Can You Sell a Property Below Its Appraised Value? What the Law Says in Mexico City
What the tax appraisal is, which value taxes are based on, what happens if the deed states a lower price, and how much can be paid in cash in 2026.
When negotiating a sale, we are often asked whether the deed can state a lower price than the one actually paid. The goal is almost always to save on taxes. Today that rarely works. The tax appraisal sets a floor for the property's value. If the price falls well below that floor, federal law taxes the buyer. And cash payments are capped. Here is what to know in Mexico City before setting a price.
Four values that are not the same
- Agreed price. What buyer and seller agree on and what the deed states.
- Cadastral value. Calculated by the City using the unit values in its Tax Code. It is the basis for property tax (predial) and is usually below market value.
- Tax appraisal (avalúo fiscal). Performed by an appraiser registered with Mexico City's tax authority, a bank or an authorized appraisal firm (Article 22 of the Mexico City Tax Code). It is used to calculate taxes.
- Bank appraisal. Ordered by the bank when the buyer takes out a mortgage, to decide how much it will lend.
Who orders the tax appraisal and who pays for it
The notary orders it as part of the closing paperwork, and the buyer pays for it as a closing cost. The appraiser visits the property, takes photographs, compares it with transactions in the area and registers it with the City's Ministry of Administration and Finance. Before signing, the notary must confirm that the appraisal is still valid and that the appraiser's registration is in good standing (Article 123 of the same Code).
Which value taxes are based on
The real estate acquisition tax (ISAI), paid by the buyer, is calculated on the highest of the agreed price, the cadastral value and the appraisal (Article 116 of the Mexico City Tax Code). Stating a lower price in the deed does not reduce the ISAI if the appraisal is higher.
Selling above the appraised value is not an issue: the ISAI is simply calculated on the price, which in that case is the highest value.
What happens if the deed states a price below the appraisal
This rule is federal and applies throughout Mexico. When the appraisal exceeds the agreed price by more than 10%, the entire difference is treated as income for the buyer (Articles 125 and 130, section IV, of the Income Tax Law). The notary calculates and remits a 20% provisional payment on that difference, with no deductions (Article 132). In 2026 the Supreme Court upheld this rule as constitutional.
An example with an appraisal of MXN 10,000,000:
- Price of MXN 9,100,000. The appraisal exceeds it by 9.9%. No income for the buyer.
- Price of MXN 9,000,000. The appraisal exceeds it by 11.1%. The MXN 1,000,000 difference is income, and the provisional payment is MXN 200,000.
- Price of MXN 8,000,000. The appraisal exceeds it by 25%. The difference is MXN 2,000,000 and the provisional payment is MXN 400,000, on top of the ISAI calculated on the full 10 million.
To find the lowest price that avoids this, divide the appraisal by 1.1. With a 10 million appraisal, the minimum price is MXN 9,090,909. The buyer can later claim the provisional payment as a credit on their annual tax return.
How it affects the seller
The seller pays income tax on the gain: the sale price minus the inflation-adjusted acquisition cost and any deductions they can document. The notary calculates and withholds the provisional payment at signing (Article 126 of the Income Tax Law).
When selling their primary residence, the seller may be exempt if the price does not exceed 700,000 UDIS, about MXN 6,230,000 at the UDI value of November 12, 2026. Any amount above that is taxed proportionally. The exemption can be used once every three years, and the seller must prove to the notary that they live in the property (Article 93, section XIX, subsection a).
Why understating the price costs more later
- Money received off the books is still income for the seller. Not declaring it is tax evasion.
- The buyer is left with a low acquisition cost. When they sell, their gain will be larger and they will pay more tax. They will also have no way to document the money paid off the books.
- With a mortgage, the bank lends a percentage of the lower of the price and its own appraisal. If the bank's appraisal comes in below the price, the buyer must cover the gap with a larger down payment or renegotiate the price.
How much can be paid in cash?
This is a separate matter, governed by the federal anti-money laundering law. Paying or accepting cash for the purchase of a property worth 8,025 UMA or more is prohibited (Article 32, section I, of the Federal Law for the Prevention and Identification of Transactions with Illicit Proceeds). With the 2026 UMA (MXN 117.31 per day), the limit is MXN 941,412.75. Since March 2026, the taxes on the transaction count toward that amount. The notary must verify how payment was made and record it in the deed.
In Mexico City almost any apartment exceeds that amount, so in practice payment is made by wire transfer, check or mortgage financing.
What to review before setting a price
- Market value, based on recent sales of similar properties in the area.
- Cadastral value, shown on the property tax bill.
- Documented acquisition cost, with the purchase deed and invoices for improvements.
- Whether the primary residence exemption applies and whether it was used in the past three years.
With this information you can set a price the appraisal will support and estimate each party's taxes in advance. For the rest of the closing costs, see our article on how much it costs to close on a property.
What we do
At Mundo Urbano we review market value and the property's documents before listing it, so the asking price holds up against the appraisal. We coordinate with the notary and, when there is one, the bank, and we follow up through closing.
This is general information based on legislation in force in 2026. It does not replace advice from a notary or an accountant, who should review each case individually.