Escrow in El Salvador: the complete guide

What escrow is

Escrow means a neutral third party holds money, documents or both during a transaction, and releases them only when conditions both sides agreed in writing are met. Neither the buyer nor the seller can move the funds alone.

El Salvador has no specific escrow licence. Escrow is an atypical contract, assimilated to the deposit contract of the Civil and Commercial Codes, and it is enforceable. The money can be held by an independent escrow agent, a bank, a bank trust (fideicomiso, reserved by law to banks) or a law firm’s client account.

What an escrow agent is not

An escrow agent has one job: to hold what is deposited and release it exactly as the agreement says. That is why it is worth knowing what it does not do.

• It is not a law firm. It does not give legal advice or check the title. That is the work of the lawyer and the notary.
• It is not a financial manager or adviser. It does not recommend investments or tell you whether the price is fair.
• It is not an investment fund. The money is not put to work. It waits.
• It is not a bank or a credit cooperative. It does not take deposits from the public and it does not lend. The funds sit in a bank account opened for the escrow.

Who takes part

• The buyer, who deposits the funds.
• The seller, who receives them once the conditions are met.
• The escrow agent, the neutral third party that holds them.
• The bank where the escrow account is held.
• The notary, who executes the deed, and the lawyer who reviews the property and the contract.

The six steps of a typical escrow

1. Request and know-your-customer. The parties send the property details and the terms they negotiated, and each one completes a know-your-customer (KYC) form. At this stage the parties usually sign a purchase option or a promise of sale.
2. Drafting the escrow agreement. It is written from the promise of sale or the draft deed. It lists every condition and the documents and inspections the agent will require before each release.
3. Compliance approval and signature. The agent’s compliance team approves the parties and the origin of the funds. The escrow agreement is signed and the escrow account is opened. The funds will stay there until closing.
4. Transfer instructions. The agent sends written instructions for the transfer and coordinates with the bank so that funds from abroad are received and credited to the escrow account in line with the rules. Confirm those instructions by phone, never only from an email.
5. Proof of funds. The agent confirms in writing to both parties that the money has arrived. From that moment, nobody can move it alone.
6. Closing and release. The funds are released according to release letters signed by the parties. In a property purchase, we recommend tying the last release to the CNR recording the transfer in the buyer’s name. How that looks in a purchase.

Where escrow is used

• Buying and selling property. The most common use: the price waits in escrow until the conditions of the sale are verified.
• New developments and off-plan sales. A project escrow account with an individual sub-account for each buyer, so every buyer’s money can be traced and controlled throughout the project.
• Construction. Payments released against the progress of the works, verified by independent inspection reports, instead of paying in advance.
• Guarantees and holdbacks. Part of the price held for an agreed period, under conditions written in the contract, to cover contingencies after closing.
• Buying a company or a business. In mergers and acquisitions, the price for the shares, the assets or the going concern is held until the conditions of the deal are met.
• Buyers who need credit. Some escrow agents also help foreign buyers prepare the documents a bank asks for in a credit application.

Why there is so much paperwork

El Salvador’s anti-money-laundering law, Decree 426 (in force since October 2025), makes banks, real estate intermediaries, and lawyers and notaries who handle property sales or client money obligated subjects: they must know their customer and report to the Financial Intelligence Unit (UIF). An escrow with funds from abroad goes through a bank, so the bank’s rules apply too.

Have these ready before you start:

• A valid passport or ID, and proof of address.
• Documents that show where the money comes from: bank statements, a sale contract, payroll or company records.
• If you buy through a company: its incorporation documents and who its final beneficial owners are.

Which documents prove the origin of funds.

If you are buying from abroad

• Ask for documents your own bank will understand: an agreement and transfer instructions in English as well as Spanish.
• Ask whether the agent’s team works with international clients in both languages, from KYC to closing.
• Plan the transfer days ahead: international wires take time and the bank may ask questions before crediting them. How to send the money from the US.

Seven questions to ask before you wire

1. At which bank is the escrow account held, in whose name, and is it separate from the agent’s own money?
2. Exactly which conditions trigger each release, and who signs the release letters?
3. What happens if the deal falls through or the parties disagree? Who decides, and for how long are the funds held?
4. What is the fee, who pays it, and are bank charges and VAT on top?
5. How does the agent meet anti-money-laundering rules?
6. How will the transfer instructions be confirmed, and what will they never ask you by email?
7. Is there one written agreement signed by every party before any money moves?

Frequently asked

Is escrow legal in El Salvador?

Yes. There is no specific escrow licence: escrow is an atypical contract assimilated to the deposit contract of the Civil and Commercial Codes. It is enforceable.

Can documents be held in escrow, not only money?

Yes. An escrow agent is a custodian of whatever the parties deposit: funds, signed documents or both, released under the same written conditions.

Who pays for the escrow?

It is agreed between the parties and written into the escrow agreement, together with any bank charges and VAT.

Is escrow the same as a fideicomiso?

No. A fideicomiso is a trust regulated by the Commercial Code, and only a bank or an authorised credit institution can act as fiduciary. Escrow is a broader deposit arrangement that an independent third party can hold.

Does the escrow agent check the property?

No. The escrow agent holds and releases the funds. Checking the title, liens and boundaries is the work of the lawyer and the notary, and it should happen before any deposit.