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Escrow Accounts: How They Are Used In Your Real Estate Transaction
By: John R. Blakefield
There are many people who are involved in the purchase of your home: agent,
broker, lender, seller and an escrow agent or company. The agent and broker are
responsible for providing you with a property and negotiating a deal to buy from
a motivated seller. The lender, either private lender, bank, or mortgage company
provides you the funds so you may purchase the property. And then there is an
escrow involved. It is common knowledge that an escrow is what a deal must go
through before the deal is closed and the transaction of your purchase from the
seller is complete and you own the property.
But what exactly is escrow and how does it work in this situation?
Escrow refers to a neutral third party that is responsible for transferring or
exchanging assets, usually property and money. There are escrow agents who are
in charge of an escrow account, which is specific to a certain deal or
transaction. These escrow agents usually work for an escrow company who are
responsible for housing the account.
When you purchase a house, after all negotiation have been finalized and papers
have been signed, the seller places the property title into an escrow account.
Here, it is kept in safe keeping until the buyer transfers the money to purchase
the title (property) into the escrow account. After a certain amount of time,
the deal is said to close escrow in which case the buyer receives the title of
the property, now officially owning it, and the seller receives the funds from
the escrow account.
The escrow account is used as protection to both the seller and buyer. If
something were to go wrong during the escrow period, the seller would simply get
the title back from the account and the buyer is in no danger of losing the
funds. This eliminates a seller losing the property or buyer losing funds, and
protects the assets of both parties.
The escrow account also houses taxes and commissions that are to be paid to the
state and brokers or agents involved. The escrow account or agent is solely
responsible for the distribution these funds so it is done fairly and with
disclosure to all parties involved. Deals can be done without escrows, but it is
simply safer and smarter to go through a third party escrow so everything is
performed legally and all events of the deal are accounted for. It protects all
parties and ensures the broker and agent get their commissions and that taxes
are paid fairly.
It is highly recommended that you always use an escrow when purchasing property.
In more complicated or higher priced deals, an attorney can assist you in creating an escrow account to make sure all parties are properly taken care of.
Another tip: either the seller or buyer may choose the escrow company. Some
sellers always prefer to use their own, and some buyers prefer to use their own.
Excluding personal preference, as long as it a reputable company, really any
escrow company will work. Because it is a neutral third party and the escrow
company really does not have a personal interest in the deals that are
occurring, you can consider it a safe place for your assets until the deal is
complete.
About the Author:
John R Blakefield is a mortgage and real estate specialist. For more
information, articles, news, tools and valuable resources on home mortgages or
investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage |
