Mexico Real Estate Purchasing Process – Understanding Exchange Rates and Transfers

After the process of searching and finding your dream property in Mexico, there can be several steps and even “hurdles” to get over before the transaction is complete and you become the proud owner of Mexico real estate. Here at TOPMexicoRealEstate, we work to make buyers aware of these processes, the turns they can take and the various solutions that are possible. Recent transactions with clients have brought the following points about exchange rates and bank transfers to my attention.

One of the largest variables in transactions is the exchange rates; sometimes there is a good deal of variation in the rules and processes even from one month to another.  Most deals on the Yucatan Peninsula are agreed upon using the USD amount, and the buyer can avoid dealing with the exchange rate.  However, during a period of high fluctuations, this may affect the seller.  For this reason, the issue should be addressed in the promissory contract (see Mexico Real Estate Contracts).   The basic options are as follows, followed with more complete details:

1. paying in pesos (buyer will deal with exchange)
2. transferring USD to the seller’s account (seller will deal with exchange)
3. sending a cashier’s check (seller will deal with exchange)
4. using a title company with escrow service (title company will deal with exchange)

Paying in Pesos

The first option leaves the buyer responsible to exchange their USD to a peso amount in one of several approaches, then to pay the seller in a fixed peso amount. Since exchange can be complicated, this option is generally not preferred by buyers, but can be used at times if the buyer and seller agree to it in the promissory contract to accommodate their particular situation.

The exchange rate is determined at the time of the transfer, and the bank will usually be able to provide exact exchange rate just before the transfer is carried out. There are also online exchange houses that tend to offer better rates than traditional banks.

General online exchange estimates posted by day can be consulted for reference, but should not be relied on for the final amount, since the rate goes up and down throughout the day; even a minor difference in the exchange rate could result in a fairly significant difference in funds.  If the buyer is responsible to change to pesos and deal with the exchange rate, they should consult the rate at the time of the transfer from the same company providing the transfer service.

However, to avoid dealing with exchange rates, it is usually recommendable for the buyer to agree upon one of the following options in the promissory contract.

Transferring USD to Seller’s Account

Typically, the American or Canadian buyer will simply pay the USD amount by wire transfer from a bank in their home country to the seller’s account in Mexico.  It will be up to the seller’s Mexican bank to exchange at market rates.  Sometimes the seller will have a USD account in Mexico.  In both cases, the seller will coordinate the conversions and the buyer will not have to deal with exchange rates.

Cashier’s Check

An alternative option is to send a cashier’s check for the dollar amount to be handed over to the seller after the signing of the promissory contract.  This alternative is very similar to the transfer in that it allows the buyer to avoid the exchange rate issue.  Some buyers prefer this method, sending a check by secure courier.  On the part of the seller, it may also be necessary to investigate what is needed for them to cash a cashier’s check.

Title Company with Escrow

TOPMexicoRealEstate often recommends working with title companies that have escrow services and can administer wire transfers, well-coordinated release of monies and exchange rates.  Clients usually find it easier to go to the bank and make one complete wire transfer to the title company’s account, often in the U.S.; the company will then deal with coordinating the international transfers and exchange rates.

For all options on exchange and currency amount, some final points should be noted:

• If direct wire transfer (or internet transfer) is chosen, numerous transfers may be required due to amount limit conditions per transfer.
• Buyers should have receipts and records of all the transaction details as they occur, which include given exchange rates if applicable.
• On the title, even though the agreements are established in USD amounts, for the majority of the transactions the value is recorded in pesos, since this is required by law.  The common practice is that the notary takes the official exchange rate given by the public official, and uses this as the peso value to be recorded on the deed.
• There needs to be a clear understanding of what amount and in what currency the seller will receive the payment.  This should be established in the promissory contract.

It is very important that all parties understand the mechanisms within which the transfer is being carried out.  Knowing the various options and coming to a clear agreement that suits the needs and the situation of the buyer and seller will do the most to avoid headaches and drawn out processes.

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