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Published 2 years ago by massrealty with 0 Comments

How Does Escrow Work in a Real Estate Transaction

One of the most vital parts of a real estate transaction is the escrow monies that are collected from home buyers. Escrow can be considered the glue in a real estate transaction. It is what keeps buyers honest in their pursuit of a property to purchase.

  • What are Escrow Funds

    How does escrow work when buying and selling a house How does escrow work when buying and selling a house
  • Escrow in Real Estate Explained

    In nearly every real estate transaction there will be what's referred to as escrow funds. Many first time buyers will ask what is escrow when they first meet a real estate agent and start looking at homes. It is fairly common knowledge that buyers have to come up with earnest money when they make a home purchase.

    The exact amount of money that will need to be put in escrow, however, can vary from location to location. In most circumstances you can expect to put between one and five percent of the purchase price. Escrow becomes crucial in a real estate transaction because it keep a buyer's feet to the fire so to speak to make sure they do what is required of the contract.

    If there were no escrow funds buyers could just walk away from a real estate transaction without any consequences. By having escrow funds held by either a real estate agent, attorney, or escrow company, a buyer could potentially lose thousands of dollars.

    Not accepting an amount of escrow that would deter a buyer from just walking away from a transaction would be foolish.

    The amount of money that is held in escrow will be duly accounted for at closing and will make up the balance of the purchase price that is owed to the seller of the property.

    While escrow funds that are held during a home purchase are the most common, there is also a few other types of escrow as well. For example, some mortgage companies will ask buyers to escrow for the taxes and insurance on the property. Some lenders require this to ensure timely payments.

    The lender will use these funds to pay the appropriate bills when they become due. At times it is a stipulation of the loan that there will be escrow for these items. There are a few other types of escrow that are reviewed in-depth in the article reference above at Maximum Real Estate Exposure.

    You will find the article to be extremely detailed and covers everything you need to know about escrow as it pertains to real estate sales. Take a look and if you find it helpful share it with other first time home buyers who may need the advice.

 

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