, why get stuck with a house in Mexico.
  • Sickness: if you’re coming down here to retire, chances are you’ll get sick or need an operation before leave on your own or in a casket. Need extra cash to pay those bills? There are no second mortgages down here! We are living longer, so unless you’ve got tons of other assets to self-insure, why tie up the cash you may need at a later time to survive.
  • Death: Every country has its own laws about death, wills, disposal of the deceased’s assets, and death taxes. Death can be a major headache for surviving spouses and children, especially where real estate is involved. Most people don’t have a clue about those things when they first move to a foreign country.

Only time will tell how things play out for the infatuated newbie couple our group was trying to stop. I hope they both live happily ever after in a paradise of their choosing.