Real estate jargon defines an escrow as an impartial holding of documents or funds related to the sale and transfer of a property. In a broader context, it is viewed as a temporary pass through account held by a third party during the process of a transaction between two parties.
As it can be seen from the definition, an escrow offers protection for both parties involved in the transaction, the buyer and seller alike. The account holding the money acts as a safeguard should anything go wrong during the transaction.
Thailand has been somewhat reluctant to adopt this system but starting from 2001, the Kingdom has officially enabled commercial banks to provide escrow account services to customers who have entered into a sale and purchase agreement with a developer. With the law in put in practice, developers and sellers were able to make a reasonable agreement beneficial to both parties, while taking advantage of an escrow account (prior to this it was problematic, because developers depended on 10% to 20% deposits to finance the construction).
Six years later, in 2007, Thailand officially introduced a first draft of escrow law. From that moment onwards, all developments were required to oblige to the new rules, even if it meant putting more pressure on the developers’ financial management. As a result, home buyers were offered protection from losing money on deposits in the case of the developers becoming unable to complete and transfer the property to them.