Letter of credit for the purchase of real estate. Letter of Credit Agreement

Buying a property is classified as a high risk transaction, so the seller can only demand a transaction with the use of a letter of credit. This is understandable, since calculations using such a system are the most reliable option for both parties. That is why it is required to consider in detail not only what it is, but also how it works in reality.

Transactions with real estate

If we consider this type of interaction in the most simplified form, then the buyer buys the object, pays for it, and the seller sells it at the price at which the agreement was reached and receives the money. Everything is pretty simple, but there are certain nuances.

It is important to understand that the purchase and sale transaction will be deemed to have taken place solely in case of successful registration of the contract of sale in the relevant registering structures. Quite real is the situation when the contract is signed, and even attributed by the buyer to the registration authorities, but then the seller changed his mind about selling his property. He goes to Rosreestr to pick up a statement of intent to sell real estate.

In such cases, a problem arises, especially if at that time the money has already been transferred to the seller. For their return it will be necessary to apply to the court, which is quite a long and costly affair. There is a situation where you can not pay immediately, but you will not get money either, because the seller will not have a guarantee that the buyer will give money after registration. In this case, there is a great risk for both sides to stay both without money and without an apartment.

general characteristics

A letter of credit is one of the modern forms of non - cash payments used for the interaction of the seller and the buyer. In fact, it is the guarantor of security and legality of any transactions. For individuals, a letter of credit when buying a property has such an undeniable advantage as all transactions in a non-cash form: it is not necessary to have a large amount of money on hand, and also worry about their transportation. When issuing a letter of credit, the buyer authorizes the bank to transfer a certain amount of money to the seller's account after it has fulfilled and confirmed certain obligations under the contract.

Practical use

If we talk about how to apply a letter of credit when buying a property, then there are certain features. The calculation scheme in this case looks like a certain way. Between the buyer and the seller an agreement is drawn up that this form will be used for mutual settlements under the transaction. The Letter of Credit agreement contains all information about what payment terms and ways of notifying the parties will be used, as well as the details of the participants in the transaction.

The buyer must apply to the bank that serves it, in order to issue a letter of credit there. In the servicing bank of the seller, a special account is also opened. To him, the buyer's bank will transfer funds from his client's account. It turns out that the funds on the seller's letter of credit are usually located even before the transaction is processed. This is the essence of security for both sides.

How to receive funds

Cash for the seller will become available only when the sale and purchase transaction is completed, and all necessary documents for its confirmation will be provided to the bank. If there is no doubt about their legality, correctness and reliability, the seller's bank will write off the funds from the letter of credit to the customer's account.

Required Document Confirmation

This type of transaction, such as the purchase of real estate, involves the provision of a contract for the sale of a house or apartment, which has passed the procedure of state registration. Some banks ask for extracts from the unified state register of rights that will confirm the buyer's ownership of the property purchased. When you find the accounts of the seller and the buyer in the same bank, the scheme becomes much simpler.

Advantages

If you use a letter of credit when buying a property, then there is a whole range of benefits for both parties to the transaction. For the seller, this will guarantee the receipt of funds in full from the buyer. The money will be on the buyer's credit account at the time of the deal, so he will be sure of their safety. The bank guarantees payment in the event that the seller submits all required documents and will comply with the terms of the letter of credit.

The buyer can rely on the full guarantee of the transaction: if for some reason the transaction does not take place, then the money will be refunded in full. If the seller does not fulfill at least one condition of the letter of credit, the payment by the bank will not be made.

Buying a property using a letter of credit allows you not to make an advance payment or pay the transaction in installments.

The non-cash mode of interaction is safe and convenient.

Compliance with the terms of the contract is closely monitored by third parties, that is, bankers. If you use a letter of credit when buying a property, then in the correctness and legality of its registration, not only the participants of the transaction are interested. Credit organizations in this case also bear responsibility in accordance with the current legislation. In this case, it is guaranteed that the executing bank for payment will not accept fake or not fully executed documents for the transaction. When the guarantor of the transaction is a credit person, that is, a letter of credit is used when buying real estate, this is always a sign of reliability.

Disadvantages of the letter of credit

While this form of mutual settlement has a whole complex of positive moments, there are certain drawbacks. The document circulation is rather complicated, since at every stage of the transaction its careful control is required. The execution of the letter of credit and the conduct of operations on it are usually accompanied by the need to pay the commission. Usually its amount depends on the amount of the transaction.

Why not used

Few people now use a letter of credit when buying a property. Sberbank has long been offering its customers a secure service. This form of mutual settlement is often compared with the use of bank cells, but it is used much less often. The methods have similarities, but there are also strong differences. The use of a cell presupposes the availability of money in physical manifestation, and for the second case it is non-cash settlements, and this is the letter of credit. Sberbank provides both options, but most often customers stop at the first one.

This is due to many points. The client deposits funds into the banking cell secretly, that is, he does not disclose the bank to its contents. In this case, the seller can not have confidence in the honesty of the buyer. And in this case the bank does not bear any responsibility, even if the contract of sale is already concluded. The letter of credit in this case is protected by both parties, since the credit institution is responsible for any violations when processing the transaction.

Conclusion

The use of a letter of credit in the purchase of real estate is recognized by specialists as a good option. Banks are interested in the success of the transaction, so they will carefully monitor it at every stage.