How to buy an apartment through an escrow account: step by step instructions!

Today I will touch upon a very important topic, which for some reason very few know about - this is the purchase of an apartment at the construction stage. Have you heard of escrow accounts? If not, read the information below. I think that it will be useful to many.

As you know, at the construction stage, you can buy housing much cheaper than in an already rented house. But such a purchase is quite risky, especially in today's volatile economic environment. Many people paid money, but in the end they did not receive an apartment, because the developer could not fulfill his obligations - the house could not be completed, or it could not be commissioned. The reasons may be different, but the result is the same - the buyers do not receive housing, losing large sums of money, paying off the mortgage loan, left without property.

Finally, in 2019, a special settlement scheme with the developer was developed, in which, in the event if the developer fails to fulfill his contractual obligations, the money is guaranteed to be returned to the buyer. This is an escrow account settlement system.

What is an escrow account? This is the account that the buyer opens with the bank where the developer took out a loan to build a house. On this account, the buyer deposits an amount of money equal to the cost of the apartment under the contract. These funds are frozen by the bank in an escrow account. Neither the buyer nor the developer can use them. The money is kept in the bank until construction is completed and the buyer receives the keys. After the developer has transferred the ownership of the apartment to the buyer, the bank transfers money from the escrow account to the developer's current account.

How to buy an apartment through an escrow account?

Step 1. Conclusion of an agreement of equity participation between the developer and the buyer, one of the points of which will be the implementation of settlements through an escrow account.

Step 2. Conclusion of an agreement between the bank, the developer and the buyer to open an escrow account.

Step 3. Transfer to the escrow account of an amount equal to the cost of the apartment.

It will take about 2 weeks to complete the paperwork and transfer funds.

What does an escrow account give?

An escrow account is a guarantee for the buyer. If suddenly the developer has not completed the house, froze the construction site or delays the commissioning of the house, the buyer will receive his money back in full. The buyer can withdraw them from the account or choose another developer and invest again in the purchase of housing. It will be convenient to team up with other equity holders.

But what if it is not the developer, but the bank that goes bankrupt?

This situation is possible. But I dare to reassure you.

First, deposits of up to $ 10 million. rubles are insured. They are returned to depositors without fail. Only if the value of the property exceeds this amount, there is a risk of losing part of the money.

Secondly, not every bank can open an escrow account. This service is provided by the most reliable banks, the bankruptcy of which is unlikely.