Real Estate Escrow in Mexico: A General Overview and Process in Creating an Escrow Account

Escrow in Mexico is a service that is an agreement between the buyer and the seller. It is a safe transaction for both parties to avoid miscommunication and misunderstanding regarding the agreement between the selling price and the payment terms. The escrow eliminates these unwanted disagreements, and it is going to protect both sides once there are disputes. The buying process is going to start with something other than escrow, but the real estate agent must do it. Once the buyer has found a property that certainly got their attention and wants to settle in Mexico, a real estate agent must be involved. The real estate agent has to provide a timeline, including the quote from the other end, to get a clearer view of where the process ends. The real estate agent must be an AMPI member who stands for (Asociacion Mexicana de Profesionales Inmobiliarios) in English term (The Mexican Association of Professional Realtors) that is affiliated with NAR. These realtors are under a pro-governmental regulatory body that oversees the legalities and ethics of the operation of real estate agencies in Mexico. Once the realtor has provided the purchase agreement about 12 pages in length, including the documents as standard, the deposit must be made after an agreement between the seller and buyer has been reached. Once the escrow account has been opened, the buyer must deposit 10% of the total amount within 1 to 4 days. The escrow deposit is managed and protected by a third-party escrow company. The escrow service typically ranges from $450 to $800, depending on the escrow company in Mexico. The buyer is usually responsible for paying for the escrow service, but it depends on the agreement between the buyer and the seller. Once the due diligence is processed, the tax payment and the inspection are made. The buyer must pay the closing cost, the escrow agent provides the estimated cost due to price fluctuation in Mexico, and the payment is made in USD dollars. Still, it is registered as Mexican Pesos in the papers. There is a 3-day examination of the documents provided for the notary. As described by the Mexicans, they are next to God. After being notarized for the buyer and seller to close the transaction or, in Mexico’s terms, “formalized.”  

Escrow is a legal arrangement in which a third party temporarily holds money or property until a particular condition has been met. The escrow agent manages it. The agent releases the assets or funds only upon fulfilling predetermined contractual obligations or receiving appropriate instructions. Money, securities, funds, and other assets all be held in escrow. Escrow is a financial process used when two parties participate in a transaction and there is uncertainty about fulfilling their obligations. Situations that use escrow involve internet transactions, banking, intellectual property, real estate, mergers and acquisitions, law, and more. Consider a company that is selling goods internationally. The company requires assurance that it receives payment when the goods reach their destination. The buyer, for their part, is prepared to pay for the goods only if they arrive in good condition. The buyer places the funds in escrow with an agent, with instructions to disburse them to the seller once the goods arrive in a suitable state. The parties are protected, and the transaction can proceed in that way. An escrow account is vital to safeguarding the deposit during a home sale. The payments are much more manageable since they are paying for their taxes and insurance throughout the year. Another bonus is that they do not have to keep track of all the different due dates. The mortgage servicer ensures those bills are paid on time every time the buyer’s tax bills and insurance premiums are due. It means they are not responsible for any late payments. The servicer covers bills for them if the escrow account is short on funds. 

Escrow in real estate refers to a financial arrangement in which a third party, the escrow agent, keeps and manages funds or assets on behalf of two parties engaged in a transaction. The escrow agent serves as an impartial arbitrator, ensuring that the terms and conditions of the transaction are met before disbursing money or property to the rightful party. The use of an escrow service is initiated by the consent of both parties to the transaction to utilize an escrow service. The escrow agent examines the escrow account and verifies its authenticity. The evaluation takes place in accordance with the agreed-upon standards once the seller complies with the conditions of the contract. ​​The escrow agent will release the funds to the seller once the buyer has verified that all conditions of the contract have been met. 

How to choose an Escrow company in Mexico? 

Creating an escrow account needs a real estate agent, especially when buying or renting a property in Mexico. The real estate agent will process the required account, and the only thing to do is provide the necessary documents to begin an escrow account. Opening an escrow account as an individual is possible, but can be complicated. Visit a local bank in Mexico and ask for an escrow account. Buying a property in Mexico should include an escrow account to protect both parties. 

Listed below is the 3-step instruction on how to have an Escrow Account in Mexico. 

1. Prepare The Purchase Agreement: After dealing with the purchase agreement, both parties agree on the cost of the property. The preliminary agreement has to be done firsthand, stipulating that an Escrow account will be used in the transaction. It must be well agreed upon with specific terms that both parties have come up with before getting the account into the escrow service. 

2. Choose an escrow company: Choosing an escrow company takes some time to discuss with the seller. Most of the time, the seller already has an escrow company provided. Starting with a new one, if the buyer does not agree with the escrow company, the seller recommends it as long as both parties agree with the terms and conditions. 

3. Start of the escrow process: Start the escrow process by making sure to get the timeline for when the other documents must be provided and the payment schedules while the escrow account is in the process. After getting the escrow number account, the procedure to endorse the property to the buyer is going to follow. 

The best real estate escrow services in Mexico depend on the reputation of the company and the experience of how they smoothly process the escrow agreements. Top best escrow companies are known to provide good quality service to process the escrow agreement between the buyer and the seller. First is TLA Financial Services which is in Puerto Vallarta, Jalisco, Mexico. The financial institution offers a U.S.-style escrow service or real estate settlement services. It typically includes accepting funds and documents from both parties involved in the transaction. The TLA holds the delivery for both parties until the conditions have occurred. The second company is called Mexland Mortgages Escrow Insurance. They offer services like escrow settlements to ensure the buyer and notary firm perform due diligence concerning the potential acquisition while providing the seller assurance that they can close the deal in no time. The escrow agreement is frequently utilized because of conditions such as inspections, clean title, and a certificate of no liens that benefit both parties. The third is ArmSec Escrow Services Incorporated, a form of commission arrangement for merchants that uses an agent. A Mexican organization called Armour Secure Escrow is equipped with all the necessary legal knowledge to provide a transaction that is recognized by Mexican law and governed by it. There are a number of concerns that both the buyer and the seller may have regarding their purchase, but Armour Secure Escrow provides complete security, secrecy, and funds guarantee to both parties, making the transaction secure and open. The only firm offering escrow services in Mexico is Armour Secure Escrow, which is also the most significant company in the nation when it comes to title insurances. 

The benefits of having an escrow account in Mexico efficiently motivate both parties, including the escrow agent, to move forward in the closing process. The buyer gets the property title, the seller receives the payment, and the agency or agent relieves their professional fee. It is best to undergo an escrow service when an important amount of money is involved. The buyer is guaranteed that the money is in good hands by an agency and will be released once the seller has provided the necessary documentation and ensured that the papers are legitimate. The seller will have a guaranteed amount of money once the term has been approved by the financial institution that will release the right amount of money.  

The disadvantage of using escrow is that it is required to pay the tax and insurance on time, or it will conflict with the agreement. Therefore, account holders of an escrow account must maintain a good reputation by paying on time to avoid being canceled with all future escrow transactions. In addition, the mortgage payments are a lot more expensive because of the taxes and insurance added to the initial price given by the seller. 

No, escrow service is not required in Mexico for real estate investing. However, being secured in the transaction recommends anyone undergo escrow settlement. The highlight of escrow settlement is the assurance of both parties that they will be motivated to fasten the transaction to close the deal immediately.  

Yes, escrow companies in Mexico are trustworthy. However, there are a lot of companies that are popping up in Mexico that offer escrow services. Therefore, always ensure that the escrow company has been around for many years of service. It is the only assurance that the company provides the requirements any client needs. 

No, escrow companies in Mexico are not regulated or insured by the government. The escrow companies in Mexico are typically U.S.-based companies under the laws of the State of domicile. Always verify the company name in the Error and Omissions, crime, and cyber fraud regulatory board if the company exists or has a record of fraudulent acts.  

Yes, it is advisable to have an escrow when transacting in Mexico. Buying a property in Mexico is advised to undergo escrow settlement with the seller, especially if the purchase value is relatively high. Making the purchasing non-problematic. However, using an escrow service has downsides because there is a prerequisite to paying for tax and insurance once the agreement has been settled. It is not advisable for purchases that are just lower value than those in the line of real estate to avoid added fees. 

No, escrow in Mexico does not provide a closing statement, or it is not a regular thing to provide. Unlike the escrow service that is in the United States of America or Canada, the escrow service provides a closing statement in every transaction to their clients. However, in Mexico, the client must ask for a closing statement for it to be provided. Asking these questions to the agent or the escrow company is not a problem as long as it is requested during the transaction for it to be included in the closing. 

Yes, escrow companies in Mexico deal with exchanging currency included in their services. However, most of the escrow in Mexico transacts through U.S. dollars, and the closing payments need to be in Mexican Pesos. Known escrow companies in Mexico already provide exchange services, as they used to deal with escrows because of foreign buyers. Make sure to ask the escrow firm regarding exchange service if it suits the bank’s capacity to where the fund is. 

The escrow agent is the one who mediates between the buyer and the seller. To agree and place an escrow account on hold until the process has been closed, the seller gets the fund, and the buyer receives the property title accordingly. The real estate agent is still in the middle of both buyer and seller, but they are not allowed to hold a payment. The escrow agent is licensed to conduct business. They must not be associated with either the buyer or seller. Most real estate agents have a huge part of Mexico’s economy by connecting buyers and sellers and even with escrow companies as requested by either the property buyer or seller. The Escrow agent is known to be Mexico real estate agent partners because of one goal: to render service and to sell the property.