Escrow is an essential real estate term you’re sure to encounter in the home buying or selling process. But what is escrow, exactly? Here is a basic guide to understanding this important part of real estate transactions:
Escrow is a legal agreement where funding and assets are held by a third party. This neutral third-party keeps the funding safe as a transaction is being completed. Once the transaction is completed, funds are allotted to the correct parties. An escrow agreement is often seen in real estate transactions, but can also be seen with other industries such as with art, jewelry and more.
Once the money goes into escrow, the seller has to follow through to finalize the sale. Once the deal is complete, the escrow money goes to the seller and is subtracted from the total mortgage payment price.
Escrow is also used by mortgage lenders after the closing of a home. Your lender takes a share of your monthly mortgage payment and puts it into an escrow account. When property taxes and insurance are due, the money is released. This can be very helpful for homeowners as it takes the task off their plate.
Escrow is used for two primary reasons in the real estate industry: good faith deposits and funding for insurance and property tax fees. Good faith deposits testify to the buyer’s sincerity and earnestness to following through with purchasing the home.
For example, a seller may invest money to make repairs on a property once an offer is accepted. They may have purchased new light fixtures or new carpet at the request of the buyer.
The seller keeps the earnest money if the buyer backs out of the agreement. This supplements the money they paid due to trying to fulfill their end of the deal.
The earnest money deposit goes towards the home’s down payment once the home purchase succeeds. An escrow officer will allot payments and will deliver the deed to the county recorder to note before closing the escrow account.
An escrow account ensures both parties are financially protected. Using an escrow company ensures funds are handled correctly. Usually, payment into this account comes from both the buyer and the seller, which encourages accountability on both ends.
Having an escrow account is a vital part of the home selling and home buying. Speak with a trusted real estate agent and escrow officer to better understand your options.
Greetings from beautiful Naples Florida! Having grown up in Siberia, in a challenging environment I have a deep appreciation of our wonderful Southwest Florida climate and lifestyle. The journey that led me here has fueled my drive to be the best at everything I attempt. My natural enthusiasm for my work is contagious, and clients know that I am "giving my all”. My deep dedication to my family that includes my two adult children and my four fabulous grandchildren. My family reminds me every day that considering family first in one’s life requires an exceptional "home base” for everyone to gather for events and holidays. Everything in my life has equipped me to be a fabulous realtor at Premiere Plus Realty. Naples is cosmopolitan and international harmonious environment, positive energy and lifestyle. As a certified yoga instructor, I believe in and understand the importance of balance in one’s life. It’s through my yoga practice that I have achieved peace and harmony in my life. It’s this peace, harmony, and enthusiasm that I wish to pass to my clients. My goal is to continue to serve you!!! It is my mission! It is my goal! Let’s get to work together! Natalia Realtor, specializing in Residential sales, New construction, seasonal rental, VA homes, First home buyers, listings, sales. Member of Miami and Stella MLS. I service Naples, Bonita Estero, Marco Island & Ft. Meyer's as well as SW Florida. I appreciate referrals and I help with referrals in other States.