Escrow account in property transaction

 What is an escrow account?

More and more banks in Bulgaria offer escrow accounts. It is becoming the standard for real estate purchases and sales as it creates trust and brings security to both parties in the transaction. An escrow account is a type of account in which an independent third party holds the amount until the transfer takes place and all agreed terms are met.

What are the stages that a real estate purchase goes through?

• Transfer of the deposit by the buyer.
• Signing the preliminary contract for the purchase of the real estate.
• Signing of the final contract-deed.
• Payment of the contractual sale price.
• Recording the deed.
• Taking possession.

How is an escrow account opened?

An escrow account can be opened at a bank.

In both cases additional fees are payable, which range between 100 and 500 BGN.

What protection does the escrow account offer?

When the buyer remits the full amount to the seller and then the notary registers the deed in the Property Registry, the transaction becomes voidable against third parties. This carries a risk for the buyer as the property may be already registered or encumbered with encumbrances.

This problem is solved by escrow in the following way:

• The buyer transfers the entire amount to the escrow account, and it remains blocked
• The bank releases funds only after the seller has fulfilled the terms of the contract.

This type of tag has advantages for both parties.

• The buyer is reassured that he is the only full owner of a property that is not encumbered with chattel encumbrances.
• Seller is assured that the buyer has the full contract sum and will be paid, subject to the fulfilment of the contract terms.

Escrow account in greenfield purchase.

    It is important that the contract is drafted very well by an expert familiar with the whole process and   all applicable legal aspects.