LAWYERS VERSUS CLOSING COMPANIES
Although they have been around for some time, closing companies are now becoming more and more prevalent. Essentially, these closing companies or “settlement” companies, are operated by ex-patriots that believe that, because they have experienced firsthand the process of purchasing real estate in Mexico, they can advise and consult others on the process. For a fixed fee, they will read the offer provided by a realtor, make some comments, and then introduce you to a preselected notary and bank to finalize the process. They will, essentially, transfer the most critical part of the process to the notary and the bank trust. The difference between an experienced Mexican Real Estate Title Attorney and a closing or settlement company are:
- The services a closing company offer are comparable to a dating service. They basically refer you to a notary and bank and do not add any value to assisting you in the transaction.
- These individuals have no formal training or extensive experience in the real estate market in Mexico.
- They cannot advise you on the benefits of acquiring property using a Corporation as compared to a Bank Trust as they do not know the difference between the two. In fact, closing or settlement companies are not aware that a foreigner can purchase property using a Mexican Corporation; therefore, they only recommend Bank Trusts.
- Should you decide to use a Mexican Corporation for your transaction, they cannot advise you on the tax consequences of purchasing property with this legal entity nor can they create one for you.
- They cannot advise you on the benefits of using pension fund money (IRAs) to acquire property in Mexico.
- They cannot represent you, nor negotiate on your behalf, with lawyers representing the other party, in particular those representing developers, as they have little experience or knowledge of the terminology or process. Therefore, they may become a detriment to your transaction.
- They will not do their independent due diligence on the seller and the title research on the property, as they do not know how to do this. They will rely entirely on a preselected notary to complete these tasks properly.
- They will not review the Title Deed once prepared nor will they ensure that all the taxes have been duly paid by the notary in order to provide you with a clear title.
- They cannot provide you with a title guaranty and will encourage you to purchase one from a service provider, thereby transferring their liability and responsibility to a Title Insurance provider.
- Finally, as an unregulated service provider, should you have a complaint or a claim to make against them, you will have no recourse other than to sue them in civil court.
As you can see, they add no value nor assistance to the transaction. They refer you to a notary, bank trust, and title insurance provider.
Some closing companies claim that they can receive and hold the funds for a transaction in their escrow account. They make this claim on the basis that one of their members is an American Realtor and therefore the funds will be deposited into their American Realtor’s trust account and held until the closing. Therefore, they claim, you are protected by the realtor’s board that they are a member of. This is not accurate. The realtor’s board of every state in the United States will only permit that funds be deposited in the trust account of realtors for transactions occurring in their state and for which the realtor is an active participant – representing the buyer or the seller. If the contrary were true, then a California Realtor can receive funds in their trust account for a transaction taking place in Nebraska and for which they have no knowledge of nor participation in. They would then be acting as an unlicensed escrow agent. Buyers are cautioned not to use the trust accounts of closing companies.