Escrow and Baja Real Estate –Controling Buyer Costs

by Mario Restrepo

One difference between escrow services in a Baja Real Estate transaction versus a California Real Estate transaction is when escrow is paid. In California, escrow services are generally paid at the close of the transaction with funds from the sale and final buyer funds deposited.  While here in Baja, most escrow companies charge escrow fees at the start of the transaction.

Another difference concerning escrow and a real estate transaction here in Baja compared to a northern California real estate transaction is who pays for escrow. Here is Baja, customarily, the buyer is paying for escrow services.

Contingencies and Baja Escrow

So if the buyer has contingencies, structure the real estate deal for the buyer to control costs in case the transaction doesn’t close. In essence, in having the buyer  pay for escrow services if certain contingencies are not satisfied within a reasonable amount of time, which for here in a Baja real estate transaction, could be first 3 to 7 days of the transaction.

Let’s say the buyer has several contingencies, with two of them being that the buyer wants a property inspection, and the buyer needs the seller to approve them for some owner financing. In this case have the buyer write up the offer to purchase stating that once the property inspection is accepted, and once the seller approves the buyer’s financials and extends the credit to the buyer, then the buyer will open escrow.

If the property inspection reveals that the property needs a lot of work and that there is a lot of room and time for negotiating, then the buyer can freely negotiate without having any money at risk, that is the cost of escrow plus the cost of the property inspection itself.

Also, if the buyer submits all of the requested financials from the seller, and the seller approves the financials, then the buyer has also not risked the cost of escrow if they are not approved for owner financing.

The down side is that in this Baja real estate market sellers in general want escrow to open as soon as possible. So if you choose to postpone escrow in your offer until buyer contingencies are removed, you should have a copy of a cashier’s check or bank check in the name of the escrow company sent to the seller to show them that you are serious. And this check should be written for a significant amount to show the seller you are serious, or otherwise you will find that some sellers will not want to take the home of the market while buyer contingencies are being removed.

Cost of Escrow in Baja

At the time of this writing, escrow services in the real estate market place here in Baja run about $550 and up. So if the transaction doesn’t go through as planed within the first 7 days, $550 is not a bad savings for 7days.

If the seller is firm and wants escrow to open immediately, then set up the offer so they pay the initial escrow fees which will be credited to them once the initial contingencies will be removed. This is not a likely scenario to happen, but it may help keep the seller in check and have them realize that money is at stake. And thus it may get the seller to accept the buyer’s offer with escrow to open after certain contingencies have been removed.