Homebuying April 16 2018

What is Escrow?

You may have heard of the term “escrow” and been aware that it’s a topic related to real estate. But for many people, that’s where their escrow expertise ends. If you remain unsure about what escrow is, read on to find out what it is and how it is used to help buyers and sellers during a home sale. 

Defining Escrow

Escrow is a secure, third-party holding account where important money and documents are kept. In real estate, people also use the term “escrow” to refer to the time between when a seller accepts the purchase agreement and when the sale officially closes. When all of the conditions of the sale are met, the third-party escrow officer transfers payment to the seller and delivers the title to the buyer.

The Importance of Earnest Money

Usually, the “earnest” money for a home sale goes into escrow. Earnest money is a deposit, typically between one and three percent of the offer, that demonstrates the buyer’s good faith to the seller. The buyer writes a check for the earnest money to the escrow officer. If the sale doesn’t go through — as a result of a bad inspection, for example — the escrow officer refunds the money. When the sale goes through, the money goes toward the purchase amount. If the buyer fails to meet any requirements, they forfeit the deposit, and the escrow officer sends it to the seller.

Protection for the Buyer

Escrow is a process designed partly to protect the buyer during the home buying process. It shields purchasers against dishonest sellers, preventing unscrupulous people from being about to immediately cash checks. Earnest money confirms the buyer’s intention to purchase the home, and indicates to the seller that they are safe to take the home off the market, and stop taking offers. This way, the buyer has time to perform due diligence on the home, before the closing deadline. Common contingencies for the closing of a real estate sale include inspections, repairs, disclosures, and objections. If the seller fails to meet all conditions, such as making the agreed repairs promised after inspection, the buyer can decide not to proceed with the purchase the home. If the buyer still wants the home, they can arrange to delay closing until the seller meets all of the requirements.

Shielding for the Seller

Escrow is not only to protect buyers — it is also essential for seller safety. Earnest money being placed into escrow assures the seller of the buyer’s willingness and capacity to close the sale. The buyer can’t pull back out of the sale without forfeiting their earnest money deposit. If the buyer does pull out of the deal, the seller at least gets the earnest money as compensation for the time lost in the escrow process. Escrow need not be a mystifying or daunting step in a house sale. It’s simply the safeguard process for both parties as a house sale deal proceeds. Everyone want the sale process to run quickly and smoothly. Escrow is just one step that serves each party’s best interests, providing necessary security and reassurance.

Still have questions?

Speak to a Loan Officer today!

  Sources Investopedia The Balance Realtor.com

Search Results for query

April 01 2020

What is a Rate Buydown?

What are mortgage points and how do they work? Simply put, a mortgage rate buydown is when a borrower pays an additional charge in order to obtain a lower interest rate on their home loan.

Read More

March 27 2020

Spring Cleaning Tips

It's time to kick off spring cleaning! We’ve compiled some tips to help you tackle cleaning with less stress.

Read More

March 23 2020

Mortgage Rates, Explained

The US is experiencing wild day-to-day fluctuations in financial markets. Headlines include massive federal stimulus and news that the Federal Reserve has cut interest rates to zero. If you have applied for a mortgage, what does this mean for you?

Read More

March 17 2020

The Coronavirus & Your Finances

 This has been a period of uncertainty for all of us, but you can be assured that our dedication to you remains unchanged. At Eagle Home Mortgage, we know that the effect of the Coronavirus is an unprecedented situation. Among the areas of concern...

Read More

March 11 2020

12 Pawsome Ways to Ensure Your Pet Loves Your New Home Too

The search for a new home is an exciting time in your life and it can be for your furry friends too! But just like children, there are a lot of things to consider to ensure your pet  is happy in their new home. Not only do you need to think about the home...

Read More

March 05 2020

Homeownership is More Attainable Than You Think

Homebuying has long been a part of the “American Dream.” But it doesn’t have to just be a dream. We know the homebuying process can feel overwhelming- or maybe even near impossible- but buying your first home is more attainable than you might...

Read More

February 28 2020

Tips for Buying a Home in 2020

If one of your goals this year is to buy a home, we’re sharing advice to prepare you for the process. We asked our top mortgage advisors to provide us with their tips and recommendations for homebuyers in 2020. We want to share these tips with you, future...

Read More

February 20 2020

Haven't Considered a Refinance? You Should!

When you refinance, you are replacing your current mortgage with a new home loan. This new home loan also comes with a new term, interest rate and monthly payment that is normally more affordable in the long-run. Refinancing can present a number of benefits...

Read More

February 14 2020

Buying a Home Together

Moving in together is a big step in any adult relationship, but buying a home together comes with a whole new set of hurdles. A home is often the most expensive purchase that you will be making…together! Below are some tips to help you prepare for this...

Read More

12345Last

Mortgage Calculators

Crunch the Numbers With Our Helpful Mortgage Calculators

Payment Calculator

payment calculator

Payment
Calculator

Affordability Calculator

affordability calculator

Affordability
Calculator

Refinance Calculator

refinance calculator

Refinance
Calculator

The Modern Digital Mortgage with a Personal Touch

Paperless. Effortless. Awesomeness TM

Simplify the home financing process with our Digital Mortgage. We'll be here to help navigate you through the entire process.

Get Pre-qualifiedWhat is a Digital Mortgage?