Escrow accounts to protect homebuyers

Escrow for real estate purchases now available. Escrow law to protect homebuyers took effect in 2008 but banks still don't offer service.

Money paid upfront by homebuyers to finance construction has been lost to real estate developers in the past.

Escrow eliminates the possibility of fraud in real estate transactions by placing payments in a safe account (escrow account) until legal ownership is officially transferred to the homebuyer.

Photo above of abandoned buildings on Bangkok's skyline, relics of the 1997 crisis.

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Escrow accounts open, Six developers and one bank involved by Kanana Katharangsiporn

Attempts to promote the use of escrow accounts for property purchases have made a modest start with six developers and one bank participating in the official launch yesterday.

Officials plan to review progress early next year and hope more participants will join the programme, says Samma Kitsin, a member of the Escrow Business Supervisory Board.

Developers should use escrow accounts to increase homebuyers' confidence," he said. "In particular, no-brand, small or new developers may want to ensure customers' confidence.

Condominium developers should also use escrow accounts as condominiums generally take a long time to build, he added.

Governments have been attempting for two decades to promote the use of escrow accounts to hold down payments and protect property buyers. In the past, many developers with limited cash flow used buyers' installment payments to finance ongoing construction. When the 1997 economic crisis struck, many developments were abandoned and thousands of buyers lost their money.

Kasikornbank, as an escrow agent, is taking part in the pilot project with six property developers: Kanda Decor Co, Chalerm Nakorn Co Ltd, Suetrong Group Co, Tararom Enterprise Co, Thanasiri Group Plc and Supalai Plc. It is the first concrete development since the Escrow Account Act took effect in May 2008.

All major commercial banks hold licences to act as escrow agents but have not used them, whether because of lack of preparedness or unattractive fees.

The act states that all commercial banks can be escrow agents if they apply to the Bank of Thailand.

"If there are very few escrow agents, we will review early next year how to allow non-bank juristic persons such as law firms to become escrow agents," said Mr Samma.

The fee may not be attractive enough for other banks to join.

The fee is only 0.3% of the down payment amount, which the homebuyer and developer would pay equally.

An escrow agent is seen as a middleman that protects both the developer's and homebuyer's interests. An escrow account will be an option provided by a developer but both buyer and seller must agree to apply the system.

Homebuyers pay monthly down payments to a bank account, taken care of by an escrow agent. The amount will be transferred to the developer with deposit interest once the unit is transferred to the homebuyer.

If the developer cannot complete or transfer the unit, the buyer will get back all the money deposited with the escrow agent. The escrow agent will take care of the account for at least five years to ensure homebuyers get units and developer get their money.

Issara Boonyoung, managing director of the low-rise housing developer Kanda Decor, said the company would provide escrow account service for any unit that took longer than six months to build.

Mr Issara, who is also president of the Housing Business Association, said escrow accounts would help smaller developers build good reputations with consumers and compete with big players.

Some of them may pay fees for customers as it is a very small amount for what they will get," he added

(Source: Bangkok Post, Escrow accounts open, Six developers and one bank involved, 28/09/2011, Kanana Katharangsiporn, link) 

Real Estate Vocabulary

real estate - property in the form of land and buildings (See Wikipedia)

property - 1. land and buildings that someone owns; 2. things that people own; possessions
property purchases - the buying of land and buildings

escrow - to ensure all the conditions of a real estate or business purchase or sale (transaction) are complete, all documents and money is held by another person (neutral third party), when everything is verified as complete money and ownership documents are given to thebuyer and seller (See Wikipedia and Google Definitions) การเก็บเงินหรือทรัพย์สินที่ให้บุคคลหนึ่ง แต่เก็บไว้กับบุคคลที่สามจนกว่าจะบรรลุตามเงื่อนไขที่กำหนดไว้แล้ว

escrow account - the special bank account used to hold money before the transfer can legally be made
escrow agent - the company that oversees the legal arrangements of escrow (deposits in escrow accounts, transfer of property)

transfer - change owner; to official arrange for someone else to be the owner of something โอน
unit transferred to the homebuyer - after the homebuyer has paid for the home (or borrowed money from a bank to pay for it), then the homebuyer becomes the legal owner of the home

deposit - a sum of money which is given in advance as part of a total payment for something เงินมัดจำ
interest - payments made for the use of another's money for a period of time

down payments - the first large payment made when a person borrows money to pay for something (the rest of the money is paid slowly over many mnths in several "installment payments")

installment payments - regular payments (made each over several months to pay off a loan, money borrowed to pay for something expensive like a home or a car)

pay money upfront - pay money before receiving the thing before you are buying (so you might not actually receive what you are buying0

fraud - the crime of gaining money by tricking or lieing to people (See Wikipedia)
abandoned buildings - buildings that have been left by people and no longer used
skyline - the line formed where the sky meets buildings or the land
relics - some object that belongs to the past, but has survived until now

modest - not large in size or amount (fairly small, especially when compared with other things of the same type) ไม่มากมาย
made a modest start - made a small start 

official - approved by the government or some authority ที่เป็นทางการ
launch - to start something เปิดโครงการ, เริ่มต้น, เริ่มทำ
official launch - an event to celebrate or introduce something new การเริ่มปฏิบัติการ, การออกตัวของสินค้า

progress - completing tasks that move you towards achieving a goal; advancing, going forward; the process of gradually improving something over time ความก้าวหน้า พัฒนาการ
review progress - look closely at what has been achieved up to now (in order to make future plans)

participants

real estate development - companies that "buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end. ... Typically, developers purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approval and financing, build the structure, and lease, manage, and ultimately sell it. Developers work with many different counterparts along each step of this process, including architects, city planners, engineers, surveyors, inspectors, contractors, leasing agents and more" (See Wikipedia)

real estate developers - companies whose business is doing "real estate development" projects (and then selling the buildings or homes they develop)
developers - same as "real estate developers"
condominium developers - companies that build condominiums

concrete - based on facts, not on ideas or guesses
development - the gradual growth and formation of something
a concrete development - something real happening (not just the usual talk only)

brand - a type of product made by a particular company ตรา, ยี่ห้อ
no-brand developers - small or new real estate developers that buyers don't know about yet (and so may not trust with their money) 
no-brand, small or new developers

confidence - feeling sure about something;  trusting and believing in something ความมั่นใจ ความเชื่อมั่น
homebuyers' confidence

ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ ให้การยืนยัน
ensure customers' confidence - make sure that customers trust you and feel sure that everything will be ok and go according to plan 

decades - periods of ten years เป็นสิบๆปี

cash - money เงินสด
cash flow - money coming into and going out of a business (as it does the business pays the everyday costs of doing business)
limited cash flow - meaning: lots of expenses (money going out) but little income coming in (so the difference must be financed some way, buyer deposits often finance construction)

finance - to provide money for something จัดหาเงินทุนให้
ongoing - happening at the present moment; continuing ไม่หยุดยั้ง, ต่อเนื่อง
finance ongoing construction - pay for the building of the condo, as it is built now (that the buyer bought with deposit)

construction - the work of building or making something, especially buildings, bridges, etc. การก่อสร้าง
developers with limited cash flow used buyers' installment payments to finance ongoing construction

crisis - an urgent, difficult or dangerous situation วิกฤต, วิกฤตการณ์
1997 economic crisis - the Asian economic crisis, that led to business failures, low incomes and recession for many years in Asia (See Wikipedia)
abandoned - left someone and no longer used ที่ถูกละทิ้ง

pilot project - a small test of a new idea or product or idea before introducing it everywhere

act - a law passed by a country's government พ.ร.บ. พระราชบัญญัติ
took effect - when a law comes into use

commercial - for business purposes
commercial bank - a bank owned by stockholders (not the government)

lack - does not have ขาดแคลน
lack of preparedness - not prepared

fee - an amount of money that you pay to be allowed to do something ค่าธรรมเนียม, ค่าตอบแทน, ค่าบริการ
attractive - worth having or doing
unattractive fees - the money they would make a service is not enough to offer the service (perhaps the legal costs involved if one side fails would be too great)

middleman - a person or company between a buyer and a seller (example: wholesalers are middlemen between factory and store)

interests - how a person gains or loses depending on how events turn out, business interests
protects both the developer's and homebuyer's interests

option - choice ตัวเลือก ทางเลือก

high-rise - tall buildings with many floors
low-rise housing - not very tall buildings for housing with few floors

reputation - the opinion that people have about how good someone is; to be known or remembered for something  ชื่อเสียง
build good reputations - act in a way that people have a good opinion of you; so you become known and remembered for the good things you do

consumers - people who buy things or services (individuals and families)

players - participants in an industry; companies and individuals who compete in a market; an important company, person, or country in an industry ผู้ค้าคนสำคัญ หรือผู้ค้ารายใหญ่
compete with big players - compete with bigger companies who are already have successful businesses