Escrow service for Real Estate
2nd June, 2022
2 mins, 55 secs read
Escrow service for Real Estate
Real estate properties are acquired daily. There is a good measure of growth and financial security in real estate making it a sought-after industry. However, the demand for properties does not meet the supply, especially in cities such as; Lagos, Abuja, and Portharcourt. This allows fraudsters to take advantage of desperate home seekers.
The increased rate of real estate scams is higher in prized areas such as Lekki, Ajah, Ikeja, Victoria Island, and similar areas. These areas pose higher risks of scams due to the increased demand for secure and luxurious neighborhoods. This demand is projected to increase. According to Chief Executive Officer, Knight Frank Nigeria, Mr. Frank Okosun, the expanding middle class desirous of quality housing will fuel the increase in demand in 2022.
Types of Real estate scams
Real estate scams occur in a variety of ways. There are corporate scams and individual scams.
One of the most common corporate scams is allocation scams. The agent allocates part of a land that has been already sold and issues a fake allocation certificate.
For instance, a company can sell 20 plots of land when there are 10 plots available. Years later, multiple people contest for the same land, whereas the agent or real estate company vanishes in thin air.
A well-known individual scam is issuing fake documents and selling lands they are not landlords of. A fraudster sells a property such as a house or land, that is unavailable and forges a title or deed in the name of the buyer. Most times, these kinds of fraudsters do not have ownership rights to said property.
Scams also extend to rental properties. Fake real estate agents rent out an already occupied property. Usually, this happens when a tenant leaves for an extended period. After the victim pays for the apartment, the current rightful tenant shows up while the agent can not be found to settle the disagreement that ensues.
Most cases, these result in disappointment, exasperation, and extra expenses to settle property disputes in court.
How to Prevent Real Estate Scams
To protect yourself from being a victim of such scams, it is generally advised to use trusted real estate agents, thoroughly inspect all properties, and avoid hasty payments.
However, even with these methods, the rate of scams keeps rising According to victim complaint data, Business E-mail Compromise (BEC)/EAC scams targeting the real estate sector are increasing.
From 2015 to 2017, there was over an 1100% rise in the number of BEC/EAC victims reporting fraudulent real estate transactions and an almost 2200% rise in the reported monetary loss.
This proves that more is needed to prevent real estate fraud. With Escrow, you can ensure safe transactions in your real estate deals.
What is escrow?
An escrow is a legal agreement between two transacting parties where the funds, assets, or valuable documents for the transaction are held with a neutral third party until the terms of the contract are met.
How does Escrow work In real estate?
Escrow can protect you from real estate fraud. Escrow services are designed to protect your assets and funds until the terms of the real estate deal are met. Such terms could include obtaining a certificate of ownership, deed of conveyance, survey papers, mobile, or property inspection.
When you secure legal ownership of the property, and all the transacting terms are met, the money gets released from escrow into the realtors' account.
To prevent rental scams, the agent and tenant could agree to keep part or whole of the rental fee in escrow for a stipulated amount of time, perhaps till the tenant gains access to the property. When this agreement is met, the agent and owner get paid.
Escrow is very advantageous in bulk payments as well. Yearly, rents could be deposited in escrow monthly. When the rent is due, the landlord gets paid instantly. This method saves the tenant from the burden of bulk payment and assures the landlord the rent will be paid for.
Would you like to learn more about escrow services? Read this article.