It’s no secret that real estate seems to have it’s own language. If it’s not your daily way of communicating, there’s a definite chance that the terms you come across can be a little bit overwhelming. I believe that in order to be the best real estate agent possible, I need to ensure that the process is as enjoyable and accessible for my clients as possible.
A part of that process is education. You can’t be comfortable with something that you don’t understand. Thus begins this blog series: Decoding Real Estate.
And here’s chapter one. All you ever wanted to know about escrow.
What Is Escrow? Essentially, escrow is a process where you utilize a third party outside of a particular transaction to hold something of value to ensure that the other parties in the transaction uphold their end of the agreement. An escrow service has no holding in the transaction other than to ensure that the funds, or item of value, is held until both parties fulfill their obligations – this is a service provided.
What Does That Mean in Real Estate? Well, essentially the two parties in this agreement are the buyer and the seller. Escrow funds are delivered to an escrow officer, who then ensures that all pieces of the contract are satisfied. These items, typically inside a real estate agreement, refer to inspections, disclosures, and any addendums or terms and conditions added to the contract prior to closing.
The buyer writes a check (referred to as earnest money) to the escrow officer, who holds the funds in an escrow account while the terms of the contract are being fulfilled. At that point, the escrow officer releases the funds, either as a refund to the buyer, applies them directly to the home loan, or passes the funds to the seller if the buyer fails to complete their portions of the agreement.
The more you know, am I right? That’s one piece of the real estate process – decoded. Stay tuned for the next installment!