Real estate has unique jargon. If you're new to the home buying process, you may be left feeling overwhelmed by the flood of unfamiliar terminology. One of the most common terms you've likely heard is escrow.
1) What is escrow?
Escrow is a financial tool that can be utilized by both home buyers and sellers. It's a safeguard, a third party who will hold the funds and title for a home. These are only released once all the conditions stated in the contract have been satisfactorily met by relevant parties (the buyer and seller).
2) Why is escrow beneficial?
The transfer of property from one owner to another is no small process and there is typically a good deal of money involved. Escrow protects both the buyer and seller by making sure that no funds or property exchange until all the conditions of the transaction have been met, such as home repairs, inspection, or earnest money.
3) How does escrow work?
As each contingency is met in the transaction, documentation is sent by the seller or buyer to an escrow officer who files it. Each completed condition draws closer to closing. Once all conditions are met, the seller gets the money; the buyer, the home.
Escrow is a beneficial tool that is not intended to cause distress, but rather security for all relevant parties.