Tag Archives: escrow

Escrow in Mexico



by Linda Jones Neil.


What is an “escrow”?


When used in the context of transfer of title, the escrow generally involves three parties – the buyer, the seller and an independent third party.  It often involves the deposit of monies from the buyer and documents from the seller, to be exchanged and delivered upon the execution of the instructions.  The independent third party is often called “the stakeholder”.


The Buyer/Seller disbursement instructions are prepared by the escrow company in compliance with the terms of the purchase/sale contract.  They are then signed by the buyer and the seller and authorize the independent third party to handle the details of the transfer.  The escrow company must comply with Articles 273 to 308 of the Mexican Commercial Code in its dealings with its clients.


Some questions and answers about escrow and related services:


Why is escrow important?   Why can’t the buyer just pay the seller directly?


Funds can be transferred directly from buyer to seller and, sometimes, they are.  When strangers are doing business, however, they often feel more comfortable doing business through an independent third party.  This is especially true when the completion of a transaction involves a lapse of time from beginning to end; such as when taxes and/or liens are to be paid from proceeds, title is to be searched and permits are to be obtained.


What is meant by “independent third party”?


The company holding the funds, the documents, executing the instructions, does not have a financial interest in the property involved in the transaction.  It is not directly affected by the potential profits or losses or consequences of the purchase/sale and therefore can be more objective, more impartial, and follow more strictly the buyer-seller instructions.


What are the buyer/seller instructions?  (also known as the settlement or disbursement contract)


It is a contract for the performance of services.  What services and how and when they are performed are drawn from the terms established by the buyer and seller in their purchase/sale negotiations.  It is a contract in which each party authorizes the release of funds and/or documents upon the occurrence of certain events or the completion of certain duties and tasks.  It outlines the general conditions under which these instructions will be carried out.


Who are the parties to a transaction?


The Buyer, the Seller, and the independent third party.  Sometimes a mortgage lender is involved.  These are the principals, the main parties to the transaction and are the ONLY persons who may amend the Instructions.  As far as the handling or disbursement of funds, an Escrow Company can ONLY disburse when the Buyer and Seller direct the Escrow Company through a written, signed instruction. The Escrow Company cannot do so without consent of the principal parties. If real estate agents represent the parties they may obtain copies of documents to the transaction, but all matters are treated as highly confidential with respect to outsiders seeking information.



What if the buyer wants the sale handled through an independent third party but the seller does not?


Then the Instructions prepared will be “uni-lateral”, one sided, and the escrow agent will be ethically bound to protect, first and foremost, the interests of the client, buyer or seller, who has contracted for the services.


Can the escrow procedure be handled by long-distance or is it necessary that the parties be present?


With email and efficient courier services each party may be in a different town, or even in a different country!  Because the procedures and customs for transfer title, whether fee simple title, or in a bank trust, are very similar throughout the entire country of Mexico, the independent third party may be located anywhere in Mexico and the buyer and seller do not usually need to appear before a Notary Public if they have authorized others to act in their behalf.


Where are funds held when they are “in escrow”?


Buyer seller funds must be held in a separate bank account, apart from any business operating funds..    Generally they will be held in a dollar based US account with FDIC insurance available up to the maximum of 250,000. USD per depositor.   Separate US and pesos funds may be held in a Mexican bank to permit ease of transfer for payment of Mexico based fees.

Copyright, 2014, Consultores Phoenix, S.C. Reproduction prohibited without permission.

about the author:

LINDA JONES  NEIL is the founder of The Settlement Company®, which specializes in real estate transfers and escrows. Licensed as a California real estate broker, she has pursued her profession in Mexico for over forty years. Her skills in negotiating contracts between parties from three distinct cultures have placed her services in demand as a consultant and for speaking engagements on Mexican law and customs in Mexico, the United States and Canada. She has been widely published on the subject of real property in Mexico. Memberships; FIABCI, AMPI and NAR.  Linda  is a former  member of the National Advisory Council of AMPI and has served as NAR Presidential Liaison to Mexico..E-mail info@settlement-co.com,        website: http://www.settlement-co.com

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The Bank Trust (Fideicomiso) Explained





Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real property located within 30 miles of any coastline or 60 miles of either border. This is referred to as the restricted  zone.


In 1973, recognizing that many Americans would enjoy the rights of ownership, and bring needed dollars to the country, President Echeverria approved the bank trust, fideicomiso, form of ownership which is available to non-Mexicans.  This regulation was further expanded in the Foreign Investment Law of 1989.


Properties located within the prohibited zone, which includes the entire Baja Peninsula, may be acquired by a foreigner through a Mexican bank trust naming the buyer of the property as the beneficiary of the trust.  Naked title is placed in the name of the bank selected by the buyer, as his trustee.  The bank administers the property according to the instructions of the buyer/beneficiary.  The buyer/beneficiary has full ownership rights: he may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to the general laws of the country established for all persons.


The term of the trust is fifty years and can be renewed for additional fifty year periods, after which it must be transferred to “one entitled to hold property” in Mexico. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law.


The procedure for establishing the fideicomiso, the bank trust, is as follows: a permit must be obtained from the Secretary of Foreign Relations which includes a description of the property to be placed in trust, the use for which it is intended, and personal data on each of the beneficiaries.  Once granted the bank draws up the trust document which is recorded in the municipality where the property is located.


The costs for the permit to establish and register the bank trust are currently about $1,500. US and annual administration fees are generally $350.00 to $500.00 per annum.  There are additional closing costs, however, and it is wise to request a written estimate prior to beginning the transfer process.


copyright, 2003,-2014, Consultores Phoenix, S.C. Reproduction prohibited without permission.



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The Role of a Closing Agent in a Mexican Property Transaction

The Role of the Closing Agent in a Mexican Property Transaction


by Linda Jones Neil


Every transfer of title to a Mexican property MUST, by law, be made before a Mexican notary public.


The Mexican notary public is required to have a degree in law.  He must have a minimum of five years of legal practice, pass a rigorous examination and then be appointed by the governor of the state in which he/she resides.   The notary is legally responsible for the review of the prior deed and the tax and lien certificates.  The notary must draft the new deed, calculate the taxes due and pay them.  Also very important, the notary is accountable for his/her actions through the state and national notary associations.


It is commonly believed that an attorney, in addition to the notary public, is required when buying property in Mexico.   This is not necessarily the case.  In fact it may make more sense to seek out a CLOSING AGENT to handle the many details of the transfer, such as ordering and reviewing the title investigation; obtaining the certificates and trust permits, interfacing with the buyer and seller, answering their questions and concerns in their native language, explaining the nuances of the transfer process; overseeing the payment of funds for these services and expenses; reviewing the deed to be sure names and addresses are correct; being sure it is registered in the public registry of property; making sure it is delivered to the buyer; providing tax receipts to the seller………….and more!


When these matters are left with the Notary Public to handle, they may not all get done, or get done slowly due to the work load of most Notaries.   When these matters are handed to another attorney to perform, they may be sandwiched in between criminal complaints, court appearances and other more remunerative activities.


A good Closing Agent can be an attorney with expertise in title transfers, or it can be a company with experienced closing officers and attorneys on its staff for consultations in the event there are title issues.   More and more there are closing agents throughout Mexico.   They are specialists in titles and transfers.

The role of the closing agent

An experienced Closing Agent is a key person in the real estate purchasing process. Hiring a good Closing Agent who understands the ins and outs of the Mexican legal system and the requirements of the law as it relates to foreign investment will make the real estate transaction go much smoother.


The closing agent should be involved in drawing up a promise contract and reviewing all documents including title, certificate of no encumbrances, and  permits. A closing agent can also order a complete title search before the transaction reaches the notary public, which will save the buyer valuable time and money should there be a problem with the title.


The prudent buyer will always insist upon using an independent third party closing agent to protect his or her interests.


Professional Closing Agents will have bi-lingual and experienced closing officers on staff to review the legalities of the transaction and to ensure that all the documents received are in order. Prudent buyers also enlist the help of the Closing Agent, who can oversee the permit process, review the draft of the deed being used in the transfer of title and order the title investigation, identifying any problems before the title has been transferred and money exchanged.

Finding a Trustworthy Closing agent


Clients should never hesitate to ask for details of the professional experience and references.  This is even more important when the real estate agent in the transaction is representing BOTH buyer and seller.  This is dual agency which is still common in Mexico.   In this case the buyer should definitely seek out his/her closing agent.


Questions to Ask a CLOSING AGENT:  What exact services will you provide? What areas of law or real estate are your specialties? Can you provide an estimate of taxes and closing cost expenses? Will you order or conduct a title search? Can you provide at least three references?   Do you have experience with transfers to foreigners, Mexican bank trusts and foreign investment? How long have you been offering Closing Services to the public? How do you handle the funds you receive for closing expenses? Do you prepare specific instructions for the disbursement of funds?


Closing Agents do not have to be specifically licensed in Mexico to be able to supervise the transfer process of Mexican property. It is important to be cautious and do the same homework as when researching a real estate agent. Ask for credentials and references. The more experienced the staff and in-house counsel the company has in handling foreign investment transactions, the more protection and safety the buyer should have in a Mexican property purchase.


Copyright, 2010-2014   Consultores Phoenix, S.C. Reproduction prohibited without permission.


about the author

LINDA NEIL  is  the founder of The Settlement Company®, which specializes in real estate transfers and escrows, specializing in the Virtual Closing®. The company does business throughout Mexico.   Licensed as a California real estate broker, Ms. Neil has pursued her profession in Mexico for more than thirty years. Her skills in negotiating contracts between parties from three distinct cultures have placed her services in demand as a consultant and for speaking engagements on Mexican law and customs in Mexico, the United States and Canada. She has been widely published on the subject of real property in Mexico. Memberships; FIABCI, AMPI and NAR.  Linda  is a former  member of the National Advisory Council of AMPI and has served as AMPI Coordinator for the state  of Baja California Sur.  Additionally she is co-founder of Global Mexico Real Estate Institute, dedicated to education the real estate professional in Mexico.

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by Linda Jones Neil


Once you have selected that great property in Mexico, and you and your agent have negotiated a successful offer……………what is next?


How can you be sure that you are going to have a title to the property, and that it will be done properly?


In any country a real estate closing requires a thorough review of the title documents, the property tax payments, the liens on the property.  If there are liens, if property taxes have not been paid, these must be taken care of and paid prior to transfer of title.


If the property is residential and is located in the “restricted” zone, a permit for a Mexican bank trust must be obtained, or arrangements made for assignment of the existing trust.   A thorough review of the trust document is required in order to determine which is best in each case.


A major benefit of buying property through the Mexican bank trust is that you can name beneficiaries to succeed you upon your death.   Naturally this selection needs to be done carefully so your instructions are clear and not subject to misinterpretation.   Another important item:  is property to be taken in joint tenancy or tenancy in common?  The words have to be correct and understanding complete in your deed.


All of these matters can and should be handled by an independent third party closing company with attorneys on its staff and experience in the field.   The real estate agents representing buyer and seller can oversee the closing process but, generally, their efforts are better spent in promoting and selling properties, not spending time in detail activities.


A real estate closing on Mexican properties has similarities to a closing in the United States and Canada.   There are the same two main parties:   the buyer and the seller.   There are however, two additional parties to a Mexican closing; one is the Notary Public who is legally responsible for drafting the deed and calculating the taxes on the transaction and, if the property is located in the “restricted zone” (along the coastline or near the borders), the bank trustee who must approve the terms of the trust (fideicomiso) contract and sign before the notary public.


Trying to arrange a time and a place for all four parties to come together to sign the deed of transfer can be a challenge.   The buyer may live in New York state, the seller in Alberta, Ontario, the bank trustee may have his main office in Mexico City, Monterrey or Guadalajara and the Notary Public may have his office almost anywhere!


With internet, e-mail, courier service and bank wire transfer services around the globe, there is absolutely no need for the parties to congregate in one location on a specific day, at a specific time and in a specific place.


The Virtual Closing is the solution!


Instructions can be signed by both buyer and seller authorizing the completion of necessary tasks such as the appraisal, the lien certificates, the title investigation, the request for the foreign relations  permit, and so forth.  Funds for the purchase can be deposited in escrow accounts and paid out per specific instructions.   Funds for the closing costs can also be deposited in escrow and paid out pursuant to instructions.

The deed, be it fideicomiso or fee simple, when drafted, can be sent to the parties for review and approval.  Rather than trying to coordinate a simultaneous signing, the trustee bank can sign when convenient without making a special (and possibly expensive) trip to the notary office.   Buyer and Seller, if their signatures are required, can provide powers of attorney to the closing company supervising the transfer.


This keeps buyers happy, and on the beach or doing their thing at home and accomplishes the goal of the operation……….a deed to the property purchased!

copyright, 2004– 2014 Consultores Phoenix, S.C., reproduction prohibited without permission


Author Linda Jones Neil is the founder of The Settlement Company®.  It is the original escrow company in Mexico, and is dedicated to processing the trusts and title transfers of Mexican real estate for foreign buyers and sellers for properties located ANYWHERE in Mexico. Ms. Neil is also licensed as a Real Estate Broker in California, is an Accredited Buyer Representative through NAR, and has over thirty five years of hands on experience in all aspects of Mexican real estate.  She holds membership in AMPI, NAR and FIABCI and PROFECO Certificate 00063/96.

E-Mail; linda.neil@settlement-co.com  and website: Web Site: http://www.settlement-co.com.

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