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Escrow Deposits? How does escrow benefit buyers and sellers?

 

In real estate transaction process, you will come across terminology that is details what is required for a property to sell. During a real estate closing, an Escrow account is created to hold funds otherwise called escrow deposits during the transaction period, usually at the time a written offer is made by the buyer to the owner of the home or condo for sale.  The Escrow deposit is a basic monetary commitment agreed to by certain terms, by the buyer to his offer. It is considered as a good faith gesture to the seller, the buyer’s commitment to complete the deal; usually the transaction cannot proceed without this commitment.  The money cannot be touched until signed off on by both buyer and seller.

The escrow agent or officer—who can be a lawyer or title company representative—keeps all the important documents and earnest money deposits while the buyer and seller and their agents work out the details of the closing. Real estate brokers can also generally hold buyers’ earnest money deposits in their escrow accounts for closing. This process is crucial, and the escrow agent is there to make the transaction run smoothly and efficiently. Escrow agents have a legal duty to act as a neutral third party concerning the deposit for both buyer and seller. Buyers and sellers are often represented by agents and brokers who handle the majority of the paperwork while working with lawyers, transaction coordinators, and cooperating brokers to close a deal. After the closing, assuming that the transaction is verified and solid and your offer is accepted by the seller, the earnest money in escrow will go toward the down payment and closing costs. When finalized the escrow agent records the deed and title transfer turn over ownership officially to the buyer.

The deposit protects both buyer and seller, in the event that the deal falls through and both parties cannot come to an agreement. A small cancellation fee is usually taken out of the deposit, but the remainder remains in escrow. Whoever holds the deposit determines whether you should get the money back under the terms of the purchase agreement or contract, so buyer and seller must review contracts thoroughly to ensure awareness of what happens to funds held in escrow if the transaction cannot be completed.  There are safeguards for the buyer in case inspections find problems in the home which the seller must remedy or else the seller will not receive money from escrow to complete the deal. When buyers try to leave the deal without legitimate reason, they forfeit that money to the seller—as a consolation for the sale’s failure. In both instances buyers and sellers can outline the terms of the purchase agreement to make sure they are protected.