- An escrow account is an account controlled by a third party (such as a bank) that holds funds paid by the buyer to the seller, such as a deposit.
- The funds are released to the seller once the deal is closed.
- The buyer can stipulate terms that need to be met before the funds are released to the seller.
- The seller has assurances that the required funds will be provided as soon as the deal is closed.
- Buyers Trust, a subsidiary of the ooba Home Loans group, is a reliable service for keeping your deposit in Escrow.
A lot of money changes hands during a home purchase, and you don’t want to risk losing it to fraud.
An Escrow account may be exactly what you need to allay your fears. As a buyer, you can safeguard your funds in an Escrow account until the seller delivers what’s promised.
As a seller, you know the transaction will only take place once the buyer receives the agreed funds.
So whether you’re a buyer or a seller, using an Escrow account can provide peace of mind throughout the home-buying process.
Here we explain:
- What Escrow is.
- What Escrow is used for.
- The benefits of using an Escrow account.
- How to obtain Escrow services.
- What does Escrow cost?
- Your options for Escrow in South Africa.
1. What is Escrow?
- “In Escrow” refers to funds and documents which have been transferred to a third party.
- The third-party holds them “in Escrow” until the conditions of the agreement between buyer and seller have been met.
2. What is Escrow used for?
- In the case of a property deal, the Escrow account is used to store the funds following the signing of the Offer to Purchase.
- The funds are then released to the seller once the deal is closed.
- For example, the deposit on the property can be kept in Escrow and released to the seller once the deal is concluded.
3. The benefits of an Escrow agreement
- The buyer has assured all their needs (such as the requirement for a home inspection) stipulated in the Offer to Purchase will be met before the funds are released to the seller.
- The seller has peace of mind knowing the deal will only commence once the home buyer has the funds necessary.
4. How to obtain Escrow services
Simply inform the buyer (if you’re the seller) or the seller (if you’re the buyer) that you wish to perform the transaction through Escrow. You then employ a bank or other institution to set up the system and conduct the transaction according to terms agreed between buyer and seller.
5. What does Escrow cost?
- Registration is free.
- Fees are calculated as a percentage of the trade amount and can cost as little as R115 per transaction.
6. Escrow in South Africa: What are your options?
- In South Africa, your options for holding your funds “in Escrow” include banks, transferring attorneys, estate agencies, and the “Buyers Trust”.
- The institution in question employs an Escrow agent to manage the funds. They are responsible for processing paperwork and advising homebuyers on their options.
Buyers Trust: A reliable option for Escrow
- Buyers Trust, a subsidiary of the ooba Home Loans group, is an example of a third party that can provide safekeeping for your deposit.
- It offers a strong alternative to the transferring attorney and estate agency as a place to invest your deposit.
- As well as providing a safebox, Buyers Trust also generates interest on the amount deposited.
How to apply for Escrow through Buyer’s Trust
- When you sign the Offer to Purchase, select Buyers Trust as the financial service with whom you wish to invest your deposit.
- Buyers Trust will then electronically arrange for you to be FICA’d. You’ll then sign a simple investment mandate.
- Following that, an account will be opened with one of the major banks in your name. This will serve as an Escrow account, and you’ll gain the advantage of a great rate of return on interest, transparency and high-level security.
- The Buyers Trust fee covers everything, including administration fees charged by the bank. Furthermore, a guarantee will be issued to the transferring attorney that you have fulfilled your contractual obligations to the property seller.
How do I keep track of the account?
You will be able to view the account at any time and will receive statements showing the amount of interest earned.
What happens when the home-buying process is complete?
Once the property has been transferred, and the deposit paid to the seller’s attorneys, the account will be closed, and the net interest earnings calculated and delivered to you.
Buy a home with confidence
If the benefits of Buyers Trust make you more confident about the home buying process, bear in mind that a home loan comparison service such as ooba Home Loans can make the process even easier by applying to multiple banks on your behalf, ensuring you receive the best deal on your home loan.
We also offer a range of tools that can make the homebuying process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
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