July 27, 2021

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Benefits of Committing to Real Estate

benefits of escrow


Commitment is when a neutral third party withholds funds during a transaction. In real estate, it is used as a way to protect both the buyer and seller during the home buying process. If you are buying a property in Ukraine, you will almost certainly encounter the fact that the owners here 1) value things in US dollars and 2) expect to be paid in cash on the table.

While paying in US dollars is legal if you are not a resident, i.e. you do not have a Ukrainian passport or permanent residence, it is neither legal nor safe to buy a property that costs more than 50,000 UAH in cash, only by bank transfer. This means that you have to open a Ukrainian bank account, but this can lead to a number of problems, namely:

1) You are abroad and cannot go to the bank to open an account;
2) You do not wish to open an account, as it may cause problems with your tax authorities at home (relevant to some US citizens and others);
3) The bank does not want to open an account for you because you are missing some documents and / or for your nationality (always relevant for American citizens);
4) Your favorite bank does not allow you to transfer US dollars to sellers based on their ignorance of the legislation on non-residents who can buy property in this way.

Image from napkinfinance.com

The easiest, hands-free way for someone in these situations to buy a property and / or leave a deposit on a property is to use our escrow service. This is offered not only to Vestor.Estate’s direct customers, but to all customers who need this service. Here’s how it works:

  1. An escrow agreement is signed setting out all terms, after which the funds can be transferred to the escrow account for use in the property purchase, plus payment of all other closing costs (notary fees, legal fees, agency fees, bank fees, etc.) associated with the deal;
  2. The seller will be required to open an account in the same bank in advance, in order to be 100% ready to receive funds from the escrow;
  3. On the day of the deal, the sales contract is signed and if all other terms of the contract are met, payment is initiated from the deposit to the seller;
  4. Once the seller receives the funds (typically 1-2 hours), the seller confirms receipt of payment with the notary and the deal is concluded with the transfer of title to the buyer;
  5. Closing costs will also be passed on by the escrow once the title is transferred, thus closing the deal.

ALSO, READ THE THESIS ARTICLES:
  • IS COMMITMENT IN UKRAINE REALLY NECESSARY?
  • THE TOP CONQUERED: COMMITMENT TO REAL ESTATE

Note: Escrow can also be used to leave a deposit on a property before the main deal, with the very similar process aside from much smaller amounts.

For investor investors, it is recommended that you send $ 5-10k to the escrow account as soon as you are ready to begin the buying process, as this allows for maximum flexibility to switch to a deal that may appear. If you wait until a large property is found and all terms to be negotiated before sending the money, during this time that the money is in transit to the escrow account, as well as getting final approval from the bank, these hot deals could be picked up by an aggressive local buyer who pays cash.

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The Benefits Of Escrow In Real Estate post first appeared on vestor.estate.