Kbank Launches Escrow Service For Home-Buyers

[webfact]

Kbank launches escrow service for home-buyers

Somluck Srimalee

The Nation

Kasikornbank launched its escrow-agent business by signing contracts with six property developers yesterday to provide an escrow account service, which will benefit home-buyers.

The six property firms are Kanda Decor Co, Chaream Nakorn Co, Suetrong Group Co, Tararom Enterprises, Thanasiri Group, and Supalai.

The bank is targeting at least 1,000 customers, KBank senior executive vice president Preedee Daochai said.

This will be the first use of the Escrow Account Act after it became effective on May 20, 2008.

Somchai Pulsawas, deputy permanent secretary at the Finance Ministry, said the ministry wanted to push this act to be used more often. But the market, especially home-buyers, did not know that this law would benefit them. This is the first time a commercial bank and property developers have linked up to use the act.

The Escrow Account Act aims to protect both home-buyers and developers when they enter a transaction for purchase of property.

Home-buyers who sign a contract under the act will get protection for their down payment, which they will pay to the bank. The bank will keep the down payment until the home is completed and ready to be handed over to the buyer. If the property developers fail to honour the contract to build the home, the buyer will get the down payment back from the bank, with interest.

According to the Escrow Account Act, both parties have to pay a fee to the escrow account agent at 0.3 per cent of total value of the down payment.

Preedee said the bank was not aiming to bring in a lot of fee income from this service, but it wanted to create a secure system for the property market. This also would generate new customers, as when they use its escrow agent service, they may also go for a mortgage from the bank.

Kanda Decor Co managing director Issara Boonyoung, who signed the contract with the bank yesterday, said the act would create more confidence for purchases of its residential projects because buyers will receive assurance that they will take delivery of their homes.

“We will use the escrow-account contract with people who buy our residences now and the next six residential projects worth Bt3 billion next year,” he said.

-- The Nation 2011-09-28

[Rabbi]

This seems, at face value, an excellent facility.

It should ensure that "buying off the plan" investors' funds are not used by the developer and that the developer must provide his own financing and not directly use deposits etc. No doubt the bank is/will offer a drawdown facility for the developer and charge a fee for it but at least the investors funds should be secure and refundable if a developer or development fails.

I am assuming that the escrow arrangement is kosher and at arms length and that the bank does not attach any lien over the funds for any advances it gives the developer.

[Pib]

A great change for the positive. Hopefully honest developers and home sellers will utilize an escrow service as it definitely helps to protect the both the buyer and the seller, especially the buyer. I would think a honest seller would want to use the service in order to help sell their residence and prove to potential buyers they will be protected from a seller who fails on their end of the deal....like never completing the construction of a home, townhouse, condo for whatever reasons like bankruptcy or fraud...or unable to prove total ownership of the residence for sale.

Sure beats the current method of the buyer and seller watching each other like a hawk, having to trust each other to a fault. Unfortunately, all too often in Thailand it seems the seller may not be that trustworthy and/or having intentions not to complete construction while not giving back down-payment money. No shortage of in-completed structures serving as homes for birds, dogs, and other critters.

[EarthAlien]

This seems, at face value, an excellent facility.

It should ensure that "buying off the plan" investors' funds are not used by the developer and that the developer must provide his own financing and not directly use deposits etc. No doubt the bank is/will offer a drawdown facility for the developer and charge a fee for it but at least the investors funds should be secure and refundable if a developer or development fails.

I am assuming that the escrow arrangement is kosher and at arms length and that the bank does not attach any lien over the funds for any advances it gives the developer.

Yes,.. in principle a good idea and a long overdue one.

I would also hope your assumptions are correct.

Once a purchaser places any funds or deposit with anyone in this country,... especially including developers, builders and real estate agents then you can only hope that things will go smoothly because in the event of any dispute or failure to deliver or complete by the vendor/developer and you are stuffed trying to get your money back. I have placed money in good faith with real estate agent and even solicitors, never to recover one penny. It's disgusting and a complete joke!

We placed a deposit with a very successful developer in Chiangmai over 4 years ago of a half million baht and had cash receipts for it but they failed to enter into the full agreed contract so we didn't proceed.

4 years later.. and after dozens of court appearances (the Thai legal system and courts are a complete JOKE, and circus) we were twice awarded full refund and court cost plus interest. The most recent hearing was that of the final decision of the appeals court that ruled 100% in our favor and ordered the money back to us.... that was a year ago.... still no cash and no closer to forcing the deal (well ... in theory we are).

Problem being that the extremely wealthy Thai/Chinese developer is now struggling to find a way to save face.... and the best way of doing that is to not pay when ordered to.

If this was in the west then the directors would have been struck off and/or jailed and the money recovered via execution of court orders or liquidation/wind-up proceedings,... but hey this is Thailand.

If we get our money back it will be a miracle and thus the phrase "Miracle Thailand" will take on new meaning for us!

Caveat Emptor.... don't part with your money in Thailand unless you're willing to say goodbye to it,.. or unless there is a really rock solid escrow mechanism in place!

[craigt3365]

It is a bit unnerving to hand over millions of baht before you get your title deed. Not a fun time. I used an intermediary accounting firm. But I was still very nervous!

[Pib]

When we handed over a certified check for our home/land we were at the Land Office doing the transfer/getting the chanote with the developer's rep. It was basically a chanote for a certified check. Although we had reserved the home with a 10% down payments a few months earlier, the home was 90% complete at that time and the developer had a rock solid track record in completing homes. But indeed, it can be somewhat nerve racking in not having/using a escrow service which wasn't available at the time.