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Why Use a MXP Escrow Account?

North Americans are familiar with the concept of Escrow Accounts. The buyer deposits the funds with an Escrow Agent who will disburse them only according to the instructions agreed upon between the buyer and the seller. Normally, if all goes according to plan, once the transaction is concluded the Escrow Agent transfers the funds to the seller and everyone is assured of a secure transaction. The buyer knows that the funds are safely held, and the seller knows that the buyer has the funds necessary to conclude the transaction. However, few people know how to deal with Escrow funds if a currency exchange is involved.

Here’s the problem: the purchase price is agreed upon in Mexican Pesos (MXP), however the buyer is using USD funds to make the purchase. If the buyer transfers the amount to the Escrow Agent using the exchange rate of the day of the transfer, then the funds available to conclude the transaction may be insufficient or more than what is required when it is the time for the payout. Here’s an example:

Purchase Price: 4 million MXP @ 22.34 on the day the offer is accepted = $179,051.02 USD.

Closing Date: 4 million MXP @ 19.01 = $210,415.57 the Buyer or lacking $31,364.55 USD to close the transaction. A serious problem which may frustrate the closing and delay even further. As the currency exchange fluctuates this may become a complicated scenario of constant communication and exchanges between all the parties involved including the escrow agent.

The solution to this problem is obvious-use a Foreign Currency Escrow Account so that the precise amount required is available in the currency of the transaction on the closing date. Mexlaw is the only International Law Firm in Mexico and Escrow Agent that has a fully insured MXP Escrow Account. Once the purchase price is agreed upon, the buyer transfers the exact amount needed to conclude the transaction and those funds will be available in MXP currency on the day of the transaction. No delays, no risk in the fluctuation of the currency, and no aggravating and frustrating exchanges between all the parties to the transaction. Please contact us for more information about this service.