Earnest Money in Mexico —
Why Non-Refundable Is Never Acceptable

You find a property you like. A purchase agreement comes back with a non-refundable earnest money clause buried in the terms — or stated plainly upfront. You may be told this is normal. This is how things are done here.

Insist on different terms. Or walk. But do not sign a non-refundable earnest money agreement in Mexico without understanding exactly what you are agreeing to.

Why This Practice Exists

Non-refundable deposit clauses lock in the deal once the buyer has skin in the game. That dynamic favors the seller side. The seller is protected from a buyer who ties up the property for weeks and then walks away without consequence. And once you have skin in the game — real, non-recoverable skin — you are less likely to walk away even when due diligence reveals problems. The leverage shifts away from you.

This is not a legal norm. It is a negotiating tactic dressed up as local custom.

The Right Structure for Earnest Money

Earnest money should go into a neutral third-party escrow account — not to the seller, not to the brokerage, and not to the developer. It should be held there until closing or until a defined due diligence period has ended and specific conditions have been met.

The due diligence period matters. Before you release earnest money into a non-refundable state, you should have verified: clean title, no outstanding HOA fees, no unpaid trust fees, no tax arrears, regime incorporated, deed issued, seller financing terms confirmed in writing (if applicable), and your attorney's review of the full purchase agreement complete.

Earnest money becomes non-refundable only after all of these conditions are satisfied — not before.

What to Negotiate

If a seller insists on a non-refundable deposit, the counter is straightforward: the deposit goes to escrow and becomes non-refundable only upon completion of a defined due diligence period. During that period — typically 10 to 21 days — you have the right to cancel for any reason and receive a full refund.

A seller with nothing to hide should have no objection to this structure. If they refuse, ask why. The answer is usually informative.

The Deposit Amount

Standard earnest money in Cabo ranges from 5% to 10% of the purchase price. On a $400,000 property, you are talking about $20,000 to $40,000. That is not a number you should put at risk before your attorney has reviewed the title, the trust documents, and the purchase agreement.

Some agreements ask for much less — $5,000 or $10,000 to "reserve" the property. The amount almost doesn't matter. The non-refundable clause is the problem, not the number. Even a small non-refundable deposit creates leverage against you in the negotiation and signals that you are willing to proceed without protection.

The Correct Sequence

The correct sequence for any property purchase in Mexico: engage your own attorney first, review the purchase agreement before signing anything or wiring any money, negotiate refundable terms with a defined due diligence period, deposit to escrow only, complete due diligence, and only then authorize the release of funds to the seller.

This is how it is done in Canada. In the United States. In most of Europe. Mexico does not have a carve-out from good practice just because it's framed as local custom.