A Mexican has a different experience.  A third-party holding purchase funds is a risk, to a national.  His experience is the opposite: If a buyer wants to purchase a property, he gives the seller a deposit, directly.  When the buyer has all his funds, two parties go to the notary and the deed is signed. Many times, there is no mortgage or trust, so what funds the buyer needs to pay, are paid directly to the seller with no third-party agreement.

The difficulty arises for non-Mexicans in our market, when they have to purchase within a fideicomiso trust for property near the ocean front.  The trust application process takes longer and is a condition of the sale, so giving money directly to a seller is a concern on the part of the buyer.

If escrow is used, it can be a Mexican bank which has a permit from the Mexican government, or an approved escrow company outside of Mexico.  Here is where we are now aware of differences in escrow in Mexico and the rest of North America:

There are No Laws in Mexico Governing Escrow

Since Mexico does not recognize escrow as a need, laws are not specific to it. So, even though escrow companies may be working in Mexico, legal jurisdiction where problems will be solved, can vary from only Mexico to include locations in the USA.

In the USA, there are more laws specifically addressing escrow and more experience in settling disputes. For this reason, you may want to weight the differences in jurisdiction. Jurisdiction will be available based on where the escrow company has a legal presence.

It is important to know in the case of escrow in Mexico, the title escrow company performs a limited function. It only holds (and charges a fee) the purchase funds and disburses them when the principals sign a disbursement letter directing how the proceeds are to be paid by wire transfer.

A VERY IMPORTANT fact is to realize, that because of the lack of escrow laws, the escrow agreement needs to be negotiated as the offer is negotiated. 

Puerto Vallarta Real Estate: What To Know About Escrow.  Any agreements which address purchase funds, default, and other conditions, need to be agreed upon and put into the escrow agreement. The escrow company will have to also agree to the changes in their standard form. A good decision is to put deadlines and prior agreed upon return of funds or payment of funds for default for specifically named parties.

The escrow holder does not pay bills, pay prorations, enforce the terms of the contract unless the terms are in the escrow agreement, or create the disbursement document or closing statement for the buyer and seller.

One thing is clear: Do not use a real estate agent, real estate company, or notary to be the escrow holder of your funds.

Because there are fewer laws about escrow, it is also easier for some unscrupulous persons to become registered as an escrow company, which does not have a genuine escrow account. This means funds may be put into an ‘escrow account’ which is also the business account of the principal owners of the escrow company. This makes it difficult to get the money out as other laws will come into play such as privacy of the individual.

A business license does not qualify as an approved escrow company to take buyers money and do something with it. Do not be naïve.  Do not expect your real estate agent to be up to speed on this. Mexico still does not require agents to be licensed.

Harriet Murray

Author and article courtesy of Harriet Murray, Founder of Cochran Real Estate in 1997. Born in Louisiana, Harriet Murray had an early love of art and studied art education in college. Upon graduation, she went on to become an art teacher in New Orleans public schools. She later moved to TX and taught art there; as well as science, speech arts, and other subjects like most young teachers do. She is the current President of the Puerto Vallarta chapter of AMPI (after serving as Vice President under different Presidents for 15 years); and is AMPI certified in both the US and Canada, as well as a member of the NAR.  She is a proud Certified International Property (CIP) specialist – an achievement only attainable after intense training in real estate in markets all over the world. This article is based upon legal opinions, current practices, reporting from FBS MLS of AMPI members, and personal real estate experience in Puerto Vallarta since 1997. I recommend that each potential buyer or seller of real estate conduct his own due diligence and review. Contact Harriet at email: harriet@casasandvillas.com.