Greetings,
What is the best way to transfer the sum needed to purchase a house from a US Bank (Bank of America) without paying unnecessary conversion or transfer fees?
Thx!
I can't answer your request for the "best" way. I can tell you what happened to us.
My wife bought a house. Contract specified X Pesos. (We have no Pesos). As the date for closing approached, 2 things happened:
1. the Peso dropped like a rock;
2. the seller asked to settle in Almighty.
Things were going our way; the number of Almighty we needed to pay the X Pesos was much lower than we planned.
Even so, there was no agreement about an exchange rate. The seller wanted more USD than he was entitled to at the published exchange rate for the day-before-closing. I wasn't adequately prepared to move the money from USD to Mexico with a conversion to Pesos at a favorable rate. On such short notice (minutes) at closing, I found that a bank where I had an account would give me a worse exchange rate then the seller wanted. Therefore, we agreed to pay the seller the number of USD that he asked for.
From that point, the transaction went smoothly. The notario held the deed in escrow until the seller told the notario he received the money. There was a delay of a few days before the USD wire transfer was completed and confirmed, but, the delay was tolerated and the seller called the notario and released the escrow. The notario registered the deed.
My suggestions are:
1. - price the contract in Pesos if the seller prefers Pesos; you might enjoy a devaluation if you are really lucky as we were;
2. - line-up the best exchange rate you can in advance and arrange for an account at a Mexican bank that can receive the pesos.
To line-up the best exchange rate you need to find out who will do the exchange for the tightest bid/ask spread. You should harbor no illusion that you aren't going to pay to convert USD to Pesos; there is no such thing as a free lunch, and there is absolutely no one in the world who will exchange currency for no charge.
To illustrate, suppose the peso is at around 10/USD. (I know this is not the current rate; I'm just trying to make the illustration as simple as possible0. When you shop around, suppose you find 2 banks who will quote you USD/MXP at:
- Bank A: will buy USD at 9 pesos per dollar or sell USD at 11 pesos per dollar;
- Bank B: will buy USD at 9.999 pesos per dollar or sell USD at 10.001 pesos per dollar
You are only interested in buying pesos; so, you are interested in their bids to buy USD (sell Pesos); seemingly, you don't care about their offers to sell USD. But, if you don't look at both their bid and their ask, then you will be missing something.
As you shop around for a bank willing to give you the best rate, you won't actually be interested in the rate they quote you when you are shopping. You are just "window shopping" now. You want to find out which Peso "store" offers the most competitive price. You will find - in doing your shopping - that you can't get the best price available by calling a dozen banks in a dozen minutes and get 12 prices within a very short time-frame. Instead, you might be able to talk to the right guy and introduce yourself at the rate of maybe one bank a day. After shopping around for a couple of weeks, you have 12 quotes for 10 or so different days; each representing a different market condition at the time of each quote.
Instead, ask for the banks bid and ask for a quantity of 2 million pesos. You will get a pair of quotes such as I've suggested. Politely tell Bank A that you very much appreciate them talking to you and then strike them off your list. Put Bank B on your short list. Their bid-ask spread is very tight. (Don't expect a bank to offer you so small a difference between their bid and ask for so small a quantity.)
A "round lot" of foreign currency is 1 million USD. You can reasonably expect to get a pretty good price if you were buying 10 million pesos for 1 million USD. You are looking to buy only 2 million pesos for about 200,000 USD. That's more or less a "retail" quantity and you won't get as good a price on that quantity. That's why its especially important to shop around to find some bank (or any other competent institution) who will sell you Pesos at the best possible price.
Assuming you negotiated your purchase price in Pesos, and, you have found one or two banks who will give you a good exchange rate, you might call the house seller a week or two before closing. Ask him if he prefers to be paid in pesos, or whether he might prefer to be paid in USD. Even though he priced the house in pesos, he might actually decide he would rather take payment in USD. If so, your house seller might actually give you a better exchange rate than the one or two banks you have lined up. I'm not suggesting that this is probable; merely that it's possible.
In other words, the best one or two banks you found during your window shopping might give you such poor prices (as indicated by a large difference between their bid and offer prices) that your house seller is actually the best game in town. Your house seller might be eager to get his payment in USD. (This was the case in our situation where our house seller was very much afraid that the peso would fall more. Although he proposed a poor exchange rate relative to yesterday's market price, his proposal was actually better than the bank I got a quote from while we were in the closing meeting.)
If he's interested in taking payment in USD then have him get back to you with a house price in USD or the exchange rate he's willing to use to convert the 2 million peso price into a USD price. He agrees to call you back 1 day later or 2 days later, etc. The morning you expect his call, call your one or two banks and ask for a fresh quote (bid and ask).
Now, you know what these banks are offering you; and, you are prepared to dicker with the house seller about his exchange rate. If he doesn't give you an exchange rate as good as the best bank, dicker with him for a better price. Either you will get a better rate from the house seller; or not. If not, tell him that you will settle in Pesos at the agreed-upon price: 2 million pesos.
If the house seller agrees to a better exchange rate than the best rate offered by your one or two banks, then you can take the deal in USD. Have him deliver an amendment to the contract agreeing to re-price the contract at 199,987.00 USD. Tell your attorney that he should acknowledge the deal. (This is probably not an entirely formal contract; but, you are only a few days from closing and probably some modicum of trust between buyer and seller is warranted.) Get the house seller's USD settlement instructions and prepare your bank to wire money to the seller's instructed bank upon receipt of a phone call or fax from you.
There is apt to be some delay - hours or days - in getting the acknowledgement from the house seller's bank that the USD arrived. At closing, have your attorney write up an amendment - you both sign it - agreeing on the USD amount and that that USD amount is to be delivered to the seller's bank. The seller's bank is apt to be - in fact - some friend or relative's account in the US. (Our house seller had us send the money to his father's USD account in the US). You MUST have a formal agreement that the deal is that when 199,987 USD arrives in the US bank of Q for Mrs. Jane Q Person, that you have met your part of the bargain with Sr. Tal y Tal. You will be able to prove that you delivered the money to Bank of Q to Mrs. Person's account; but, you owed Sr. Tal y Tal that amount of money. He has to acknowledge that payment to Mrs. Person constitutes payment on your contract with Sr. Tal y Tal).
Sounds like a lot of rigamarole to re-price the contract in USD; even so, it might be easier to do that rather than arrange a USD to Peso exchange and get the Pesos in a Mexican bank so that you can bring a Peso bank check to the closing.
Good luck
(I trust you have a trustworthy Mexican attorney to represent you in this closing.)
Mark
