Seller Financing in Mexico

Seller financing—where the seller acts as the lender and allows the buyer to pay for the property over time—has been a useful tool in the U.S. for decades. In Mexico, however, it is far less common. That said, more sellers have recently begun offering it as a way to attract buyers, increase marketability, and potentially secure a higher price. The key concern, though, is how to protect yourself against default.

Traditionally, Mexican real estate transactions have been handled through cash purchases or bank loans, so seller financing still represents only a small percentage of deals. However, it is becoming increasingly attractive because it opens the property to a wider pool of buyers, allows sellers to earn interest on the financed portion, and can speed up the sale in a slower market. A typical example might involve a buyer paying 50% upfront and financing the remaining 50% over five years. The buyer takes possession after the initial payment while the seller receives monthly installments on the balance. The problem arises when the buyer stops paying—then what?

To mitigate this risk, sellers must take legal precautions under Mexican law. First, due diligence on the buyer is critical. This means verifying income, checking creditworthiness, reviewing ownership history if the buyer is selling another asset, and looking into any legal disputes or red flags. Second, the most important legal tool is a “retention of title” (retención de dominio) clause in the contract. With this, the buyer can take possession, but legal title remains with the seller until all payments are completed. If the buyer defaults, the seller retains ownership and is in a stronger legal position to reclaim the property. Finally, all documents should be signed before a Mexican public notary, which makes the agreement legally binding and provides greater enforceability in court.

Even with these protections, risks remain. If a buyer defaults but refuses to leave, eviction can be a long and stressful process. Sellers may also face legal costs and potential property damage during disputes. For this reason, seller financing often makes sense only when it is the best or only way to sell the property. It can be particularly useful in a buyer’s market, when traditional financing is not available to the target buyer, or when the seller is comfortable with the possibility of holding the note and navigating the legal process if necessary.

Ultimately, seller financing in Mexico is still evolving. Done correctly—with strong legal safeguards, thorough buyer vetting, and a properly drafted retention of title clause—it can be a powerful sales tool. Done carelessly, it can turn into an expensive headache. The bottom line: always work with an experienced attorney when structuring a seller-financed transaction in Mexico.

This interview was conducted between Eduardo Tapia and Fletcher Wheaton info@jetzlaw.com or fletcher@remexico.com