AMPI, MLS, Escrow, the Trinity of Safe Real Estate Transactions

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By Susan Fogel and Glenn Sandford

There is a tragic story making the rounds of the local press, and blogs, and Mexican law websites. It is everyone’s worse nightmare.

An elderly American man sold his home to another couple. They duly made their Good Faith Deposit and as instructed by their agent, sent it to the notario publico’s account. When all of the documents were ready, the buyers signed in front of the notario and also then sent the remaining almost US $200,000 to the notario’s personal account.

The buyer’s took possession of the property. Today, four months later, the seller still does not have his money. The notario is not responding to phone calls or email. In fact, he is under investigation by the college of notarios and could lose his license. This notario has been accused of allegedly stealing money from another organization and of falsifying legal records according to the El Sudcaliforniano. This is a rare and extreme example, but a cautionary tale.

The La Paz AMPI/MLS members are puzzled and shocked that this happened here. We are wondering how this particular notario was chosen, and how he managed to allegedly circumvent the new Draconian anti-money laundering law that requires the disclosure by everyone involved in the transaction of the names of everyone else involved in the transaction. Every penny must be accounted for. How did this guy get away with this?

The vast majority of real estate transactions involving foreigners in Mexico close without a hitch. The money transfers safely from buyer to seller. The buyer receives a clean fideicomiso, and begins their Mexican adventure.

How do you protect yourself? Whether you are a buyer or a seller, here are some pointers.

First and foremost, make sure that your agent is a member of AMPI/MLS. Members of these organizations subscribe to a high code of ethics and practices. MLS members use closing attorneys with separate escrow accounts to hold the buyer’s funds. Make sure that the purchase offer contract that you sign states who will be the closing attorney and how the money will be handled.

Now let’s talk escrow. Many people will tell you there is no such thing as escrow in Mexico. Escrow is a process whereby a neutral third party receives all monies and documents and holds them all in trust until all the terms of the purchase contract are met. Escrow closes when all monies have been deposited and all documents have been completed. Everyone signs in front of the notario.

An escrow account is a separate account that the closing attorney uses strictly for buyer and seller funds. You will be given receipts and proof of wire transfers as money goes in and out, and at closing both buyer and seller will receive a closing statement showing where the money went.

While there are US-named escrow companies like Stewart Title, Fidelity Title, and First American Title operating legally in Mexico, most of the real estate transactions are handled by closing attorneys. These attorneys do exactly as the definition above states. They will accept the Good Faith Deposit from the buyer. They will order the various permits and start working on the new fideicomiso. They work hand-in-hand with your real estate agent, the bank holding the fideicomiso, the notario, and both buyer and seller. At closing, they will disburse the buyer’s funds to the seller. They are the neutral third party. Part of the closing attorney’s job is to ensure that the seller has the legal and mental capacity to sell the property and that the buyers are who they say they are.

The definition of escrow and the escrow account are so simple that many people think this mysterious process called escrow must be more complicated. What is complicated is the work the closing attorney does to follow the chain of title, clear any mistakes, and ensure that they are delivering the title–in the case of a foreigner–the fideicomiso free of any liens.

Buying real estate in Mexico is safe. Here in La Paz, we have several good closing attorneys. We know the good, empathetic notarios, and all of the fiduciarios at the banks. Together with your agent, the closing attorney ensures that your escrow progresses smoothly and you, as the seller receive your funds, and you as the buyer receive a clean fideicomiso.

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