Using Escrow in México

We recently had an unfortunate situation in which an ‘escrow company’ failed to send purchase funds to the seller, took all the money, and left the country. How could this have happened?

Escrow is a third person holding funds for others in a transaction to buy and sell. The third-party escrow is for the buyer to put funds into showing the seller that they are serious.

The escrow also holds the total purchase funds before closing and sometimes holds buyer or seller extra costs, which must be paid to the notary. Examples of these extras held by the third party are the buyer’s closing costs and the seller’s power of attorney costs when he is not present.

According to international anti-laundering laws, the escrow account should hold only monies associated with the sale transaction.

Auditors will not want to see other unrelated costs in the disbursement from the third party when closing occurs. For example, purchase funds of the seller’s car, or furniture cannot be held by the escrow holding the purchase price and costs of the sale.

Yes, we can understand these procedures are basic when a third party is holding funds of other persons.

However, escrow laws do not exist in Mexican law, nor do they exist for the majority of Roman or Napoleonic law countries.

So, these escrow companies working in Mexico do not have approval to operate an escrow company.

The companies that operate here must show us more credentials so that we can trust how they hold the funds of other persons. This has been difficult to accomplish because of foreigners’ requirements.

We are using escrow, and many do not realize this situation is not the same in other countries. These countries do not agree to have third parties hold the funds of the buyer and the seller. Why? Many cultures have ways to buy and sell without having a third party hold funds. They trust themselves more than a third party.

Attorneys in other cases hold funds for their clients. In Texas, we as brokers were entitled to have escrow accounts at the banks.

How we handle this in Mexico requires much more diligence regarding these third-party holding fees.

What happens when buyer and seller disagree before closing and there is default on one of these principals? How and who decides who receives the deposit? There is no law in Jalisco or Nayarit to handle this.

For this reason, we look for companies that can legally work in the US or other countries with escrow laws. This jurisdiction is where a case can be settled under bona fide law if the parties cannot agree to the disbursement of funds between themselves. The principles also must agree to outside of Mexico jurisdiction.

In the USA, the individual states administer their laws individually, except for federal laws that apply.

We currently have three companies most agents use for escrow. We have years of experience with them, and they do not offer a kickback for using their service.

You, as buyers and sellers, need to be careful and do your own due diligence and not depend solely on your agent.

The person who should really be able to show why they use a certain escrow is the Associate who sponsors the agents and has legal responsibility for their actions.

This article is based upon legal opinions, current practices, and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.


  • Harriet Cochran Murray

    Harriet was born and raised in Louisiana. She has a BA in Art Education and has lived in Vallarta since 1996, founding Cochran Real Estate a year later. She is also a Certified International Property Specialist and a long-time Realtor who travels the world to attend courses and give presentations.

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