Purchase Agreements and Earnest Money in Mexico Real Estate

The purchase agreement is where a Cabo deal stops being a conversation and starts being a commitment. In Mexico, this contract — the contrato de compraventa — governs everything from the earnest money you put up to the penalties if either side walks away. I have seen buyers sign these without fully understanding the terms, and I have seen buyers negotiate them into solid protective agreements. The difference is knowing what to ask for.

The Contrato de Compraventa, Explained

The contrato de compraventa is the binding purchase agreement between buyer and seller in a Mexico real estate transaction. It is not the deed transfer — that happens at closing before the notario publico. The contrato is the road map to closing: what you are buying, for how much, when, under what conditions, and what happens if someone changes their mind.

The contract is typically written in Spanish. You should always have it translated and reviewed by a bilingual real estate attorney before signing. Your agent (on the Ronival side, for example) will facilitate this, but the legal review is your responsibility and your protection.

Earnest Money: How Much and Where It Goes

Earnest money (depósito or señal) in Mexico typically runs 5-10% of the purchase price. On a $700,000 Cabo condo, that means $35,000 to $70,000. The deposit demonstrates serious intent and takes the property off the market while you move through due diligence and closing.

Critical rule: your earnest money should go into a US-dollar escrow account managed by a reputable title company — not into the seller's bank account, not into the agent's trust account, not into the notario's account. Stewart Title, First American Title, and LegalSure all operate in Baja and offer escrow services specifically for foreign buyers. For a detailed look at how escrow works in Mexico, see our escrow guide.

If a seller or agent pushes you to deposit money directly into their account, that is a significant red flag. Walk away. Legitimate transactions in Los Cabos use escrow as standard practice for exactly this reason.

Contingencies You Should Insist On

Mexico's purchase agreements do not come with the standardized contingency frameworks that most US states use. Everything is negotiable — which means you need to know what to ask for:

• Due diligence period (15-30 days): Time to inspect the property physically, review HOA documents, check for liens or encumbrances, and verify that what you saw matches what you are buying
• Title clearance: Verification at the Registro Publico de la Propiedad that the seller has clean title, free of liens, mortgages, back taxes, or competing claims
• Fideicomiso contingency: If a new bank trust must be established (or an existing one transferred), the contract should be contingent on the bank approving the trust. If the bank declines, you get your deposit back
• Property inspection: Professional inspection of structural, electrical, plumbing, and any systems. Mexico does not have the same disclosure requirements as the US, so the inspection is your primary protection against hidden defects
• HOA/condo regime review: If buying in a development, you need to review the régimen de condominio, HOA financial statements, reserve fund status, and any pending special assessments. See our HOA guide

Every one of these contingencies should have a clear deadline and a clear consequence: if the contingency is not satisfied by date X, the buyer may terminate and receive a full deposit refund.

What Happens If Someone Walks Away

The standard penalty structure in Mexico purchase agreements works like this:

• Buyer walks away (outside contingencies): The seller keeps the earnest money deposit. The buyer forfeits whatever they put up — typically 5-10% of the purchase price
• Seller walks away: The seller returns the buyer's deposit plus an additional equal amount — effectively paying the buyer a penalty equal to the deposit. If you put up $50,000 and the seller backs out, you receive $100,000 back

This 2x structure is common but not universal. Some contracts specify different penalty amounts or cap the seller's penalty at just the deposit return. Read the penalty clauses carefully and negotiate symmetry — if the seller's penalty is lower than yours, push for equal treatment.

Pre-Construction Purchase Agreements

Pre-construction contracts are a different animal. Instead of a single earnest money deposit followed by a closing, you are typically looking at a payment schedule tied to construction milestones: 30-50% at signing, then incremental payments at foundation, framing, and completion. For a complete analysis of the pre-construction vs. resale decision, see our pre-construction guide.

The critical questions for pre-construction contracts:

• What happens to your payments if the developer does not complete the project?
• Is the money held in escrow or going directly to the developer's operating account?
• What is the guaranteed completion date, and what are the penalties for delay?
• Do you have an exit clause if construction is delayed beyond a specified period?

Established developers like Pueblo Bonito, Solmar, and Questro have strong track records of delivery. Less established developers may not. The contract protections matter most when the developer's track record matters least — which is to say, always.

From Contract to Closing

A typical resale closing in Los Cabos takes 30-90 days from signed purchase agreement. The timeline breaks down roughly like this:

1. Week 1-2: Due diligence period — inspection, HOA review, preliminary title search
2. Week 2-4: Title clearance at Registro Publico, fideicomiso establishment or transfer initiated with the bank
3. Week 4-8: Bank processes the fideicomiso (new trusts can take 4-8 weeks; transfers are faster)
4. Week 6-12: Closing at the notario publico — signing, payment of closing costs and taxes, registration of the deed

The notario publico is the government-appointed official who handles the closing. See our closing costs guide for the full breakdown of what you pay at closing (typically 4-6% of purchase price).

Bottom Line: What to Negotiate

Here is the short list of what to insist on in every Cabo purchase agreement:

1. Escrow for all deposits — never wire directly to seller
2. Due diligence contingency with a clear refund path
3. Fideicomiso contingency — deposit returned if bank declines
4. Symmetric penalties — seller's walkaway penalty should equal yours
5. Clear closing deadline with defined extension terms
6. Furniture and fixtures inventory if the sale includes furnishings
7. Bilingual translation of every clause

The purchase agreement is a negotiation. Sellers expect pushback. Agents expect you to have questions. The only mistake is signing without reading — or reading without understanding.