Real Estate Escrow Services


Real estate dealing is a once in a life time transaction for a number of people. Real estate dealing is a complicated issue and a very risky issue too. Every body does not have the required knowledge and tact to deal with these matters. Hence a lot of them depend upon an agent who works as a middle man. Even so in some cases complications arise while dealing through agents also. In such cases the need for an escrow arises. In still some matters where there is a protracted litigation or where more than one party are there as sellers, and where there were differences of opinions among the sellers, the need for an escrow arises. Traditionally an elderly member of the family or the village head who was neutral and who enjoyed the confidence of all the parties concerned worked as an escrow without being called so. An escrow is a neutral party in real estate who holds the legal documentation and funds on behalf of the buyer and seller. The neutral party in the real estate market is called an escrow holder.

In countries like America real estate escrow services are legally accepted and the role of escrow is defined by Law. Escrow is a legal arrangement in which an asset is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition in a contract as payment of a purchase price. Upon that event occurring, the escrow agent, usually an authorized bank, will deliver the asset to the proper recipient. The Escrow prepares an Addendum to the purchase documents and the joint escrow instructions as approved by the buyer and seller. If there are any inconsistencies in the instructions of the parties, it is the duty of the escrow holder to bring them to the notice of the transacting parties and sort out the matter. The escrow instructions are not as detailed as the Purchase agreement.

Real Estate Escrow services are not so popular in India. Middle men who are friends of both parties work as escrow holders but many times they do not charge. Of late with the boom in Real estate market there are many varieties of service providers available. Now-a-days banks, financial institutions and agencies who offer financial assistance, hold the funds, see through the documentation, attend to the registration aspect, arrange for the mortgages and finally supervise the exchange of property and consideration. These agencies in a way are escrow holders. More particularly in the field of home finance, the financial institutions like HDFC have on their panel, a number of independent and experienced lawyers. They are consulted on each application, they prepare the documents and they also help in completing the registration formalities. The lawyers also take up the responsibility of registering the mortgage in favour of the financial institution and later converting the property in the buyer’s name. So in a way the financial institution is playing the escrow role in India. However in this whole process the buyer and seller have no instructions to give to the financial institution. The financial institution which is lending the money takes necessary steps to safe guard the interests of the buyer, the seller and the institution itself.

In recent times, development of real estate became a big business with the boom in the Real estate prices. With FEMA allowing foreign investment in India and with the removal of restrictions on NRI investment in immovable properties in India, many realtors have entered the business in a big way. Private limited companies who employ experts in each field have stared the business of developing and selling lands, house sites, residential flats, commercial flats, farm houses and other commercial properties. These private limited companies employ civil engineers, architects, draftsmen, lawyers, chartered accountants- experts in each field. These companies would thus develop real estate properties, do all the legal paper work, liaison with financial institutions, arrange for finance to individual parties and ultimately sell the real estate property to them. In these cases the Realtors as they call themselves are the sellers, developers, agents and escrow holders all turned into one. This sort of arrangement conveys conviction to an outsider and fills with confidence. In fact the scope for fraud is less in this arrangement. So ‘Realtors’ as they are called are the Indian cousins of escrow holders of the western countries.

The geometric progression in which the realtors or realities are growing in the recent times more than answers the question of the need of escrow services in real estate transactions. Many prominent banks including ICICI Bank and HSBC already have full-fledged escrow facilities.