Peso Loans, Dollar Deals in Cabo Real Estate: Currency Risk at Closing

Peso Loans, Dollar Deals: How Exchange Rates Can Cost You Thousands at Closing

Here's a scenario that catches people off guard: you agree on a sale price in U.S. dollars, the buyer finances part of it with a peso-denominated bank loan, and somewhere between signing and settlement, a few thousand dollars just... evaporate. It's not fraud. It's currency law. I asked Eduardo Tapia, a real estate attorney here in Cabo, to explain why this happens and what to do about it.

Mexican Law Only Recognizes Pesos

This is the part most Americans don't know: under Mexico's monetary law, pesos are the only legal tender. You can absolutely write a dollar-denominated obligation into a purchase agreement, but at the moment of actual payment, no one can be legally required to hand over dollars. They're only required to deliver pesos.

So when a Mexican bank — in the case Eduardo described, Banorte — finances a buyer's purchase, that loan comes out in pesos. If the deal itself is structured in dollars, as most high-end Cabo transactions are, somebody has to convert. And every conversion carries exchange rate risk.

Why the Timing of the Exchange Rate Matters

Here's where it gets tricky. There's typically an exchange rate set at the outset of the transaction. But by the time trustees actually sign off — which Eduardo says can take up to 30 days — the market may have moved. Deals usually settle at an average rate to account for this, but "average" doesn't mean "zero difference." On a multi-million-dollar transaction, even a small shift can mean a real dollar gap between what was expected and what actually lands in escrow.

A Real Example: Two Families, One Bidding War, $15,000 on the Table

Eduardo described a deal involving two Mexico City families competing for the same property — a genuine bidding war, both sides motivated, seller holding the leverage. The purchase price was around $3 million. When it came time to settle, the exchange rate left roughly $15,000 short of what was expected.

On a $3 million deal, $15,000 is a rounding error to some — and a real number to worry about for anyone actually managing the transaction.

How the Gap Actually Gets Resolved

According to Eduardo, this happens "all the time" in a market where the underlying currency is pesos but pricing is quoted in dollars — which is standard in Los Cabos given the concentration of U.S. and Canadian buyers. When a shortfall shows up in escrow, the parties typically negotiate a resolution: splitting the difference, adjusting who covers prorated HOA dues, or some similar offset.

Why not just fight it out? Because the alternative is an interpleader action — a court proceeding, usually in the U.S. since most Cabo transactions run through U.S.-based escrow, where a judge holds the disputed funds until the parties agree on where they go. That process is slow and expensive for an amount of money that's almost always smaller than what it would cost to litigate.

The Takeaway

If you're a seller working with a buyer using peso financing, build the exchange rate conversation into your negotiation up front — including who absorbs a shortfall if the rate moves against you. It happens often enough that "we'll figure it out at closing" isn't a plan. Talk to your attorney before you're staring at a disbursement instruction with less money on it than you expected.

For real estate help in Los Cabos or Baja California, reach out to Fletcher Wheaton at fletcher@remexico.com. For legal help from a real estate attorney in Los Cabos, reach out to Eduardo Tapia at info@jetzlaw.com.