There are number of common risks areas to look out for and the following list is my no means exhaustive. 

The agents are not licensed or bonded. Many agents, though members of the local MLS, do not know the market very well. Some do not know or even care if properties they are selling have title problems.  If you send a down payment to an agent, the agent could disappear with your money. This has happened before.  Even if it is a U.S. name franchise, if there is a problem, they will likely claim it is a different entity in Mexico. 

Escrow agents are not bonded. It has been known for Escrow agents to empty out their escrow account and flee. 

A large percentage of the properties have title problems. You need to get title insurance. Even if you ask for title insurance and pay for it, you might not ever receive a policy. It is possible for a seller to sell a "promise to make a promise" and you'd never know you are getting a property with title problems. The escrow agents are recommended by the real estate agents, and have every incentive to make sure your cash gets disbursed.

The closing process is complicated and expensive. Foreigners buying near the coast or border have to obtain a foreign investment permit, and are required to hold title through a bank trust Fideicomiso. 

If you have any title problems it can take years to get it cleared. Make sure you hire an attorney to help you get clean title.  Ask the seller if they have U.S. title insurance and if they have their Fideicomiso. 

If the seller doesn't have a Fideicomiso, there is a reason why, usually some title problem.  If the seller has a Fideicomiso, that is not a guarantee that they have clean title. 

Don’t underreport transfer values. People used to under-report values so the seller could pay less capital gains tax, and buyer could pay less transfer tax.  But the government has caught on. 

If you do this, or allow the seller to do this, you will find yourself liable for the seller's capital gains. If the seller doesn't pay their capital gains, for any reason, you have to pay it. So you have to modify the contract to state that the seller doesn't get any money until they pay their capital gains taxes. You need an attorney to do that for you. 

There is a rich history of re-socializing property. Watch out for Ejidos (communal farming land). In case of any dispute, the agrarian judge always rules in favor of the Ejido. In the Puenta Banda story in Ensenada, there were rumors of corruption, maps being redrawn, etc.

It is risky to use developer financing or any Mexican financing. Typical contracts state that the developer keeps title until you pay everything off. If they go bankrupt in the meantime, you can lose everything. With bank financing,it can take years to get liens removed after you have made your last payment. 

Hire an attorney in advance. You are spending $7000+ on closing costs. An extra $1000 for an attorney is a worthwhile investment. 

Just make sure they are competent. Ensure your attorney examines the commitment for title insurance before any funds get distributed to the seller. Put that requirement in the Offer.

Some people put title in corporations to avoid the bank fee and because they feel more secure having a title instead of having title in a trust. A foreigner can set up a Mexican corporation. You only need two shareholders and one can be a U.S. LLC. 

You cannot live in a house that is owned by your Mexican corporation.  There is ambiguity in the law as to whether you can own residential rental real estate in a Mexican corporation if you don’t live in it. 

Many people in Mexico view income tax as optional, and nobody likes to give receipts. If you rent your property, you need official receipts “Facturas” if you are going to take itemized deductions (which you have to do if you use a Mexican company to hold title to your property). 

If you pay tax as an individual, there is a blind deduction option to paying income tax, which is easier. You need to get a Mexican tax ID or the renter is supposed to withhold the tax for you and submit it to the government. 

Foreigners need government and bank permission to rent out property held in Fideicomisos.  There is a $400 fee to get the government (SRE) permission plus whatever an attorney will charge.  Do this before getting your Fideicomiso otherwise you will have to pay an attorney to modify your Fideicomiso. 

If you do have income in Mexico, you are supposed to pay estimated taxes every month. It is a nuisance, and the tax hurts your cash flow.  You don’t get the deductions you get in the U.S.  Tax is based on gross rent.

Mexican tax laws change all the time. Capital gains taxes weren’t too bad if you were a resident for a couple of years before you sold. But that exemption is no longer there. Capital gains taxes are huge. Your capital gains taxes go down the longer you own a place.

Now that you have a foreign trust, you have to file special documents with the IRS that no accountant knows about, forms 3520 and 3520A. If you don't do it in time (and it isn't the normal tax deadline),the penalties can be drastic.

It is hard to get money out of Mexico. One way I've figured out to do it is via an ATM card. Bank drafts are too expensive. Their mail system is too slow and not trustworthy.  But there is no problem getting money from the U.S. to Mexico using Western Union. 

To open a Mexican bank account, you first need an FM3 visa and a Mexican light bill. You can get the FM3 (365 day visa) from a Mexican consulate with three month's of bank statements showing above some amount (around $1000) deposited each month.  You also need photos without glasses, and you need to pay in cash. You also technically need the FM3 to own real estate in Mexico.  And if you are going to rent out your property, you need a “lucrativo” FM3 which has additional requirements (hire a lawyer to help you upgrade your FM3). The FM3 makes it easier to enter Mexico (you can use the Mexican citizen line) but more difficult to leave (you have to get permission to reenter from immigration at the airport, and they will ask you what you have been doing in Mexico).

You have to repeat the FM3 process when you arrive in Mexico and register with local immigration. You basically need the same documents all over again. 

You have to renew your visa in the exact same town year after year. There is a lot of corruption in the Immigration department. The easiest way to renew a visa is to hire a lawyer and pay them a fee to help you renew the visa. 

To get the utilities changed to your name (which you need to do to open a bank account), you need a full copy of your trust documents and the photo page of your FM3 and an old light bill from the previous owner (or at least their name or the address). 

If you want to actually use the condo yourself, you will need to find a manager who is willing to do short term rentals. Good managers can be hard to find. 

You have to bargain. Asking price is not necessarily close to true market value.  There are MLS "sold" books but the agents do not report any data.  You could hire an escrow agent to search public records for neighboring properties, but you will have to pay for the service. You will have to convert pesos into dollars using the exchange rate in place at the time. Also, many values are underreported.  Make low offers and be patient. You'd be surprised. A lot of owners want out badly for whatever reason (e.g., high condo association fees, inherited property). 

Standard real estate commission is 10%. There are big savings to be made by avoiding properties that are on the MLS.  But you need the advice of someone who knows the market. And you need a lawyer. 

Be aware that it can be hard to sell in Mexico. Because agents often set the asking price too high, pendencies can be long.

Make other owners, property managers, and condo association managers your first source of information. Don't waste your time with agents who don’t know the comps(use agents with lots of experience). The managers can sometimes help you find a condo at a reduced commission. The real estate agents are not legal experts and will not guarantee you clean title. Other owners will give you candid advice and can be found on www.vrbo.com.

Don’t use a short “offer to purchase” form supplied by a real estate agent.  Those typically only protect commissions. Get a lawyer to draft a “pro-buyer” offer for you. Make sure to address that U.S. escrow will be used, that the recorded value will be the actual contract value, that no funds will be disbursed until your attorney is satisfied with the commitment for title insurance, that no funds will be disbursed to the seller until capital gains taxes have been paid, and that unit will be sold as shown, with no furniture removed.