Most people have heard the term “escrow,” but many don’t understand exactly what it’s for or how it works. If you are considering purchasing or selling a house in the near future, this is an important term you’ll want to understand.
The basics of escrow accounts
When money is held in escrow, two parties conducting a financial transaction agree that the money to be transferred as a part of the sale will be held and monitored by a nonbiased third party until all the conditions of the contract are fulfilled. Escrow is typically used in a variety of situations, such as when a vendor is completing a job that has multiple components and wants to have some assurance of payment before beginning the project. However, most people are familiar with escrow accounts through the lens of real estate purchases, where several conditions typically need to be satisfied before closing, yet the buyer needs to provide a good-faith guarantee that they intend to complete the purchase.
What are the benefits of escrow?
The main benefit of using escrow in a real estate transaction is security. When a buyer and seller make an agreement on a home purchase, the buyer can have the confidence of knowing that the escrow agent will not release the funds to the seller until the stipulations of the contract have been completed. Meanwhile, the seller has insurance that the buyer intends to fulfill the contract or else risk losing the escrow funds.
What are the steps when money is held in escrow for a real estate transaction?
The escrow process consists of several distinct steps that are followed until the funds are finally transferred to the seller:
- A home seller and buyer agree on a purchase price and the home goes under contract
- Once the contract is signed by all parties, the buyer must deposit the funds with the escrow agent within a predefined time frame.
- The conditions of the contract are fulfilled (typically such as inspections, home modifications, the seller moving out, etc.)
- The parties meet at the closing attorney’s office to sign all closing documents.
- After all closing documents are signed, the attorney will release all funds due to the Seller.
Having confidence when buying or selling a home
Escrow is an important part of the real estate transaction process, and understanding more about it gives you the confidence to have the best possible experience when you sell your current home or buy a new one. But along with knowledge, you need the help of an experienced and professional real estate firm to guide you through your journey. If you’re buying or selling a home in the Greenville area contact The Parker Group today, our agents and support staff will be your partner as you take the next big step in your life.